2016 (12) TMI 1918 - HC - Income Tax

Deduction u/s 80P(2)(d) - interest earned from banks Post office and on FDRs other than co-operative societies - ITAT deleted addition - ITAT justification in treating the addition eligible for deduction u/s 80P as made by the AO on account of Provident Fund not been deposited to the Provident Fund regularly and within the stipulated time - HELD THAT - These very questions have been answered in Cooperative Cane Development Union Ltd. 2012 (9) TMI 1250 - ALLAHABAD HIGH COURT relying on a decision 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 of the Act. This appeal is allowed. The substantial questions of law are therefore decided in favour of the department and against the assessee.

Summary

The Allahabad High Court, in an appeal under Section 206-A of the Income Tax Act, 1961, addressed two key questions regarding the deductibility of interest income and provident fund amounts under Section 80P(2)(d). The Court examined whether the ITAT was justified in deleting additions made by the Assessing Officer on interest earned from banks, post office, and FDRs, and on provident fund amounts not regularly deposited.Relying on the Supreme Court's ruling in Totgar's Co-operative Sale Society Ltd. (322 ITR 283 (SC), 2010) and the Allahabad High Court's earlier decision in CIT, Bareilly v. Co-operative Cane Development Union Ltd. (ITA No. 520/2008), the Court held that "the investment in securities is not a primary object of the cooperative credit society" and that earning interest from such investments "would necessarily be chargeable to tax under Section 56 of the Act." Further, provident fund amounts not deposited timely are not exempt under Section 80P as they do not form part of the normal business income.Consequently, the appeal was allowed, and the substantial questions of law were decided in favor of the department and against the assessee.