2022 (6) TMI 1152 - AT - Income Tax

Deduction u/s 80P - deduction on interest earned from Co-Operative Banks u/s 80P(2)(d) - HELD THAT - CIT(A) has erred in law in holding that the observations of the Hon ble Gujarat High Court in the case of State Bank of India Vs. CIT ( 2016 (7) TMI 516 - GUJARAT HIGH COURT to the effect that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act haveno binding effect on the jurisdictional Revenue Authorities. In the case of Surendranagar District Co-op. Milk Producers Union Ltd. 2019 (9) TMI 978 - ITAT RAJKOT ITAT held that assessee-co-operative society could not claim benefit of section 80P(2)(d) in respect of interest earned by it from deposits made with nationalised/private banks, however, said benefit was available in respect of interest earned on deposits made with co-operative bank. In the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society ( 2017 (1) TMI 1100 - KARNATAKA HIGH COURT ), the Karnataka High Court has held that the interest income earned by a co- operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. Respectfully, following the decision of Honourable High Court of Gujarat and other cases cited above, in our view, interest earned by the assessee on surplus held with cooperative bank amounting would be eligible for deduction under Sec.80P(2)(d) - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction u/s 80P of interest income.
2. Delay in filing the appeal.

Issue 1: Disallowance of deduction u/s 80P of interest income:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) upholding the disallowance of deduction u/s 80P of interest income of Rs. 3,81,570 for the assessment year 2015-16. The assessing officer held that interest income earned by the assessee from deposits kept with a cooperative bank was not eligible for deduction under section 80P(2)(d) of the Act. The Ld. CIT(A) dismissed the appeal, citing a decision of the Hon'ble Gujarat High Court and the Karnataka High Court, stating that interest income from surplus funds in cooperative banks is not eligible for deduction under section 80P(2)(d). However, the ITAT Ahmedabad disagreed with this interpretation. They highlighted that interest earned by the assessee on surplus held with a cooperative bank should be eligible for deduction under Sec.80P(2)(d) of the Act, citing various precedents including the decisions of the Gujarat High Court, Kolkata ITAT, and Karnataka High Court. Consequently, the appeal of the assessee was allowed.

Issue 2: Delay in filing the appeal:
The appeal was time-barred by 106 days, and the assessee provided an affidavit explaining the delay. The ITAT Ahmedabad considered the Supreme Court's stance on the Limitation Act, emphasizing that a liberal approach should be adopted to ensure substantial justice. They noted that refusing to condone the delay could result in a meritorious matter being dismissed at the outset. Therefore, in the interests of justice, the ITAT Ahmedabad decided to condone the delay in filing the appeal, allowing the case to be decided on merits after hearing the parties.

In conclusion, the ITAT Ahmedabad's judgment favored the assessee, allowing the appeal against the disallowance of deduction u/s 80P of interest income. They also addressed the delay in filing the appeal by condoning it to ensure substantial justice. The decision was based on a detailed analysis of legal precedents and statutory provisions related to cooperative societies' eligibility for deductions under section 80P of the Income Tax Act.