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2022 (12) TMI 741 - AT - Income TaxDeduction u/s 80P(2)(d) - assessee had received interest income from the deposit made with the aforesaid Co-op. Bank - HELD THAT - We note that the issue is no longer res-integra; and the Tribunal in a recent decision in the case of Palm Court M. Premises Co-operative Society Ltd 2022 (9) TMI 650 - ITAT MUMBAI held after considering the decision of PCIT Vs. Totagar s Co-operative Sales Society 2017 (7) TMI 1049 - KARNATAKA HIGH COURT has held in favour of assessee as concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with cooperative banks - Decided against revenue.
Issues Involved:
1. Deduction under Section 80P(2)(d) of the Income Tax Act for interest earned from deposits in cooperative banks. 2. Interpretation of Section 80P(4) and its impact on Section 80P(2)(d). 3. Relevance of amendments made by the Finance Act, 2015 to Section 194A(3)(v) and its implications on Section 80P. 4. Jurisdictional High Court decisions and their applicability. Detailed Analysis: 1. Deduction under Section 80P(2)(d) of the Income Tax Act for interest earned from deposits in cooperative banks: The primary issue revolves around whether the interest earned by a cooperative society from deposits in cooperative banks qualifies for deduction under Section 80P(2)(d) of the Income Tax Act. The Assessing Officer (AO) disallowed the deduction claimed by the assessee, arguing that cooperative banks do not fall under the purview of "cooperative societies" as referred to in Section 80P(2)(d). The AO added the interest income of Rs. 2,04,21,374/- to the total income of the assessee, asserting that the interest income from cooperative banks does not partake the character of operational income from the cooperative housing society's activities. 2. Interpretation of Section 80P(4) and its impact on Section 80P(2)(d): The AO's disallowance was based on the interpretation that Section 80P(4) excludes cooperative banks from the benefits of Section 80P. However, the Ld. CIT(A) and the ITAT noted that Section 80P(4) does not affect the eligibility of a cooperative society to claim deductions under Section 80P(2)(d) for interest income earned from deposits in cooperative banks. The Tribunal emphasized that a cooperative bank continues to be a cooperative society, and thus, interest income derived from such banks is eligible for deduction under Section 80P(2)(d). 3. Relevance of amendments made by the Finance Act, 2015 to Section 194A(3)(v) and its implications on Section 80P: The revenue argued that the amendment to Section 194A(3)(v) by the Finance Act, 2015, which requires cooperative banks to deduct income tax at source, indicates a legislative intent to exclude cooperative banks from the definition of cooperative societies for the purposes of Section 80P. However, the Tribunal and the Ld. CIT(A) did not find this argument persuasive, holding that the amendment to Section 194A(3)(v) does not impact the interpretation of Section 80P(2)(d). 4. Jurisdictional High Court decisions and their applicability: The revenue relied on the decision of the Hon'ble Karnataka High Court in PCIT Vs. Totagar's Cooperative Sales Society (395 ITR 611 (Kar)), which was in favor of the revenue. Conversely, the assessee cited another decision from the same court in PCIT Vs. Totagar's Cooperative Sales Society (392 ITR 74), which was in favor of the assessee. The Tribunal applied the principle laid down by the Hon'ble Supreme Court in CIT Vs. Vegetables Products Ltd. (88 ITR 192), which states that when there are conflicting decisions, the one favorable to the assessee should be adopted. The Tribunal also referred to multiple decisions from jurisdictional benches that supported the assessee's claim for deduction under Section 80P(2)(d). Conclusion: The Tribunal upheld the decision of the Ld. CIT(A) allowing the deduction under Section 80P(2)(d) for interest income earned from deposits in cooperative banks. It dismissed the revenue's appeals, affirming that the interest income derived from investments in cooperative banks by a cooperative society is eligible for deduction under Section 80P(2)(d). The Tribunal's decision was consistent with various precedents and the principle of favoring the assessee in cases of conflicting judicial interpretations.
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