INCOME TAX ACT, 1961

Section 80P(2)(a)

Deduction under section 80P - Co-operative society - Interest earned by assessee-society on providing loan to its petrol pump division business -

Assessee-society consisted of two divisions, viz. main division, which was engaged into providing credit facility to its farmer members and other division, which was a petrol pump division. It claimed deduction under section 80P in respect of interest income received from its petrol pump division business. The petrol pump division borrowed funds from assessee's head office (main division) for which the assessee received interest. AO disallowed the deduction claimed under section 80P, which was upheld by CIT (A). Aggrieved, the assessee was in appeal before Tribunal. Assessee submitted that as the pump division did not take any loan from any bank/financial institutions for running the pump, thus it took the same from the head office division as its main activity was providing finance to its farmer members. Therefore, the loan taken by the pump division, could not be considered as commercial and hence, the deduction claimed under section 80P(2)(a) was justifiable. Held: It was an admitted position that pump division of assessee-society, was not carrying out activities beneficial to its farmer members. The activities carried out by that division were fully taxable and not coming under purview of section 80P. Both divisions were distinct from each other and head office i.e. main division, provided loan to the pump division, which was utilized for commercial activities of the pump division and it could not be said to serve as per provisions of section 80P deduction available to societies and its members. Therefore, deduction claimed under section 80P in respect of interest income received from petrol pump division business, was rightly denied.

REFERRED :

FAVOUR : Against assessee

A.Y. : 2017-18 & 2018-19

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