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2016 (12) TMI 1909 - HC - Income TaxDeduction u/s 80P(2)(d) - interest earned out of surplus funds lying deposited with the post office and bank - HELD THAT - These very questions have been answered by a Division Bench of this Court in Cooperative Cane Development Union Ltd. 2012 (9) TMI 1250 - ALLAHABAD HIGH COURT relying on a decision in the case of Totgar's Cooperative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT wherein it was clearly spelt out by the Apex Court that the investment in securities is not a primary object of the cooperative credit society and the objects of the society do not provide for investment of money in post office or bank and thereby earned interest. Any such interest earned from such deposits would necessarily be chargeable to tax under Section 56 - Decided against assessee.
Issues:
Appeal under Section 206-A of the Income Tax Department against Tribunal's order. Analysis: The High Court heard arguments from both parties regarding the appeal filed by the department under Section 206-A of the Income Tax Department against the Tribunal's order dated 14.01.2016. The questions of law raised in the appeal revolved around the eligibility of interest earned from surplus funds deposited with post offices and banks for deduction under Section 80P(2)(d) of the Income Tax Act, 1961 as income derived from business and profession. The court referred to a previous decision of a Division Bench in a similar case and a judgment of the Hon'ble Apex Court in Totgar's Cooperative Sale Society Ltd. v. Income Tax Officer, emphasizing that interest earned from such deposits would be chargeable to tax under Section 56 of the Act as the primary object of a cooperative credit society is not investment in securities. The court ruled in favor of the department, allowing the appeal and deciding the substantial questions of law in favor of the department and against the assessee. The judgment highlighted that interest earned from investments made in post offices and banks is not exempt under Section 80P(2)(d) of the Income Tax Act, 1961, as it does not align with the primary objectives of a cooperative credit society.
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