2019 (1) TMI 1008 - AT - Income Tax

Entitlement to deduction u/s. 80P(2) - Whether the interest income, commission from GDCS and processing fee are income from business or income from other sources? - Held that - As decided in assessee s own case relying on NAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD. 2005 (8) TMI 28 - SUPREME COURT OF INDIA can be applied to a Co-operative Society also where there is a claim of deduction u/s. 80P(2)(a)(i) of the Act. Considering all these aspects, we are of the opinion that the interest earned by the assessee could not have been treated under the head income from other sources but only as a part of its business income. Cross Objection of the assessee is allowed.

Summary

Issues:
1. Entitlement to deduction u/s. 80P(2) of the I.T. Act.
2. Classification of interest income, commission from GDCS, and processing fee as income from business or other sources.

Entitlement to Deduction u/s. 80P(2) of the I.T. Act:
The Tribunal found that the issues raised were previously adjudicated in the assessee's favor for the assessment year 2012-2013. The Tribunal highlighted that the assessee, a Multi State Co-operative Society, engaged in providing credit facilities to its members, was eligible for deduction u/s. 80P(1) of the Act. The Tribunal clarified that to be considered a Cooperative Bank under Section 80P(4), the Reserve Bank of India must classify the society as such. As the Revenue failed to provide evidence of this classification, the Tribunal dismissed the Revenue's appeal.

Classification of Interest Income:
The Tribunal addressed the treatment of interest income earned by the assessee on bank deposits. The Assessing Officer categorized this income as 'income from other sources,' denying the claim of deduction u/s. 80P(1) of the Act. The assessee argued that the interest income was from deposits for statutory reserve requirements under the Multi State Co-operative Societies Act, 2002. The Tribunal agreed that since the deposits were for business purposes, the interest income should be considered part of the business income. Referring to a CBDT Circular and the judgment in the case of Nawanshahar Central Co-operative Bank Ltd., the Tribunal allowed the assessee's cross objection, emphasizing that the interest income should be treated as business income.

In conclusion, based on the Tribunal's previous order and the specific circumstances of the case, the Tribunal upheld the CIT(A)'s decision to delete the addition made by the Assessing Officer. The appeal filed by the Revenue was dismissed, affirming the orders of the CIT(A).