ISPAT EMPLOYEES COOPERATIVE THRIFT AND CREDIT SOCIETY LTD. vs. PR. COMMISSIONER OF INCOME TAX-18 NEW DELHI

The assessee seeks to assail the order rendered by the Income Tax Appellate Tribunal [“ITAT”] dated 15 July 2021 and proposes the following questions for our consideration: “A. circumstances of the case, ITAT has erred in not allowing deduction of amount of interest earned on savings and Fixed Deposit Receipt [“FDR”] under Section 80P(2)(a)(i) of the Income Tax Act, 1961 [“Act”]?

We note that the questions as they are raised stand conclusively answered against the assessee by our own Court in Mantola Co- Operative Thrift & Credit Society Ltd. v. Income Tax, [2014 SCC OnLine Del 4383]. While dealing with an identical issue of “income generated from FDRs” and whether it would qualify for the purposes of “deduction” under Section 80P(2)(a) of the Act, the Court had held thus: “6. No doubt, the term “attributable” is much wider than the term “derived from”, but the question still remains, whether the interest income earned from the FDRs out of surplus funds, which were not to be made available and given as credit to the members, can be treated as income attributable to providing credit facilities to members. We need not dilate on the said question as the issue was considered and stands answered by the Supreme Court in the case of Totgars' Co-operative Sale Society Ltd. v. Income Tax Officer,

The present case is of surplus funds, which were not required for carrying on business of providing credit facilities to members. Half of the funds mobilised/collected from the members could be used for providing credit to the members. The balance amount had to be retained and used for specified purpose, other than providing credit facilities to members. This amount was deposited in FDRs for an average period of 500 days. Bye-laws of the appellant cooperative society prescribed that 50% of the amount mobilised/collected would not be given on credit to the members. These constituted surplus funds as has been held by the Assessing Officer and by the Tribunal. It is on these funds that the interest was earned. The interest earned from the aforesaid funds as held by the Supreme Court in Totgars' Cooperative Sale Society Ltd. (supra), would fall under Section 56 and would be taxable under the head “income from other sources”. 9. Another contention raised by the appellant-assessee is that the assessee was engaged or carrying on business of banking. He submits that wide interpretation should be given to the “banking” and grant of thrift and credit should be construed as banking. It is not possible to accept the said contention and give this extended and broad meaning to the term “banking”. The appellant-assessee is a cooperative thrift society and not a banking company and the expression “business of banking” cannot be given a spacious meaning to unrealistically expand the term beyond acceptable limits. Business of banking connotes and is different from activities undertaken by the appellant. The aforesaid wide meaning, as

Similarly, with regard to the claim for deduction under Section 80P(2)(i), we find that there was no discussion or finding by the Commissioner of Income Tax (Appeals), though this ground/issue was raised. This has happened because the Commissioner of Income Tax (Appeals), as noted above, had granted exemption to the entire income earned by the appellant-assessee under Section 80P(2)(i)(a). Learned counsel for the respondent-Revenue submits that this issue could be examined by the Commissioner of Income Tax (Appeals) on merits. We take the statement on record. The appeal is disposed of. No Costs.”

In view of the aforesaid, we find no substantial questions of law which stands raised. The appeal thus fails and shall stand dismissed.