2022 (9) TMI 1526 - AT - Income Tax

Deduction u/s. 80P(2)(d) - interest income from investment in Co-operative bank - HELD THAT - An identical issue had been considered in the case of Varathappam Palayam Primary Agricultural Co-op. Credit Society 2022 (7) TMI 113 - ITAT CHENNAI and by following decision of The Salem Agricultural Producers Co-operative Marketing Society Ltd 2016 (9) TMI 699 - MADRAS HIGH COURT held that interest earned on deposits with District Central Cooperative Banks is assessable under the head business income of the co-operative society and consequently for said interest benefit of section 80P(2)(d) is available. Thus assessee is entitled for deduction towards interest earned from Coimbatore District Central Co-operative Bank u/s. 80P(2)(d) - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Deduction under Section 80P(2)(d) of the Income Tax Act, 1961 for interest earned from a cooperative bank.
3. Classification of interest income as business income or income from other sources.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an appeal with a delay of 24 days. The learned AR for the assessee explained that the delay was due to the inability to download the order from the IT Portal. The delay was neither intentional nor willful but due to unavoidable reasons. The learned DR opposed the condonation, arguing that the reasons given did not fall within reasonable and bona fide causes. After hearing both sides, it was concluded that the reasons provided constituted a reasonable cause under the Act. Therefore, the delay was condoned, and the appeal was admitted for adjudication.

2. Deduction under Section 80P(2)(d) of the Income Tax Act, 1961:

The assessee, a cooperative primary agriculture credit society, claimed a deduction under Section 80P(2)(d) for interest earned from the Coimbatore District Central Co-operative Bank. The Assessing Officer disallowed this deduction, classifying the interest income under 'income from other sources' based on the Supreme Court's decision in M/s. The Totgars Cooperative Sales Society Ltd. The CIT(A) upheld this decision. The assessee argued that the interest income should be considered business income and thus eligible for deduction under Section 80P(2)(d), citing the Madras High Court's decision in T.C.A No. 5 of 2015 and the ITAT Chennai decision in Varathappam Palayam Primary Agricultural Co-op.Credit Society Vs. ITO.

The learned DR supported the CIT(A)'s decision, referencing the Supreme Court's ruling that interest income from fixed deposits is assessable under 'income from other sources'. However, the Tribunal found that similar issues had been resolved in favor of the assessee in previous cases, including the ITAT Chennai decision and the Madras High Court ruling. The Tribunal held that interest earned on deposits with District Central Cooperative Banks is assessable under 'business income' and eligible for deduction under Section 80P(2)(d).

3. Classification of Interest Income:

The Tribunal examined whether the interest income should be classified as business income or income from other sources. The assessee argued that the interest income from the cooperative bank should be considered business income, citing previous Tribunal and High Court decisions. The learned DR maintained that the interest income should be classified as income from other sources, referencing the Supreme Court's decision in the Totgars case.

The Tribunal reviewed the relevant case laws and concluded that the interest income from the cooperative bank should be classified as business income. Consequently, the assessee was entitled to the deduction under Section 80P(2)(d). The Tribunal directed the Assessing Officer to delete the additions made under 'income from other sources'.

Conclusion:

The Tribunal allowed the appeal, condoning the delay in filing and granting the deduction under Section 80P(2)(d) for the interest income earned from the Coimbatore District Central Co-operative Bank. The interest income was classified as business income, consistent with previous judicial decisions. The Tribunal directed the Assessing Officer to delete the additions made under 'income from other sources'. The order was pronounced in the open court on 15th September 2022.