2016 (1) TMI 1262 - AT - Income Tax

Denial of deduction of interest income earned from fixed deposits u/s 80P(a)(i) and 80P(2)(d) - Held that:- For getting the deduction under the section, there has to be direct and proximate connection or nexus to the earning of the assessee society. Provision of section 80P was intended to encourage and promote to growth of cooperative societies, therefore, a liberal construction should be given to the language employed in the provision as was held in CIT vs South Arcot District Co-operative Marketing Society Ltd.[1989 (1) TMI 3 - SUPREME Court]

If the totality of facts are analyzed with the facts of the present appeal is not clear as to how much interest was received from fixed deposits maintained with the banks and how much from co-operative societies. The Ahmedabad Bench of the Tribunal in State Bank of India Employees co-operative credit society ltd. (2015 (4) TMI 94 - ITAT AHMEDABAD) wherein the assessee society, having accepted deposits from its members, kept the idle fund with bank, since there was no nexus between the interest earned on the said deposits and business of the assessee providing credit facility to its members, held that it could not claim deduction u/s 80P(2)(d) of the Act. Since, the source of interest, as mentioned earlier, how much from the bank and from the co-operative society are not clear, I remand this appeal to the file of the ld. Assessing Officer to examine the claim of the assessee afresh. The assessee is directed to furnish evidence as to how much interest was received from banks and how much from the co-operative society. Appeal of the assessee is allowed for statistical purposes only.