2022 (5) TMI 1445 - AT - Income Tax

Eligibility of deduction u/s 80P(2)(a)(i) - exemption of income received from BDCC Bank and other banks under the provisions of section 80P(2)(d) - CIT-A held Interest earned on long term investments i.e. deposits for period of more than one year received from BDCC Bank and other banks is not eligible for exemption u/s 80P(2)(d) - interest received from SB accounts or other bank or schedule bank the short term investments is treated as business income of the assessee - Whether interest earned on long term investments cannot be treated as business income? - HELD THAT - We find that the section 80P does not make a distinction between the long term investments and short term investments the only requirement under the provisions of section 80P(2)(d) is that an interest income or dividend income should be earned by a co-operative society from another cooperative society. The provisions of section 80P does not provide for any distinction between income earned on long term and short term investments. Thus the ld. CIT(A) clearly fell in error in drawing such distinction not supported by any statutory provisions in the Act. Therefore the findings of the ld. CIT(A) contained in sub-para (e) of para 11 are set-aside. Therefore the grounds of appeal filed by the assessee stands allowed.

Summary

Issues:
Appeal against orders of ld. Commissioner of Income Tax (Appeals) for assessment years 2012-13 and 2013-14 regarding eligibility of exemption of income under section 80P(2)(d) of the Income Tax Act, 1961.

Analysis:
1. The appellant, a cooperative bank, contested the denial of exemption under section 80P(2)(a)(i) by the Assessing Officer, who treated it as a cooperative bank. The ld. CIT(A) ruled in favor of the appellant, recognizing it as a cooperative society eligible for deduction under section 80P(2)(a)(i).

2. Regarding interest received from cooperative societies, the ld. CIT(A) allowed deduction under section 80P(2)(d) for short-term deposits but disallowed it for long-term investments exceeding one year. The appellant challenged this distinction, arguing that the Act does not differentiate between long-term and short-term investments for exemption under section 80P(2)(d).

3. The Tribunal noted that section 80P does not specify a distinction between long-term and short-term investments. It held that any interest income earned by a cooperative society from another cooperative society is eligible for deduction under section 80P(2)(d). The Tribunal set aside the ld. CIT(A)'s distinction and allowed the appeal, emphasizing that the Act does not support such differentiation.

4. The Tribunal's decision in ITA No.61/PAN/2018 for the assessment year 2012-13 applied mutatis mutandis to ITA No.62/PAN/2018 for the assessment year 2013-14. Consequently, both appeals were allowed, affirming the eligibility of the appellant for exemption under section 80P(2)(d) for interest income from cooperative societies.

5. The Tribunal's comprehensive analysis clarified the statutory provisions under section 80P and emphasized that distinctions unsupported by the Act cannot be imposed. The judgment underscored the importance of adhering to legislative intent and statutory language in interpreting tax exemptions for cooperative societies.