ITO, WARD-58(7), NEW DELHI vs. THE CO-OPERATIVE URBAN THRIFT & CREDIT SOCIETY LTD, DELHI

The present appeal raises two issues. The first issue is with regard to availability of deduction under Section 80P(2)(d)-(i) of the Income- Tax Act,1961 in respect of interest/dividend income earned from other Co-operative Banks and second issue relates to allowability of deduction

Briefly, the facts are, assessee is a Credit Co-operative Society and assessed in the status of Association of Persons (AOP). In the return of income filed for the assessment year under dispute, assessee had claimed deduction under Section 80P(2) in respect of interest income earned from other co-operative banks as well as nationalized banks. While examining the issue in course of assessment proceedings, the Assessing Officer observed that deduction under Section 80P(2)(d) of the Act is available on interest income earned from other co-operative societies and not from banks. Accordingly, he disallowed assessee’s claim of deduction in respect of interest and dividend earned.

Assessee contested the aforesaid disallowance before learned First Appellate Authority.

After considering the submission of the assessee and relying upon the ratio laid down in certain judicial precedents, learned Commissioner (Appeals) held that the primary activity of the assessee is lending money to its members. Therefore, the interest income earned has to be treated as income from business. He further held that the interest and dividend income earned from other co-operative banks is allowable as deduction under Section 80P(2)(d). In so far as interest earned from the other banks, learned Commissioner (Appeals) held that since such interest of Rs.37,712 is below the threshold limit of Rs.50,000, it can be allowed as deduction under Section 80P(2)(c)(ii) of the Act.

We have considered rival submissions and perused the material on record.

In so far as the issue relating to allowability of deduction under Section 80P(2)(d) in respect of interest and dividend income earned from investments made in other co-operative banks, we do not find any infirmity in the decision of learned Commissioner (Appeals) as there are plethora of decisions of Tribunal holding that co-operative banks will have same status as that of co-operative societies.

As regards the allowance of deduction of Rs.37,712 under Section 80P(2)(c)(ii) of the Act, we are unable to agree with the decision of the learned First Appellate Authority as the conditions of the said provision, in our view, are not fulfilled. This is so because, it cannot be said,