Cooperative society's interest income from investments deemed business-related under tax law

The Tribunal allowed the appeal, determining that interest income earned by a cooperative society from surplus funds invested in short term deposits and securities is attributable to its business activities. The decision aligned with the jurisdictional High Court's ruling that such income qualifies for deduction under section 80P(2)(a), rejecting the Assessing Officer's treatment of the income as from other sources.

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Issues:
Appeal against disallowance of deduction u/s 80P(2)(a) for interest income earned by a cooperative society from surplus funds invested in short term deposits and securities.

Analysis:
The assessee, a cooperative society, filed its return for A.Y 2016-17 declaring total income as 'Nil' after claiming deduction u/s 80P(2)(a) of the Act for interest earned from surplus funds. The Assessing Officer disallowed the deduction, treating the interest income as income from other sources, not business profit, and brought it to tax. The CIT (A) upheld this decision, citing the Supreme Court case of Totgar's Cooperative Sale Society vs. ITO. The assessee appealed to the Tribunal, challenging the disallowance of the deduction.

The assessee argued that interest income from fixed deposits made from surplus funds is attributable to its business and should be allowed as a deduction u/s 80P. The jurisdictional High Court had distinguished the Totgar's case, holding that such interest income is business income. The Tribunal noted this distinction and allowed the appeal, following the High Court's decision. The Tribunal emphasized that the income derived from activities listed in u/s 80P(a) should be considered for deduction under 80P(2)(a).

In summary, the Tribunal allowed the appeal, holding that interest income earned by the cooperative society from surplus funds invested in short term deposits and securities is attributable to its business activities, in line with the jurisdictional High Court's decision. The Tribunal's decision was based on the interpretation that income derived from activities listed in u/s 80P(a) should be eligible for deduction u/s 80P(2)(a), contrary to treating it as income from other sources.

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