2022 (4) TMI 494 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - interest income as received by the assessee on the surplus deposited with BDCC Bank Ltd. and also investments of statutory reserve funds - HELD THAT - On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. This issue was considered in the case of CIT vs. Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT as referring to case of Totgars Co-operative Sales Society Ltd. 2010 (2) TMI 3 - SUPREME COURT held that the ratio of decision of the Hon ble Supreme Court in the aforesaid case (supra) not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. As from material on record it is not clear that whether the entire interest income was received from cooperative bank or other bank? - In the circumstances, we remit the matter to the file of the Assessing Officer for the purpose of verifying whether entire interest income of ₹ 8,19,601/- was received from other co-operative bank, if so, allow the same or otherwise restricted the exemption to the extent of income received from other cooperative banks. Thus, the grounds raised by the assessee are partly allowed for statistical purposes.

Summary

Issues Involved:
Allowability of deduction under section 80P(2)(d) of the Income Tax Act for interest income received by a cooperative society from other cooperative societies.

Detailed Analysis:

Issue 1: Allowability of deduction under section 80P(2)(d)
The primary issue in this case revolves around the allowability of deduction under section 80P(2)(d) of the Income Tax Act for interest income received by a cooperative society from other cooperative societies. The appellant, a cooperative society engaged in providing credit facilities to its members, filed an appeal against the order of the Commissioner of Income Tax (Appeals) denying the claim for deduction of exemption on interest income received from another cooperative society. The Assessing Officer and the CIT(A) had denied the deduction, citing that income of the cooperative bank is not exempt under section 80P(4) of the Act.

Analysis:
The Tribunal analyzed the provisions of section 80P(2)(d) which exempt income derived by a cooperative society from its investments held with other cooperative societies. It was observed that the interest income should have been derived from investments made by the assessee cooperative society with other cooperative societies to claim deduction under this section. The Tribunal referred to the decision of the Hon'ble Karnataka High Court in a similar case and distinguished the applicability of section 80P(2)(d) from section 80P(2)(a)(i) of the Act.

Judicial References:
The Tribunal also referred to the decision of the Pune Bench of the Tribunal in a related case, highlighting the divergent views of different High Courts on the issue of deduction under section 80P. The Tribunal emphasized that in the absence of a direct judgment from the jurisdictional High Court, it preferred to follow the view in favor of the assessee taken by the Hon'ble Karnataka High Court.

Conclusion:
In light of the legal position and reasoning adopted by the lower authorities, the Tribunal concluded that the entire interest income source was not clear from the records. Therefore, the matter was remitted back to the Assessing Officer to verify if the interest income was received solely from cooperative banks or other sources. The Tribunal partly allowed the appeal for statistical purposes, emphasizing the need for a detailed verification regarding the source of the interest income for appropriate deduction under section 80P(2)(d).

This comprehensive analysis highlights the key legal aspects and judicial references considered by the Tribunal in determining the allowability of deduction under section 80P(2)(d) for interest income received by the cooperative society.