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2016 (12) TMI 1910 - 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:
- Interpretation of Section 80P(2)(d) of the Income Tax Act, 1961 regarding deduction for interest earned on surplus funds deposited with post office and bank. Analysis: The High Court heard arguments from both the Revenue and the Assessee regarding an appeal filed by the department under Section 206-A of the Income Tax Act against a Tribunal order. The questions of law to be answered revolved around the justification of the Tribunal's decision in upholding the Commissioner of Income Tax (A)'s order regarding the qualification for deduction under Section 80P(2)(d) of the Act for interest earned on surplus funds deposited with post offices and banks. The Court referred to a previous Division Bench decision and a Supreme Court case which clarified that the investment in securities is not a primary object of a cooperative credit society, and any interest earned from such deposits would be chargeable to tax under Section 56 of the Act. The Court ultimately allowed the appeal, deciding the substantial questions of law in favor of the department and against the assessee. The judgment highlighted the importance of the primary objects of a cooperative credit society in determining the taxability of interest earned from investments made in post offices and banks.
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