Commissioner of Income Tax vs Haryana State Co-operative Housing Society

N.K. Agrawal, J.—The following question has been referred by the income tax Appellate Tribunal u/s 256(1) of the income tax Act, 1961 (for short "the Act") : Assessment year 1981-82:

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was right in law in holding that the short-term deposits are ''investment'' of the assessee within the meaning of the provisions of section 80P(2)(d) and interest earned on these deposits is exempt u/s 80P(2)(d)?

The assessee, a co-operative society, earned certain income in the form of interest on certain deposits and investments and claimed exemption under clause (d) of section 80P(2) of the Act.

Interest or dividend, derived from investment with another co-operative society, is required to be deducted from the total income of the assessee-society. In other words, such income is exempt from payment of income tax.

A similar question was considered by a Division Bench of this court in Commissioner of Income Tax Vs. Haryana Co-operative Sugar Mills Ltd., , and it was held that short-term call deposits made by the assessee-co-operative society in a co-operative bank were "investments" within the meaning of clause (d) of section 80P(2) of the Act and qualified for deduction from the taxable income of the assessee-society. We are inclined to take the same view as in the case of Commissioner of Income Tax Vs. Haryana Co-operative Sugar Mills Ltd., and answer the question in the affirmative, i.e., against the Department and in favour of the assessee-society subject to verification by the Assessing Officer if the investments were made by the assessee-society with another co-operative society.