2026 (7) TMI 47

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.... issue in this appeal of the assessee is as regards to order of the CIT(A) confirming the addition made by the AO on account of interest of income tax refund received u/s. 244A of the Act by the assessee amounting to Rs. 45,73,538/- by treating the same as 'income from other sources' instead of allowing deduction u/s. 80P(2)(a)(i) of the Act. 3. Briefly stated facts are that the assessee is a cooperative society registered under the Delhi Cooperative Societies Act and is engaged in the business of banking exclusively for its members whereby it mobilizing thrift money from its members and providing credit facilities to its members. For the relevant assessment year 2017-18, assessee filed its return of income declaring gross total income u....

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....n of the Hon'ble Special Bench of this Tribunal in the case Maharashtra State Cooperative Bank Ltd. vs. ACIT [2010] 38 SOT 325 (Mum) (SB) and specifically drew our attention to para no. 9.7 of the aforesaid decision, which read as under: "9.7. On the survey of afore-noted judgments rendered by the highest court of the country, it can be seen that the scope of the phrase "attributable to" is wider than "derived from". Whereas in the case of later, the relation of the income with the source must be direct and that of the first degree, but in the former even some commercial or casual connection sufficies the test. As every income of assessee falling under the head `Profits and gains of business or profession' may not be necessarily `d....

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....t. The direct nexus of interest on income tax refund is with the payment of income-tax but when we try to trace the relation between income tax and the income on which it was paid, it comes to light that the same was for the business of banking. Thus there exists a commercial and casual connection between the ic business. It is still further imperative to note that the amount of income-tax collected by the authorities was for the denial of deduction u/s. 80P and not on any other count not related to any activity other than the banking activity. With the restoration of deduction u/s. 80P, which has commercial connection with the business of banking, the interest on income-tax refund can be rightly said to have casual connection with such ban....