2022 (12) TMI 797 - AT - Income Tax

Deduction u/s.80P(2)(a)(i) - interest earned from various Co-operative Banks - HELD THAT - The Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. 2022 (1) TMI 419 - ITAT PUNE has held 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 overturn the impugned order and direct to grant deduction u/s.80P(2)(a)(i) of the Act on the amount of interest earned from various Co-operative Banks. Assessee appeal is allowed.

Summary

Issues:
1. Ex parte order by NFAC
2. Eligibility of deduction u/s.80P(2)(a)(i) for interest income from fixed deposits
3. Interpretation of section 80P for cooperative societies

Issue 1: Ex parte order by NFAC
The judgment deals with an appeal arising from an ex parte order dated 15-07-2022 passed by the National Faceless Appeal Centre (NFAC), Delhi under section 250 of the Income-tax Act, 1961, related to the assessment year 2018-19. Despite notice, the assessee did not appear, leading to the appeal being disposed of ex parte.

Issue 2: Eligibility of deduction u/s.80P(2)(a)(i) for interest income from fixed deposits
The assessee, a Cooperative credit society, declared total income at Nil after claiming deduction u/s.80P(2)(a)(i) for a sum of Rs.57,73,194. The dispute arose regarding interest income of Rs.1,73,110 earned from fixed deposits with Nationalised banks, which the AO treated as income from other sources, disallowing deduction u/s.80P(2)(a)(i). The CIT(A) upheld this view. However, the Tribunal overturned this decision, citing precedents and holding that a cooperative society, like the assessee, is eligible for deduction u/s.80P(2)(a)(i) on interest income from investments/deposits with cooperative banks.

Issue 3: Interpretation of section 80P for cooperative societies
The judgment delves into the interpretation of section 80P for cooperative societies. It references a decision by the Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT, which clarified that despite certain restrictions on co-operative banks, a cooperative society registered under the Cooperative Societies Act is entitled to deduction u/s.80P(2)(a)(i) for interest income from investments/deposits with cooperative banks. The Tribunal applied this interpretation to the present case, allowing the appeal and directing the grant of deduction u/s.80P(2)(a)(i) on the interest earned from various cooperative banks.

This judgment highlights the importance of legal interpretation in tax matters, specifically concerning deductions for cooperative societies under section 80P of the Income-tax Act, 1961. The decision provides clarity on the eligibility of cooperative societies for deductions on interest income from cooperative banks, based on relevant legal precedents and interpretations of the law.