2021 (12) TMI 1259

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....nt is a cooperative society registered under the Maharashtra Co-operative Societies Act, 1960. It is engaged in the business of providing credit facilities to its members. The return of income for the assessment year 2013-14 was filed on 19.07.2013 declaring Rs.Nil income. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(2), Nashik ('the Assessing Officer') vide order dated 19.10.2015 passed u/s 143(3) of the Income Tax Act, 1961 ('the Act') Act at a total income of Rs. 48,36,400/-. While doing so, the Assessing Officer made the following additions to the returned income : Sr.No. Particulars Amount (Rs.) 1 Interest income on deposit made with Nationalized bank, i.e. Bank of Bar....

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....er disallowances made by the AO. Being aggrieved the appellant is in appeal before us in the present appeal. 5. Ground of appeal No. 1 & 2 challenges the decision of the CIT(A) denying the claim of exemption u/s. 80P(2)(a)(i) in respect of interest on fixed deposits with Bank of Baroda at Rs. 3,18,843/-. The AO denied the exemption of interest of Rs. 3,18,843/- earned on the investment made with Bank of Baroda treating it under the head 'income from other sources' not as 'income from business'. On an appeal before the CIT(A), the CIT(A) upheld the contention that the said interest income should be assessed as 'income from business'. However, he denied the claim of exemption u/s. 80P(2)(a)(i) on the ground that the assessee lends money to....

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....osits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as well as the CIT(A) were of the opinion that the interest earned from third parties or non-members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as 'income from other sources' There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon'ble Punjab & Haryana High Court in the ca....

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....Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 & 2 stands allowed. 10. Grounds of appeal No. 3 & 4 challenges the decision of the CIT(A) denying the claim for exemption of interest earned on the securities held with RBI. The reasoning given by us in relation to grounds of appeal No. 1 & 2 equally holds good to the issue in grounds of appeal No. 3 & 4 and, therefore, for the reasons stated therein, we allow these grounds in favour of the assessee and direct the AO to ex....