2015 (10) TMI 2583 - AT - Income Tax

Eligibility to deduction u/s.80P - whether assessee was eligible for deduction u/s.80P(2)(a) or 80P(2)(d) of the Act on the interest received by it? - Held that - What we find is that in case the interest was received from surplus invested by the assessee in short-term FDs or Savings Bank account of other banks then the judgment of jurisdictional High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd 2015 (2) TMI 995 - KARNATAKA HIGH COURT would come to its aid. However if the money deposited was amounts lent to the assessee by its members or due by the assessee to its members then such deduction may not be automatic. We are therefore of the opinion that the issue requires a fresh look by the AO. We set aside the orders of authorities below and remit the issue back to the file of the AO for consideration afresh in accordance with law. - Decided in favour of revenue for statistical purpose..

Summary

Issues:
1. Eligibility of the assessee for deduction u/s.80P(2)(d) of the Income-tax Act, 1961.
2. Interpretation of the word "attributable" in Section 80P(2)(a)(i).
3. Consideration of interest income earned by a Cooperative Society providing credit facilities to its members.

Analysis:

Issue 1:
The appeal filed by the Revenue contested the allowance of deduction u/s.80P(2)(d) by the CIT (A) for the assessee. The Revenue argued that the assessee's investment source was unclear, whether surplus or funds lent by members. The CIT (A) had relied on a judgment of the jurisdictional High Court, leading to the dispute. The Tribunal noted the conflicting contentions and remitted the issue back to the AO for a fresh examination to determine the nature of the investment and the eligibility for deduction under the relevant sections.

Issue 2:
The Tribunal delved into the interpretation of the word "attributable" in Section 80P(2)(a)(i) by referencing the judgment of the Apex Court in the case of CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. The analysis emphasized that the term "attributable to" holds broader significance than "derived from," indicating that receipts from sources other than the primary business activity could still be considered attributable. This interpretation was crucial in determining the interest income earned by the Cooperative Society providing credit facilities to its members.

Issue 3:
The Tribunal examined the interest income earned by the Cooperative Society from short-term deposits and savings accounts. It was established that the interest income was directly linked to the business of providing credit facilities to members, as per Section 80P(2)(a)(i). The Tribunal differentiated this scenario from a case involving investments from retained amounts, as clarified by the Apex Court in a separate judgment. The conclusion was that the interest income in question was attributable to the business activity of the Cooperative Society and, therefore, eligible for deduction under Section 80P of the Act.

In summary, the Tribunal's judgment highlighted the importance of clarifying the source of investment for determining eligibility for deductions under the Income-tax Act. The interpretation of the term "attributable" played a significant role in establishing the link between income earned and the primary business activity. The decision provided clarity on the treatment of interest income in the context of Cooperative Societies providing credit facilities to members, emphasizing adherence to legal provisions for tax deductions.