2020 (12) TMI 341 - AT - Income Tax

Deduction claimed u/s. 80P - assessee has not filed its return of income u/s.139(1) of u/s.139(4) of the Act or in response to notice u/s.148 within the prescribed time allowed hence in view of Specific provisions of Section 80A(5) deduction claimed u/s.80P(2)(a)(i) cannot be allowed - HELD THAT - What is required to be seen is whether the assessee has made a claim in the return of income filed for the relevant year or not, even though such return is not filed within due date. In this case, the assessee although not filed its return of income for the impugned assessment year u/s.139 of the Act but such return of income has been filed in response to the notice issued u/s.148 of the Act and in the said return of income the assessee has made a claim for deduction u/s.80P(2)(a)(i) - no merit in the arguments taken by the ld.DR that the assessee is not entitled for deduction u/s.80P unless such deduction is claimed by filing return of income within the prescribed time allowed u/s.139(1) or 139(4) of the Act. This view is fortified by the decision of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd. 2016 (4) TMI 826 - KERALA HIGH COURT . Interest income earned from fixed deposits and claimed deduction u/s.80P(2)(d) - AO has denied deduction on interest income earned from a co-operative bank on the ground that as per the said provisions, interest earned from any other co-operative society is only eligible for deduction u/s.80P(2)(a)(i) - HELD THAT - In this case, the assessee is primarily engaged in the business of providing credit facilities to its members and in the course of its business it has parked funds collected from its members in other co-operative banks / nationalized banks as per the statutory requirements of the cooperative societies Act. The assessee has treated interest earned from other co-operative banks as part of its business activity. Once the assessee has earned interest income as part of its business activity and such interest income is earned out of the funds belonging to its members, then the assessee is entitled for deduction u/s.80P(2)(d) in respect of such interest income. identical issue was considered by the Hon ble Madras High Court in the case of CIT vs. Veerakeralam Primary Agricultural Co-operative Credit Society 2016 (7) TMI 922 - MADRAS HIGH COURT wherein held that the benefit of deduction u/s.80P of the Act is excluded for cooperative banks but credit co-operative societies are entitled to claim deduction u/s.80P of the Act in respect of interest income earned from deposits kept in other co-operative banks. CIT(A) was right in allowing the benefit of deduction claimed u/s.80P of the Act in respect of income derived from the activity including interest income earned from fixed deposits. - Decided against revenue.

Summary

Issues Involved:
1. Disallowance of deduction claimed under Section 80P due to late filing of return.
2. Eligibility of interest income from cooperative banks for deduction under Section 80P(2)(d).

Detailed Analysis:

1. Disallowance of Deduction Claimed under Section 80P Due to Late Filing of Return:

The Revenue's primary contention was that the assessee did not file the return of income before the due date but filed it after the issuance of notice under Section 148, and thus, the claim for deduction under Section 80P should be disallowed as per Section 80A(5). The Assessing Officer (AO) disallowed the deduction claimed under Section 80P(2)(a)(i) on the grounds that the return was not filed within the prescribed time under Sections 139(1) or 139(4). The AO emphasized that the deduction cannot be allowed unless claimed in a timely filed return.

The Tribunal examined the provisions of Section 80P read with Section 80A(5) and concluded that there is no requirement in these sections that the return must be filed within the prescribed time under Section 139(1) or 139(4). The critical aspect is whether the claim was made in the return of income filed for the relevant year, even if filed late. The Tribunal referenced the decision of the Kerala High Court in Chirakkal Service Co-operative Bank Ltd. vs. CIT, which held that a return filed beyond the stipulated period could still be accepted and acted upon if proceedings are pending. Therefore, the Tribunal found no merit in the Revenue's argument and upheld the CIT(A)'s decision to allow the deduction.

2. Eligibility of Interest Income from Cooperative Banks for Deduction under Section 80P(2)(d):

The Revenue argued that the interest income earned from deposits kept in cooperative banks is not eligible for deduction under Section 80P(2)(d), referring to the Supreme Court's decision in Totagars Co-operative Sales Society Limited vs. ITO. The AO contended that the interest income should be classified as "other sources" and not business income, thus disqualifying it from deduction under Section 80P.

The Tribunal distinguished the facts of the current case from the Totagars case. It noted that in Totagars, the cooperative society was engaged in trading agricultural produce and parked surplus funds in banks, whereas the current assessee was primarily engaged in providing credit facilities to its members. The funds were deposited in cooperative banks as part of statutory requirements, and the interest earned was integral to the assessee's business activity.

The Tribunal also referenced the Madras High Court's decision in CIT vs. Veerakeralam Primary Agricultural Co-operative Credit Society, which supported the view that credit cooperative societies are entitled to claim deductions under Section 80P for interest income earned from deposits in cooperative banks. Consequently, the Tribunal upheld the CIT(A)'s decision to allow the deduction for interest income under Section 80P(2)(d).

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that allowed the assessee's claim for deduction under Section 80P, including the interest income earned from deposits in cooperative banks. The Tribunal found no error or infirmity in the CIT(A)'s order and upheld the decision to grant the deduction.

Order Pronounced:

The appeal of the Revenue was dismissed on 10th November 2020 at Chennai.