2014 (9) TMI 1022 - AT - Income Tax

Eligibility for deduction/s.80P(2)(d) - interest income and dividend income received by the assessee cooperative society on investment made in deposits/savings accounts and shares of Sindhudurg Central Cooperative Bank - Held that - An identical issue had come up before the Tribunal in the case of M/s. Janata Grahak Madhyavarti Sahakari Sangh Maryadit (2013 (11) TMI 1604 - ITAT PUNE). We find the Tribunal, following the decision of the Tribunal in the case of Bajaj Auto Ltd. Employees Credit Cooperative Society Ltd. 2013 (8) TMI 949 - ITAT PUNE decided the issue in favour of the assessee and allowed the claim of deduction u/s.80P(2)(d) for interest received on the deposits with the Aurangabad District Central Cooperative Bank - Decided in favour of assessee

Summary

Issues:
Allowability of deduction u/s.80P(2)(d) for interest and dividend income received by the cooperative society from a cooperative bank.

Analysis:
The appeal filed by the assessee challenged the order of the CIT(A) regarding the deduction u/s.80P(2)(d) for interest income of &8377;31,77,452 and dividend income of &8377;5,41,667 received from investments made with a cooperative bank. The Assessing Officer disallowed the deduction, stating that cooperative banks are distinct from cooperative societies. The AO held that cooperative banks engage in banking business with the public, while cooperative societies provide credit facilities to members only. The CIT(A) upheld the AO's decision.

The assessee contended that the cooperative bank in question is also a cooperative society, citing a similar case where deduction u/s.80P(2)(d) was allowed for interest received on deposits with another cooperative bank. The Tribunal's decision in that case favored the assessee, emphasizing that the cooperative bank's status as a cooperative society remains unchanged despite the withdrawal of deduction for certain cooperative banks under section 80P(4). The Tribunal held that interest income on deposits with the cooperative bank is allowable under section 80P(2)(d).

Following the precedent, the Tribunal in the present case allowed the deduction u/s.80P(2)(d) for the interest and dividend income received by the cooperative society from the cooperative bank. The Tribunal concluded that the income qualifies for deduction under section 80P(2)(d) of the Income Tax Act, upholding the assessee's grounds of appeal on this issue. As a result, the appeal filed by the assessee was allowed.

Since the assessee succeeded in obtaining the deduction u/s.80P(2)(d), the Tribunal did not adjudicate on the alternate grounds related to the allowability of interest and dividend income u/s.80P(2)(a)(i) of the Income Tax Act. The Tribunal pronounced the judgment in open court on 24-09-2014.