2011 (7) TMI 1221 - HC - Income Tax

Summary

Issues involved: Interpretation of deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 for interest income on fixed deposits placed with banks other than cooperative banks.

Summary:

Issue 1: Deduction u/s 80P(2)(a)(i) for interest income on fixed deposits from non-cooperative banks

The case involved a Cooperative Bank for A.Y. 2003-04 where the Assessing Officer disallowed interest on fixed deposits from non-cooperative banks for deduction u/s 80P(2)(a)(i). The CIT (A) upheld the disallowance, but the ITAT allowed the claim based on a Supreme Court decision. The Revenue challenged this decision.

Judgment: The High Court upheld the ITAT decision, stating that investments by Cooperative banks to earn interest constitute banking business, making the income attributable to the business of banking. Referring to the Nawanshahar Central Cooperative Bank case, the Court emphasized that income from such investments is deductible u/s 80P(2)(a)(i). The Court distinguished the Totgars Cooperative Sale Society case, noting that decisions related to Cooperative banks differ from those related to Cooperative Sale Societies.

Result: The appeal by the Revenue was dismissed, and no costs were awarded.