2022 (1) TMI 1158 - AT - Income Tax

Deduction u/s.80P(2)(a)(i) - deduction u/s.80P(2)(a)(i) and 80P(2)(d) in respect of interest earned on deposits made with banks - AO refused deduction u/s.80P on such interest income, which came to be allowed in the first appeal. Aggrieved thereby, the Revenue has approached the Tribunal - HELD THAT - Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit 2019 (4) TMI 682 - ITAT PUNE decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune ITAT in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit 2015 (8) TMI 1085 - ITAT PUNE had allowed the deduction in similar circumstances. Reliance of the ld. DR in the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society 2017 (7) TMI 1049 - KARNATAKA HIGH COURT is not relevant. The issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee co-operative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the effect of this decision, it turns out that the same is not germane to case under consideration in view of the position that the primary claim of the extant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act. In view of the foregoing discussion, we uphold the conclusion drawn by the ld CIT(A) in the impugned order by allowing deduction u/s.80P(2)(a)(i) of the Act. - Decided against revenue.

Summary

Issues:
1. Allowance of deduction u/s. 80P(2)(a)(i) on interest income earned by the assessee.
2. Interpretation of conflicting judgments regarding deduction u/s. 80P on interest income.
3. Relevance of a previous case regarding deduction u/s. 80P(2)(d) on interest earned by a cooperative society.

Analysis:
1. The appeal pertains to the allowance of deduction u/s. 80P(2)(a)(i) of the Income-tax Act, 1961 on interest income earned by a Co-operative Society providing credit facilities to its members. The Assessing Officer initially denied the deduction, which was later allowed in the first appeal. The Revenue challenged this decision before the Tribunal.

2. The Tribunal considered the conflicting views expressed in various judgments. It referenced the Pune ITAT's decision in a previous case where deduction u/s. 80P was allowed on interest income. This decision was contrasted with the opinions of the Karnataka High Court and the Delhi High Court on similar matters. The Tribunal noted that in the absence of a direct judgment from the jurisdictional High Court, it relied on the Karnataka High Court's view favoring the assessee, as seen in the case of Tumkur Merchants Souharda Credit Cooperative Ltd.

3. The Tribunal distinguished a previous case regarding deduction u/s. 80P(2)(d) on interest earned by a cooperative society on investments made in cooperative banks. It clarified that the current case's primary claim was about the eligibility of deduction u/s. 80P(2)(a)(i), not u/s. 80P(2)(d). The Tribunal upheld the conclusion of the CIT(A) in allowing the deduction u/s. 80P(2)(a)(i) for the assessee, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the allowance of deduction u/s. 80P(2)(a)(i) on interest income earned by the cooperative society, based on the interpretation of relevant judgments and the specific nature of the case at hand. The decision was in line with the previous findings and consistent with the legal provisions of the Income-tax Act, 1961.