2021 (6) TMI 165 - AT - Income Tax

Section 80P deduction qua its interest income derived from parking of surplus funds in nationalised banks - HELD THAT - We find no substance in the Revenue's argument in view of the fact that the hon'ble jurisdictional high court's decision in The Vavveru Co-operative Rural Bank Ltd 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT and 2017 (4) TMI 1548 - ANDHRA PRADESH HIGH COURT has settled the very issue in assessee's favour and against the department thereby granting Section 80P deduction to a co-operative society qua interest income derived from parking of surplus funds in nationalised banks as well. - Decided in favour of assessee. Denying Section 80P deduction on parking of surplus funds in private banks and the interest received from the LIC deposits involving varying sums - We find no merit in the assessee's stand since their lordships said decision applies in an instance of section 80P deduction on interest income derived from nationalised banks only. We thus affirm the CIT(A)'s reasoning denying the impugned relief to the assessee. These three cross-objections of the assessee are dismissed.

Summary

Issues:
1. Eligibility of Section 80P deduction for interest income from parking of surplus funds in nationalized banks.
2. Denial of Section 80P deduction on parking of surplus funds in private banks and interest received from LIC deposits.

Analysis:

Issue 1: Eligibility of Section 80P deduction for interest income from nationalized banks:
The appeals and cross-objections arose from the CIT(A)'s orders concerning the eligibility of Section 80P deduction for interest income derived from parking surplus funds in nationalized banks. The Revenue contended that the CIT(A) erred in allowing the deduction. However, the Tribunal upheld the CIT(A)'s decision based on the precedent set by the jurisdictional high court's ruling in The Vavveru Co-operative Rural Bank Ltd. Vs. CIT. The court had previously granted Section 80P deduction to a cooperative society for interest income from parking of surplus funds in nationalized banks. Thus, the Tribunal dismissed the Revenue's appeals and affirmed the CIT(A)'s reasoning.

Issue 2: Denial of Section 80P deduction on private banks and LIC deposits:
The assessee's cross-objections sought to reverse the lower authorities' denial of Section 80P deduction on surplus funds parked in private banks and interest received from LIC deposits. The authorized representative argued that there was no distinction in Banking Regulation law between public and private sector banks. However, the Tribunal disagreed, stating that the previous high court decision granting Section 80P relief applied only to interest income from nationalized banks. Therefore, the Tribunal upheld the denial of the deduction for the assessee's deposits in private banks and LIC interest. Consequently, the Tribunal dismissed the assessee's cross-objections.

In conclusion, the Tribunal dismissed all three Revenue's appeals and the assessee's cross-objections related to the eligibility of Section 80P deduction for interest income from nationalized banks and the denial of the deduction for private banks and LIC deposits. The common order was pronounced on 24th May 2021.