TaxTMI 
TaxTMI 
2008 (3) TMI 321
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....d by way of interest on bank deposit is not ancillary and incidental to carrying on of the business of providing credit facility to its members and as such, exempt under section 80P(2)(a)(i) of the Income-tax Act, 1961 ? 2. Whether, on the facts and circumstances of the case, the Tribunal was correct in remitting the case back to the Income-tax Officer for fresh computation of income in spite of the fact that its income is exempt from tax ? 3. Whether, on the facts and circumstances of the assessee's case, the Tribunal is correct in holding that the sum of Rs. 15,98,592 being interest on bank deposits is taxable without deducting therefrom the interest paid to LIC on loans raised on which interest has been earned ?" 2. The assessee, the ....
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....itions assessed it on total income of Rs. 7,81,460. 4. The assessee aggrieved by the order of the Assessing Officer preferred an appeal before the Commissioner of Income-tax (Appeals), who held that the income of the assessee is exempt under section 80P(2)(a)(i) of the Act. However, he did not adjudicate the alternative plea put forth by the assessee that its income was also exempt on the principle of mutuality. 5. The Revenue then preferred an appeal before the Patna Bench of the Income-tax Appellate Tribunal, hereinafter referred to as "the Tribunal". The Tribunal on consideration of the materials placed before it came to the conclusion that the sum of Rs. 15,98,592 being interest received by the assessee on deposit with bank was not el....
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....nterest earned on the deposits made, does not arise out of one or more of the activities specified in section 80P(2)(a)(i) of the Act but the interest received by the assessee on the bank deposit is ancillary and incidental to carrying on the business of providing credit facility to its members and, as such, exempt under the aforesaid provisions. It may be stated herein that the assessee deposits surplus funds available with it in banks and earns interest thereon. The nature of activity in which the assessee is involved clearly creates a situation when surplus fund is available to it which it deposits in bank and earns interest thereon. The placement of such fund being incidental and ancillary to carrying on of the business of providing cre....