2018 (1) TMI 1593 - AT - Income Tax

Deduction u/s 80P(2)(d) - Interest income earned from deposits with the Trivandrum District Co-operative Bank Ltd. Thiruvananthapuram - whether a sum assessed as income from other sources whether is entitled to deduction u/s 80P(2)(d)? - HELD THAT - The Hon ble Karnataka High Court in the case of Principal Commissioner of Income-tax Anrs. Vs. Totagars Co-operative Sale Society 2015 (4) TMI 829 - KARNATAKA HIGH COURT had categorically held that deduction u/s 80P(2)(d) of the I.T.Act is only for income received on investments with a Co-operative Society and not a Co-operative Bank. Whereas earlier Bench of the Hon ble Karnataka High Court in the case of Principal Commissioner of Income-tax Anrs. Vs. Totagars Co-operative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and held that Co-operative Society includes a Co-operative Bank and interest earned from deposits with a Co-operative Bank is also entitled to deduction u/s 80P(2)(d) of the I.T.Act. The assessee had specifically raised the contention that the assessee is only a Co-operative Society and not a Cooperative Bank. In the interest of justice and equity we are of the view that the matter needs to be examined by the A.O. afresh in the light of the certificate issued by the Registrar of Co-operative Societies regarding the status of Trivandrum District Co-operative Bank Limited. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Denial of deduction u/s 80P of the Income-tax Act for a primary agricultural credit society.
2. Interpretation of section 80P(2)(d) regarding income from other sources derived by a Co-operative Society from its investments with another Co-operative Society.

Analysis:
1. The assessee, a primary agricultural credit society, filed a return of income for the assessment year 2014-2015 claiming deduction u/s 80P of the Income-tax Act. The Assessing Officer denied the deduction stating that the assessee was engaged in banking activities and therefore not eligible for the deduction. The CIT(A) allowed the deduction for income under the head 'business or profession' but rejected the claim for 'income from other sources' as it was received from a Co-operative Bank, not a Co-operative Society as required by the Act.

2. The main issue before the Tribunal was whether the income of &8377; 2,20,84,676 assessed as 'income from other sources' was eligible for deduction u/s 80P(2)(d) of the Income-tax Act. The assessee argued that the Trivandrum District Co-operative Bank Limited, from which the income was received, was a Co-operative Society. However, the Tribunal found ambiguity in the registration certificate provided and referred to section 80P(2)(d) which allows deduction for income derived by a Co-operative Society from its investments with another Co-operative Society.

3. Referring to relevant case law, the Tribunal noted conflicting judgments regarding whether a Co-operative Bank falls under the definition of a Co-operative Society for the purpose of section 80P(2)(d). Considering the ambiguity in the status of the Trivandrum District Co-operative Bank Limited, the Tribunal remanded the matter to the Assessing Officer to determine if the bank qualifies as a Co-operative Society. If confirmed, the interest income received by the assessee would be eligible for deduction u/s 80P(2)(d) of the Act.

4. The Tribunal dismissed the Stay Petition as the main appeal was allowed for statistical purposes. The decision was pronounced on January 29, 2018, setting aside the previous orders and remanding the matter to clarify the status of the Trivandrum District Co-operative Bank Limited for determining the eligibility of the assessee's income for deduction under section 80P(2)(d) of the Income-tax Act.