2017 (4) TMI 1311

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....lowance of exemption available to the assessee under section 80P(2)(a) on the interest income amounting to Rs. 54,31,730/- received from State Bank of India. 3. Brief facts of the case are that the assessee is a cooperative credit society. It has filed its return of income on 6.9.2012 declaring NIL income. On scrutiny of the accounts, it revealed to the AO that the assessee had made fixed deposits with nationalized and private banks, from where it has earned interest income. In the opinion of the AO, such income does not qualify for grant of deduction under section 80P(2) of the Income Tax Act, 1961. Accordingly, he disallowed deduction under section 80P on interest income of Rs. 54,31,730/-. Appeal to the CIT(A) did not bring any relief....

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....sessee society had made deposits with nationalized banks which has resulted interest income of Rs. 16,14,579/-. It claimed deduction of this amount under section 80P(2) of the Act. 5. In the background of the above facts, the Hon'ble Court has observed that deduction under section 80P(2) is not available. Finding recorded in para-13 and 14 of the judgment is worth to note. It reads as under: "13. In the opinion of this court, in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall in any of the categories mentioned under section 80P(2)(a) of the Act. In the case of Totgars Co-operative Sale Society (supra), as rightly submitted by the learned counsel for the....

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....siness of providing credit facilities to its members or marketing of agricultural produce of its members. The court has held that when the assessee society provides credit facilities to its members, it earns interest income. The interest which accrues on funds not immediately required by the assessee for its business purposes and which has been invested in specified securities as "investment" are ineligible for deduction under section 80P(2)(a)(i) of the Act. For the above reasons, this court respectfully does not agree with the view taken by the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income Tax Officer Ward-V, Tumkur (supra) that the decision of the Supreme Court in Totgars Co-operative Sale Society (s....