2026 (3) TMI 779

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....pugned order emanated from the order of the Assessment Unit Income-tax Department (for brevity the 'Ld. AO'), order passed under section 143(3) r.w.s. 144B of the Act, date of order 21.03.2024. 2. The brief facts of the case are that the assessee is a cooperative society engaged in the business of providing credit facilities to its members. For the impugned assessment year, the assessee filed its return of income and total income declared as nil by claiming deduction amount of rupees 5,27,25,755/- under section 80P of the Act. The assessee's case was selected for scrutiny. The assessee was asked to furnish the details & to explain the interest received from investment from District Cooperative Bank and other banks and treasuries etc whic....

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....the Central Register of Cooperative on 29.11.2004. He further contended that for Assessment Years 2014-15 and 2017-18, the Ld. AO had accepted the assessee's claim had not made any addition against the claim of deduction under section 80P(2)(a)(i) of the Act. The Ld. AR invited our attention in the impugned appellate order para 5.7 and 5.8, which are reproduced as below. "5.7 In the context of admissibility of such interest income u/s 80P, it would be pertinent to make reference here the observation made by the jurisdictional ITAT, Mumbai Bench, in a similar situation, in the case of New Satara Zilla Nagrik Sahakari Patsanstha Maryadit vs. National Faceless Appeal Centre, Vide: [2024] 164 taxmann.com 413 (Mumbai - Trib.). The h....

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....peals filed by the assessee society are hereby allowed." 5.8 In the above noted decision, the Hon'ble ITAT held that interest income earned by from fixed deposits placed with scheduled/nationalized bank is a part the assessee's regular business activity, which is to provide credit facilities to its member. The surplus funds parked in FDs are incidental and essential to maintain liquidity and comply with regulatory requirement. Therefore, this interest income qualifies for deduction under section 80P(2)(a)(i) of the Income Tax Act. Considering the above noted decision and ratio of facts in the case under consideration, I am inclined to hold that the action of the AO in denying deduction u/s 80P to the appellant in respect of....

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....posit of surplus fund and earning interest is very well covered by the main as well as ancillary activity of the business of the assessee and the income so earned is part of the business income, therefore the assessee is entitled deduction u/s 80P(2)(a)(i) of the Act. Accordingly, we upheld the order of Ld. CIT(A) and dismiss the grounds raised by the revenue. 14. In the result, appeal filed by the revenue is dismissed." 6. We have heard the rival submissions and carefully perused the material available on record. The assessee is a co-operative society duly registered under the provisions of Section 62 of the Multi-State Co-operative Societies Act, 2002. The assessee is engaged in the business of banking and in providing credit ....