2022 (11) TMI 775 - AT - Income Tax

Denial of deduction u/s.80P(2)(a)(i) on the interest income - HELD THAT - The Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. 2022 (1) TMI 419 - ITAT PUNE has held, vide its order that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessee is also a Co-operative society registered under the Cooperative Societies Act. Respectfully following the decision of the Division Bench, we overturn the impugned order and direct to grant deduction u/s.80P(2)(d) of the Act on the amount of interest earned from various Co-operative Banks. Assessee appeal is allowed.

Summary

Issues:
- Denial of deduction u/s.80P(2)(a)(i) on interest income of Rs.32,03,362.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune concerned the denial of deduction u/s.80P(2)(a)(i) on interest income of Rs.32,03,362. The assessee, a credit Cooperative society, filed a return declaring total income at Nil after claiming the deduction. The Assessing Officer (AO) disallowed the interest income of Rs.52,84,507 earned on term deposits with Co-operative Banks, holding it as chargeable under the head 'Income from other sources'. The first Appellate Authority upheld the AO's decision. The Tribunal was approached by the assessee challenging this denial.

Upon review, the Tribunal noted that the assessee was a cooperative society registered under the Maharashtra Cooperative Societies Act, 1960. During the relevant year, the assessee earned interest totaling Rs.1,05,06,592, with Rs.52,84,507 from various Co-operative Banks. The Tribunal referred to a decision by the Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT, which clarified the eligibility of co-operative societies for deduction u/s 80P. The Tribunal held that the provision of section 80P(4) did not affect the eligibility of a cooperative society for deduction u/s 80P(2)(d) on interest income from investments/deposits with a Co-operative Bank. As the assessee was a registered Co-operative society under the Cooperative Societies Act, the Tribunal overturned the previous decision and directed to grant deduction u/s.80P(2)(d) on the interest earned from Co-operative Banks.

In conclusion, the Tribunal allowed the appeal, setting aside the denial of deduction u/s.80P(2)(a)(i) on the interest income of Rs.32,03,362. The decision was pronounced in the Open Court on 15th November, 2022.