2022 (10) TMI 353 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) being interest income received from Cooperative Bank - assessee submitted that the assessee is a co-operative credit society and its main activity is providing credit facilities to its members by accepting deposits, savings etc. and providing loan and advances to its members only - HELD THAT - The decision of Hon ble Apex Court in the case of Totgars Co-operative Sale Society Limited 2010 (2) TMI 3 - SUPREME COURT the issue was related to interest income earned from Nationalised Bank which is taxed under the income from other sources. But in case of co-operative credit societies/cooperative banks which has different setup altogether where deduction under Section 80P(2)(a)(i) of the Act is allowable when the interest is derived from credit provided to its members. The same cannot be equated with Nationalised Bank which has dealt by the Apex Court. In the present case the assessee society had received interest income from co-operative banks only and the assessee is a credit society and funds received from its members only thus the deduction is properly claimed by the assessee. The decision of Hon ble Gujarat High Court 2016 (7) TMI 516 - GUJARAT HIGH COURT and the ratio laid down by the Hon ble Jurisdictional High Court is applicable in assessee s case. In fact, the decision of Hon ble Apex Court has also not debarred for claiming deduction under Section 80P wherein the credit facilities are given to the members and is directly related to the business while deriving interest. Thus, the appeal filed by the Revenue is dismissed.

Summary

Issues:
- Appeal by Revenue against orders passed by CIT(A) for AY 2014-15 & 2013-14.
- Dispute over deletion of interest earned under Section 80P(2)(d) of the Act.
- Interpretation of law regarding deduction eligibility for co-operative credit societies.
- Comparison between interest income from co-operative banks and Nationalised Banks.
- Applicability of Section 80P(2)(a)(i) for deduction on interest derived from credit provided to members.

Analysis:
1. The appeals were filed by the Revenue against orders dated 08.08.2019 passed by the CIT(A) for AY 2014-15 & 2013-14. The primary issue revolved around the deletion of interest earned under Section 80P(2)(d) of the Act by the CIT(A).

2. The assessee, a Co-operative Society, declared total income for AY 2014-15. The Assessing Officer disallowed the deduction under Section 80P(2)(a)(i) for interest income received from a Cooperative Bank. The PCIT directed reassessment considering legal positions, citing a relevant High Court judgment.

3. The CIT(A) allowed the appeal of the assessee, leading to the Revenue filing an appeal. The Ld. DR contended that interest income from Nationalised Banks should be taxed under "income from other sources" and not eligible for Section 80P deduction.

4. In response, the Ld. AR referenced a High Court case, stating that interest derived from credit provided to members is deductible under Section 80P(2)(a)(i) for societies offering credit facilities. The AR argued that the CIT(A) rightly upheld the appeal.

5. The Tribunal noted that the Apex Court's decision regarding Nationalised Banks differs from co-operative credit societies. Deductions under Section 80P are allowable for societies providing credit facilities to members. The Tribunal found the assessee's claim valid as it received interest income from co-operative banks and operated as a credit society.

6. The Tribunal dismissed the Revenue's appeal for both AY 2014-15 and 2013-14, affirming the CIT(A)'s decision. The judgment emphasized the distinction between co-operative credit societies and Nationalised Banks, upholding the eligibility of Section 80P deductions for interest derived from credit provided to members.

7. In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the specific setup of co-operative credit societies and their entitlement to Section 80P deductions for interest income sourced from credit extended to members.