INCOME TAX ACT, 1961

Section 80P(2)(a)(i)

Deduction under section 80P(2)(a)(i) - Co-operative society - Interest income earned from commercial and co-operative bank -

Assessee claimed deduction under section 80P(2)(a)(i) of interest income earned from commercial and co-operative bank . AO noticed that aforesaid interest income was not derived by the assessee from its activity of providing credit facilities to its members. Therefore, interest income accrued assessee on the funds invested with bank was considered as income from other sources under section 56. Held: Income by way of interest earned by deposit or investment of idle or surplus does not change its character irrespective of the fact whether such interest is earned from a schedule bank or a co-operative bank and thus clause (d) of section 80P(2) would not apply to the facts of assessee's case. Assessee earned interest income on surplus funds deposited with nationalized bank and cooperative Bank and the same was not attributable to business operation of assessee co-operative society as interest earned on the fund invested with commercial bank was not operational income from providing credit facilities to its members.Accordingly, AO was justified in denying deduction.

REFERRED :

FAVOUR : Against the assessee

A.Y. :

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