The Calcutta High Court has allowed a deduction to other interest income apart from 10% net profit transferred to a reserved fund.
The High court of Calcutta allowed the appeal filed by the Principal Commissioner of Income Tax against the Electro Urban Credit Co-operative Society Limited, engaged in a business of banking and providing credit facilities to its members. The provisions of Section 6 of West Bengal Co-operative Societies Act, 2006 is applicable to the Co-operative Society.
The assessee relies on Sections 79 and 82 for provisions relating to firstly, investment of funds by his client and secondly, on a mandate to transfer, in every cooperative year, not less than 10% of its net profit to a reserved fund. The corresponding enabling procedure is as per Rule 119 in West Bengal Co-operative Societies Rules, 2011. In accordance with these laws the assessee made the investments and received the amount of profits and gains achieved from interest earnings on such investments, consequently, he is entitled to deductions.
Relying on the relevant judicial decision, the High Court held that the rules made under the West Bengal Co-operative Societies Act, 2006 mandate 10% of net profit in every cooperative year to be transferred to a reserve fund. Interest income on the rest of the net profit of respondents appears to be similar income or to be similarly treated as interest income on investment of sale of agricultural produce. Consequently, the increased amount of profits of eligible businesses as discussed above shall be the amount of deduction available to the assessee under section 80P.
The division bench consisting of Justice Arindam Sinha and Justice Shekhar B. Saraf directed the matter be remanded to the Assessing Officer, so as to work out interest earned on the reserve fund if invested and allow deduction therefore in addition to the deduction already allowed in applying section 80P(2)(d), as in the assessment order.
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