2023 (1) TMI 1275 - AT - Income Tax

Disallowance u/s 80P (2)(d) - interest income from Co-Op Bank in respect of its surplus funds deposited by framing the assessment u/s 143(3) - HELD THAT - Allowability of deduction claimed by the Assessee Society u/s 80P (2)(d) is no longer Res-Integra as the same has already been decided by the Tribunal in number of cases in favour of the Assessee liked in Palm Court M Premises Co-operative Society Ltd. 2022 (9) TMI 650 - ITAT MUMBAI decided the issue in favour of the assessee by distinguishing the judgment rendered in case of Totgar's Co-operative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d). Thus we are of the considered view that the Assessee is entitled for deduction claimed u/d 80P(2)(d) being the interest earned in respect of its surplus funds deposited with Co-Op Bank. Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of the addition of Rs. 19,20,726/- by disallowing the deduction claimed under section 80P(2)(d) of the Income Tax Act, 1961.
2. Entitlement of the Assessee to the deduction under section 80P(2)(d) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Confirmation of the Addition of Rs. 19,20,726/- by Disallowing the Deduction Claimed under Section 80P(2)(d):

The Assessee, a Co-Op Society, filed its return of income declaring a total income of Rs. NIL. The Assessing Officer (AO) made a disallowance of Rs. 19,20,726/- under section 80P(2)(d) on account of interest income from Co-Op Bank, framing the assessment under section 143(3) of the Income Tax Act. The Assessee appealed against this disallowance to the Commissioner of Income Tax (Appeals) [CIT(A)], who confirmed the addition and dismissed the appeal. Aggrieved by the CIT(A)'s order, the Assessee approached the Tribunal.

2. Entitlement of the Assessee to the Deduction under Section 80P(2)(d):

The Tribunal reviewed the arguments presented by both parties and examined relevant case laws and judicial pronouncements. The Assessee's representative argued that the CIT(A) erred in confirming the disallowance, relying on previous Tribunal decisions in the Assessee's favor for earlier assessment years. The Tribunal noted that the issue of deduction under section 80P(2)(d) for interest income from investments in Co-Op Banks has been consistently decided in favor of the Assessee by various coordinate benches.

The Tribunal cited the case of Palm Court M Premises Co-operative Society Ltd., where it was held that interest income earned by a Co-Op Society from investments in Co-Op Banks is eligible for deduction under section 80P(2)(d). This decision distinguished the Supreme Court judgment in Totgar's Co-operative Sale Society Ltd. and was supported by decisions from the Bombay and Gujarat High Courts. The Tribunal emphasized that the definition of "co-operative society" under section 2(19) includes Co-Op Banks, thus entitling the Assessee to the deduction.

The Tribunal further referenced several cases, including:
- M/s Solitaire CHS Ltd. Vs. Pr.CIT-26, Mumbai
- Land and Cooperative Housing Society Ltd. Vs. ITO
- M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai
- Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range 20(2)(2), Mumbai
- Kaliandas Udyog Bhavan Premises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai

These cases consistently upheld that interest income from Co-Op Banks qualifies for deduction under section 80P(2)(d). The Tribunal also noted the Karnataka High Court's decision in Pr. CIT & Anr. Vs. Totgar's Co-operative Sale Society Ltd. and the Gujarat High Court's decision in State Bank of India vs. CIT, which supported the Assessee's claim.

Conclusion:

The Tribunal concluded that the Assessee is entitled to the deduction of Rs. 19,20,726/- under section 80P(2)(d) for interest earned from surplus funds deposited with Co-Op Banks. The CIT(A) erred in upholding the AO's denial of this deduction. Consequently, the Tribunal directed the AO to allow the deduction claimed by the Assessee.

Result:

The appeal filed by the Assessee was allowed for statistical purposes. The order was pronounced in the open court on 17.01.2023.