2022 (5) TMI 1564 - AT - Income Tax

Deduction u/s 80P (2) (d) - receipt of dividend income from other cooperative societies - HELD THAT - As case of the assessee that the assessee society has received dividend from other cooperative societies such as IFFCO and UP State Cooperative Bank, that being so, the dividend received from cooperative societies are expressly exempt u/s. 80P(2) (d). See assessee own case 2018 (7) TMI 2314 - ITAT DELHI and 2018 (9) TMI 1172 - ITAT DELHI - Decided in favour of assessee.

Summary

Issues:
1. Eligibility of deduction under section 80P (2) (d) for dividend income.
2. Addition of opening balance of Special Reserve under section 41(1) of the Act.

Eligibility of deduction under section 80P (2) (d) for dividend income:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning AY 2014-15. The controversy revolved around the eligibility of deduction under section 80P (2) (d) for dividend income received by the assessee from other cooperative societies. The revenue contended that the exemption granted by the CIT(A) was not consistent with the provisions of section 80P, especially after the insertion of subsection 4 by the Finance Act, 2006. The revenue argued that since the assessee's income from banking activities was beyond the purview of section 80P, the dividend income should not be eligible for exemption. However, the CIT(A) allowed the deduction of dividend earned by the assessee, citing precedents and the plain law of section 80P (2) (d). The coordinate bench's decisions in similar cases supported the assessee's claim for exemption under section 80P (2) (d), leading to the dismissal of the revenue's appeal.

Addition of opening balance of Special Reserve under section 41(1) of the Act:
During the hearing, the counsel for the assessee argued that the addition of Rs. 8,03,892 on account of the opening balance of the Special Reserve was unjustified under section 41(1) of the Act. It was explained that the amount represented the transfer of long-outstanding liabilities from the balance sheet to the Reserve due to untraceable entries. The nature of the Special Reserve and the circumstances surrounding the transfer were discussed, leading to the conclusion that the grounds in the cross objections were not pressed. Consequently, the cross objection of the assessee was dismissed. The appeal of the revenue and the cross objection of the assessee were ultimately dismissed by the tribunal.

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