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2015 (3) TMI 1249 - AT - Income TaxRevision u/s 263 - AO had not applied or considered section 80P(2)(d) in accordance with the wordings of the said section - whether the interest on deposits earned by a Co-operative Society where such deposits were with a Cooperative Bank are allowable as a deduction under Section 80P(2)(d) of the Act? - Held that - As in the case of Bagalkot District Central Co-operative Bank (2015 (1) TMI 1005 - ITAT BANGALORE) held that a Cooperative bank which is also a Co-operative Society cannot be excluded from the purview of benefits available to a Cooperative Society unless the provisions of the Act so stipulate. No doubt in the said decision the Tribunal was considering the application of Section 194A(3)(v) of the Act wherein it was mandated that a Cooperative Society was not required to deduct tax at source if the interest credit were paid to any Co-operative Society. It had unequivocally held that the said provision applied to all Cooperative Societies including a Cooperative Society engaged in the business of the bank or in other words a Co-operative Bank. Therefore the view taken by the AO that income by way of interest or dividends earned by the assessee society from the Cooperative bank namely Kanara Dist. Central Co-operative bank which was also a Co-operative Society was eligible for deduction cannot be faulted. We cannot say that the order of the AO was erroneous and prejudicial to the interest of the revenue. In this view of the matter we cancel the impugned order of the learned CIT and consequently the appeal of the assessee is allowed.
Issues:
1. Whether deduction under section 80P(2)(d) of the Income-tax Act should be allowed on interest received from deposits with Cooperative Banks. 2. Whether a Cooperative bank can be considered a Cooperative Society for the purpose of claiming deductions under section 80P(2)(d). 3. Whether the order of the CIT under section 263 of the Act was erroneous and prejudicial to the interest of revenue. Issue 1: Deduction under section 80P(2)(d) The appellant claimed a deduction under section 80P(2)(d) of the Income-tax Act on interest received from deposits with Cooperative Banks. The CIT held that this claim should not have been accepted, stating that a Cooperative bank cannot be considered a Cooperative Society for the purpose of this deduction. The appellant argued that the bank where it had placed its deposits was registered as a Co-operative Society under the Co-operative Societies Act, but the CIT disagreed. The question was whether interest on deposits earned by a Co-operative Society with a Cooperative Bank is allowable as a deduction under Section 80P(2)(d). Issue 2: Cooperative bank as a Cooperative Society The Tribunal considered previous judgments, including one where it was held that a Cooperative bank, being a Co-operative Society, cannot be excluded from the benefits available to a Cooperative Society unless the Act stipulates otherwise. The Tribunal found that the provisions of Section 80P(2)(d) did not warrant the restrictive interpretation given by the CIT. It was concluded that the income by way of interest or dividends earned by the appellant from the Cooperative bank, which was also a Co-operative Society, was eligible for deduction under Section 80P(2)(d). Issue 3: Error in CIT's order The appellant challenged the order of the CIT under section 263 of the Act, arguing that it was erroneous and prejudicial to the interest of revenue. The Tribunal disagreed with the CIT's interpretation and held that the order of the Assessing Officer was not erroneous. It was concluded that the deduction claimed by the appellant was allowable, and the order of the CIT was canceled. Consequently, the appeal of the assessee was allowed for Assessment Year 2009-10. In conclusion, the Tribunal allowed the appeal, holding that the interest earned by the appellant from deposits with a Cooperative Bank, registered as a Co-operative Society, was eligible for deduction under Section 80P(2)(d) of the Income-tax Act. The Tribunal found that the CIT's order was not correct, and the appellant's claim for deduction was justified.
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