2023 (9) TMI 1410 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest received from another cooperative society engaged in banking activities - whether the assessee being co-operative society be denied benefit of section 80P(2)(d) of the Act on interest received from another cooperative society engaged in banking activities? - HELD THAT - CIT(A) has rightly passed the order as held Circular of CBDT cannot override the provisions of the Act of Parliament. Even the careful reading of the Circular No. 6 of CBDT make it clear that exemption is withdrawn with respect to Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards, and not the co-operative societies. The assessee before us is the cooperative society and not the Regional Rural Bank. Therefore, considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative society the assessee is entitled for the exemption on the interest earned on the deposits. Decided in favour of assesee.

Issues Involved:
1. Deletion of addition on account of disallowance of deduction claimed under section 80P(2)(d) of the Income Tax Act, 1961.
2. Consideration of relevant parts of Circular No. 6/2010.
3. Following of the ITAT Jodhpur's order in the assessee's own case for a previous assessment year.

Summary:

Issue 1: Deletion of Addition on Account of Disallowance of Deduction Claimed Under Section 80P(2)(d)
The Revenue contended that the deduction claimed by the assessee under section 80P(2)(d) of the Income Tax Act, 1961, amounting to Rs. 2,23,46,187/-, was erroneously allowed by the CIT(A). The primary argument was that Baroda Rajasthan Gramin Bank Ltd. is not registered under the Co-operative Societies Act, 1912, or any other law for registration of co-operative societies, thus not qualifying as a cooperative society under section 2(19) of the Act. The ITAT Jodhpur, however, upheld the CIT(A)'s decision, referencing the assessee's own case for the assessment year 2014-15, where it was determined that Baroda Rajasthan Gramin Bank, deemed a cooperative society under section 22 of the Regional Rural Bank Act, 1976, qualifies for the deduction under section 80P(2)(d).

Issue 2: Consideration of Relevant Parts of Circular No. 6/2010
The Revenue argued that Circular No. 6/2010 clarifies that Regional Rural Banks (RRBs) are not eligible for the deduction under section 80P from the assessment year 2007-08 onwards. The ITAT Jodhpur noted that while the CBDT Circular No. 6/2010 states that RRBs are not eligible for deduction under section 80P, it cannot override the statutory provisions of the Act. Section 22 of the Regional Rural Bank Act explicitly deems RRBs as cooperative societies for the purposes of the Income Tax Act, 1961. Therefore, the interest earned on deposits with such banks qualifies for the deduction under section 80P(2)(d).

Issue 3: Following of the ITAT Jodhpur's Order in the Assessee's Own Case for a Previous Assessment Year
The ITAT Jodhpur reiterated its earlier decision from the assessment year 2014-15, which was also confirmed by the Hon'ble Rajasthan High Court. The Tribunal emphasized that the facts of the assessment year 2016-17 are similar to those of the assessment year 2014-15. Consequently, the Tribunal directed the AO to allow the deduction of Rs. 2,23,46,187/- under section 80P(2)(d), following the precedent set in the assessee's own case.

Conclusion:
The ITAT Jodhpur dismissed the Revenue's appeal, affirming the CIT(A)'s order to allow the deduction under section 80P(2)(d) of the Income Tax Act, 1961. The Tribunal upheld that the interest earned from deposits with Baroda Rajasthan Gramin Bank Ltd. qualifies for the deduction, as the bank is deemed a cooperative society under section 22 of the Regional Rural Bank Act, 1976. The appeal was dismissed, and the CIT(A)'s order was found to be in accordance with the law and previous judicial decisions.

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