2022 (1) TMI 888 - AT - Income Tax

Deduction u/s 80P - main provision contained in section 80P(1) and (2) specifically excludes only co-operative banks, which are co-operative societies who must possess a license from the RBI to do banking business - HELD THAT - We find that it is nobody s case that the assessee society has received interest from a co-operative bank, which is having the license from RBI. In this view of the matter, the issue is squarely covered in favor of the assessee by the aforesaid decision of Hon ble Supreme Court in THE MAVILAYI SERVICE COOPERATIVE BANK LTD. ORS. VERSUS COMMISSIONER OF INCOME TAX, CALICUT ANR. 2021 (1) TMI 488 - SUPREME COURT - Decided against revenue.

Summary

Issues:
1. Denial of deduction under section 80P(2)(d) of the Income Tax Act, 1961 in respect of interest income derived by the Appellant from a cooperative bank.
2. Failure of the Commissioner of Income Tax (Appeals) to address the main submission of the Appellant regarding the eligibility for deduction under section 80P(2)(d) of the Act.

Analysis:
Issue 1: The Appellant's appeal was against the denial of deduction under section 80P(2)(d) of the Income Tax Act, 1961 for interest income received from a cooperative bank. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the denial based on the provision that excludes interest income from cooperative banks unless they are licensed by the RBI. However, the Appellant argued that the interest income derived from a cooperative society, like a cooperative bank, should be eligible for deduction under section 80P(2)(d). The Appellate Tribunal referred to a decision of the Hon'ble Supreme Court which clarified that the provision cannot be invoked in the case of cooperative banks without an RBI license. Since it was established that the cooperative bank in question did not have an RBI license, the Tribunal ruled in favor of the Appellant, setting aside the orders of the authorities below and allowing the appeal.

Issue 2: The second issue was the failure of the Commissioner of Income Tax (Appeals) to address the main submission of the Appellant regarding the eligibility for deduction under section 80P(2)(d) of the Act. The Appellate Tribunal found that the issue at hand was the treatment of interest received by cooperative societies from other cooperative societies, including cooperative banks, under section 80P(2)(d). The Tribunal noted that the decision of the Hon'ble Supreme Court in a similar case supported the Appellant's argument. The Tribunal further emphasized that the Appellant fell within the scope of the Supreme Court decision as the cooperative bank did not possess an RBI license. Consequently, the Tribunal allowed the appeal, applying the same reasoning mutatis mutandis to the subsequent assessment year.

In conclusion, the Appellate Tribunal ruled in favor of the Appellant, allowing the appeals and setting aside the previous orders that denied the deduction under section 80P(2)(d) of the Income Tax Act, 1961. The Tribunal's decision was based on the interpretation of the law and the precedent set by the Hon'ble Supreme Court regarding the eligibility for deduction in cases involving cooperative banks without an RBI license.