TaxTMI 
TaxTMI 
2010 (1) TMI 923
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....me earned by way of interest on fixed deposits and saving balances with commercial banks. 2. The assessee filed a return of income on 31-10-2006 declaring an income of Rs. 21,57,12,199 which was claimed exempt under section 80P(2) of the Income-tax Act, 1961 (in short 'the Act') and resultantly, the taxable income was declared at 'nil'. Thus, the income earned by the assessee by way of interest from the commercial banks was also claimed as exempt under section 80P of the Act. The Assessing Officer has held that the earning of interest from commercial banks was not a business activity of the assessee and accordingly, the same was assessable as 'income from other sources'. Accordingly, interest of Rs. 44,67,564 earned from commercia....
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....the Act as such deposit was ancillary to the business of providing credit facilities to its members. 4. On the other hand, the learned DR has submitted that interest earned from banks is assessable under the head 'other sources' and in this connection referred to the judgment of the Hon'ble Madhya Pradesh High Court in the case of Devi Ahilya New Cloth Market Co. Ltd. v. CIT [2009] 222 CTR (MP) 583. 5. We have considered the rival submissions carefully. In brief, the fact situation can be understood as follows. The assessee is a Co-operative Society duly registered under the Punjab Co-operative Societies Act, 1961 and its main activities relate to providing credit facilities to its member Cooperative Societies within the....
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....erative societies. Section 80P(1) provides that in case of an assessee being a cooperative society, any income referred to in sub-section (2) thereof shall be deducted in computing the total income of the assessee. The claim of the assessee, in terms of section 80P(2) was on account of clause (a) sub-clause (i) thereof, which reads as under:- "80P(2) The sums referred to in sub-section (1) shall be the following, namely (a) in the case of a co-operative society engaged in:- (i) carrying on the business of banking or providing credit facilities to its members, or ... ... the whole of the amount of profits and gains of business attributable to any one or more of such activities." 8. From a rea....
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....s to hold that it is not necessary that the income in respect of which deduction is claimed, should be derived from the business referred to in section 80P(2)(a)(i). It would be sufficient to invoke the claim under section 80P(2)(a)(i) if the relevant income is shown to be related to any activity which is inextricably linked with the business referred to in section 80P(2)(a)(i). It would be sufficient to claim deduction under section 80P(2)(a)(i) if a proximate connection between the income in question and the business referred to in section 80P(2)(a)(i) of the Act, is established. In this background, now we may consider the claim of the assessee of treating the income earned by way of interest from commercial banks, as eligible for deducti....
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....Co-operative Apex Bank [2001] 251 ITR 194 and that of the Special Bench of the Tribunal in the case of Surat District Co-operative Bank Ltd. v. ITO [2003] 85 ITD 1 (Ahd.), clearly aids the aforesaid inference. In our view, the funds kept in bank can be said to be ready for utilization by the assessee in its business of providing credit facilities to its members. The income from such monies, kept in the bank, in our considered opinion, can be said to be attributable to the business of providing credit facilities, so as to fall within the ambit of section 80P(2)(a)(i) of the Act. Accordingly, the income in question qualifies for exemption under section 80P(2)(a)(i) of the Act. In view of our aforesaid conclusion, the stand of the Assessing Of....