2011 (6) TMI 811 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the issue of whether the CIT(A) was justified in directing the AO to allow deduction u/s 80P(2)(a)(i) of the Act for interest income earned from Non-SLR investments.

Comprehensive Details:

Issue 1: Deduction u/s 80P(2)(a)(i) for interest income from Non-SLR investments
The assessee, a cooperative bank, filed a return of income for the asst. year 2005-06 claiming deduction u/s 80P. The AO restricted the deduction due to interest income earned from Non-SLR entities. The CIT(A) allowed the appeal based on relevant judgments. The revenue contended that recent Supreme Court judgment held such income taxable u/s 56. The assessee argued the distinction between a cooperative bank and society. The Tribunal noted the legislative intent of section 80P(2)(a)(i) and the necessity of Non-SLR funds for banking activities. Referring to precedents, the Tribunal upheld the CIT(A)'s decision, stating the interest income was attributable to banking activities.

Conclusion:
The Tribunal dismissed the department's appeal, affirming the CIT(A)'s decision to allow deduction u/s 80P(2)(a)(i) for interest income from Non-SLR investments.