2013 (4) TMI 784 - AT - Income Tax

Principle of Mutuality - No one can make profit out of himself - Deduction for Co-operative Societies u/s 80P - Assessee is a co-operative housing society and has derived income by way of interest from Co.op. Bank, S.B. Account and fixed deposit. Assessee claimed deduction from such income u/s 80P of the Act. Since he had not filed any details, the AO denied the claim and treated it the as income. - HELD THAT - Interest received by the assessee on the surplus funds is to be assessed under the head income from other sources , the decision of CIT(A) upheld. Decision of Hon ble Supreme Court in the case of The Totgar's Co-operative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT and Madras Cricket Club Versus Income-tax Officer 2009 (11) TMI 586 - MADRAS HIGH COURT followed. Decided against the assessee.

Summary

Issues:
1. Dismissal of interest earnings claim on saving with co-operative bank account under section 80P.
2. Excessive application of facts from a different case.
3. Generation of funds from members' contributions for reserves.

Issue 1: Dismissal of interest earnings claim under section 80P:
The appellant, a co-operative housing society, appealed against the dismissal of its claim for interest earnings on saving with a co-operative bank account under section 80P of the Income Tax Act, 1961. The Assessing Officer denied the claim as the appellant did not provide details, treating the amount as income. The ld CIT(A) upheld this decision, citing a Supreme Court case where interest income from bank deposits was considered taxable under "income from other sources." The Tribunal agreed, stating that interest income from surplus funds cannot be considered as business profits and does not qualify for deduction under section 80P. The Tribunal also referenced a Madras High Court case to support this decision, ultimately dismissing the appeal.

Issue 2: Excessive application of facts from a different case:
The appellant argued that the ld CIT(A) incorrectly applied facts from a case involving a sales co-operative society, not a housing society. However, the Tribunal found that the core issue was the taxation of interest income, which was consistent with the Supreme Court's ruling on such income falling under "income from other sources." Therefore, the Tribunal upheld the decision based on the nature of the income rather than the specific type of cooperative society.

Issue 3: Generation of funds from members' contributions for reserves:
The appellant contended that the funds generating interest were from contributions received from members for the society's operations. The appellant claimed that interest on operational funds should not be taxable based on the principle of mutuality. However, the Tribunal held that interest income from surplus funds, including interest from cooperative bank accounts and fixed deposits, falls under "income from other sources." The Tribunal referenced legal precedents to support this position, emphasizing that such interest income does not qualify for deduction under section 80P. Consequently, the Tribunal rejected the appellant's arguments and upheld the decision of the ld CIT(A) to treat the interest income as taxable.

In conclusion, the Tribunal dismissed the appeal, affirming the decision to treat the interest earnings as taxable income from other sources, not eligible for deduction under section 80P.