2019 (5) TMI 704 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest earned from deposits in Co-operative Banks and nationalised Banks - HELD THAT - This issue for consideration before us has been considered and decided against the assessee by following the decision of THE TOTAGARS CO-OPERATIVE SALE SOCIETY, 2017 (1) TMI 1100 - KARNATAKA HIGH COURT considering M/S. THE TOTGARS COOPERATIVE SALE SOCIETY LIMITED VERSUS INCOME TAX OFFICER. KARNATAKA 2010 (2) TMI 3 - SUPREME COURT we hold that the assessee is not entitled for being allowed deduction under section 80P(2)(d) of the Act on interest income earned on deposits made with Co-operative Banks and nationalized Banks - Decided against assessee. Deduction u/s 80P( 2) (c) - Profits and gains used in section 80P(2)(c) - as submitted that the profits and gains attributable to such activities include the activities of the assessee and the profit earned by the assessee from such activities - claim of the assessee is that the assessee falls within the category of 80P(2)(c) and therefore is entitled to deduction as mentioned in the said provision upto an amount of ₹ 50,000/-, whereas case of the Revenue is that as the activities of the assessee are not eligible for deduction under any of the clauses - HELD THAT - This issue is no more resintegra as various high court and tribunal had decided this issue in favour of assessee. See FILM NAGAR CO-OPERATIVE HOUSING SOCIETY LTD. VERSUS INCOME-TAX OFFICER. 2002 (7) TMI 233 - ITAT HYDERABAD-B , TAMIL NADU BRICK AND TILE MANUFACTURERS INDUSTRIAL SERVICE CO-OPERATIVE SOCIETY LTD. VERSUS COMMISSIONER OF INCOME-TAX. 2002 (12) TMI 24 - MADRAS HIGH COURT In view of the above the assessee is entitle to deduction under section 80P( 2) (c) of the Act as the assessee was carrying the cooperative activities within the meaning of law - Decided in favour of assessee

Summary

Issues Involved:
1. Entitlement to deduction under Section 80P(2)(d) of the Income Tax Act.
2. Entitlement to deduction under Section 80P(2)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Entitlement to Deduction under Section 80P(2)(d):

The primary issue was whether the interest income of ?63,16,231/- earned by the assessee from a cooperative bank is entitled to deduction under Section 80P(2)(d) of the Income Tax Act. The assessee, a Housing Cooperative Society, had filed a return of income declaring nil income after claiming this deduction. The AO disallowed the deduction, which was upheld by the CIT (A). The Tribunal referred to the decision of the jurisdictional High Court in Pr. CIT v. Totgars Co-op Sale Society [395 ITR 611], which held that the interest earned from a cooperative bank is not deductible under Section 80P(2)(d). The Tribunal noted that this issue had been conclusively decided against the assessee by the High Court and the Supreme Court in Totgar’s Cooperative Sale Society v. ITO [322 ITR 283]. Therefore, the ground raised by the assessee was dismissed.

2. Entitlement to Deduction under Section 80P(2)(c):

The second issue was whether the assessee was entitled to a deduction of ?50,000/- under Section 80P(2)(c) of the Act. The CIT (A) had denied this deduction on the ground that the activities of the assessee were not covered under Sections 80P(2)(a) and (b). The assessee argued that the term "profits and gains" used in Section 80P(2)(c) should be interpreted broadly to include all heads of income, as supported by the Supreme Court's decision in CIT v. Virmani Industries P. Ltd [216 ITR 607]. The Tribunal agreed with the assessee, citing various judgments, including Film Nagar Co-operative Housing Society Ltd. [91 ITD 27], Maker Tower Co-op. Hsg. Society Ltd. [20 SOT 253], and Tamil Nadu Brick & Tile Mfrs. Industrial Service Co-operative Society Ltd. [129 TAXMAN 343], which supported the view that the term "profits and gains" encompasses a broader range of income. Consequently, the Tribunal held that the assessee was entitled to the deduction under Section 80P(2)(c)(ii) for ?50,000/-.

Conclusion:

The Tribunal dismissed the ground related to the deduction under Section 80P(2)(d) but allowed the deduction under Section 80P(2)(c). The appeals were partly allowed, and the order was pronounced in the open court on 22nd March 2019.