2022 (11) TMI 1172 - AT - Income Tax

Deduction u/s 80P - Exemption of interest income received from other cooperative society u/s 80P(2)(d) - AO was of the opinion that the interest income so received is not eligible for exemption u/s 80P(2)(a)(i), as the said income was received from non-members of the society - HELD THAT - Reasoning of the Assessing Officer as well as the ld. CIT(A) was overruled by the Co-ordinate Bench of this Tribunal in the case of The Ugar Sugar Works Kamgar Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO 2021 (11) TMI 1117 - ITAT PANAJI in favour of the appellant society. Thus interest income is eligible for deduction u/s 80P(2)(d) - we direct AO to allow the same. Hence, the ground of appeal no.1 stands allowed. Additions u/s 40(a)(ia) and section 36(1) - HELD THAT - As inflated profits on account of such disallowances, would also qualify for deduction u/s 80P(2)(a)(i) - Hence, direct the AO to allow the above disallowances which form part of the business income of the appellant society for exemption u/s 80P. Accordingly, ground of appeal nos.2 and 3 stands allowed.

Summary

Issues Involved:
- Appeal against orders of Commissioner of Income Tax (Appeals) for assessment years 2013-14 and 2014-15.
- Applicability of provisions under sections 80P(2)(d), 40(a)(ia), and 36(1) of the Income Tax Act, 1961.
- Denial of exemption under section 80P(2)(d) for interest income received from other cooperative societies.
- Disallowance under sections 40(a)(ia) and 36(1) of the Act.

Analysis:

Issue 1: Appeal against Commissioner of Income Tax (Appeals) Orders
The appeals were filed against the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2013-14 and 2014-15. The Tribunal proceeded to dispose of both appeals by a common order due to identical facts and issues involved.

Issue 2: Applicability of Provisions under Sections 80P(2)(d), 40(a)(ia), and 36(1)
The appellant, a cooperative society, claimed exemption under section 80P(2)(d) of the Income Tax Act, 1961 for interest income received from other cooperative societies. The Assessing Officer denied the exemption and made additions under sections 40(a)(ia) and 36(1) of the Act. The Commissioner of Income Tax (Appeals) partly allowed the appeal, setting aside the disallowance under section 40(a)(ia) and confirming the addition under section 80P(2)(d).

Issue 3: Denial of Exemption under Section 80P(2)(d)
The Tribunal referred to a Co-ordinate Bench decision that clarified the eligibility of deduction under section 80P(2)(d) for income derived from investments made with other cooperative societies. The Tribunal held that the interest income in question was eligible for deduction under section 80P(2)(d) and directed the Assessing Officer to allow the same, overturning the decision of the Commissioner of Income Tax (Appeals).

Issue 4: Disallowance under Sections 40(a)(ia) and 36(1)
The Tribunal, without delving into the merits of the disallowances made under sections 40(a)(ia) and 36(1), directed the Assessing Officer to allow these disallowances as they formed part of the business income of the appellant society for exemption under section 80P of the Act. Consequently, the grounds of appeal challenging these additions were allowed.

Conclusion:
The Tribunal allowed both appeals of the assessee for the assessment years 2013-14 and 2014-15, overturning the decisions of the Commissioner of Income Tax (Appeals) on the denial of exemption under section 80P(2)(d) and disallowances made under sections 40(a)(ia) and 36(1) of the Income Tax Act, 1961. The Tribunal's detailed analysis and reference to relevant legal precedents ensured a fair and just decision in favor of the appellant cooperative society.