2022 (12) TMI 870 - AT - Income Tax

Deduction u/s.80P - Savings and Fixed Deposits with Co-operative Bank - whether the assessee is eligible for deduction u/s 80P(2)(d) where the deposits were made in the co-operative banks? - assessee contends that the co-operative bank is akin to that of the co-operative society which is registered under the Co-operative Society s Act or under any other law for the time being enforce - HELD THAT - The assessee has relied on the decision of co-ordinate bench in the case of Kaliandas Udyog Bhavan Premises Cooperative Soceity 2018 (4) TMI 1678 - ITAT MUMBAI which has considered the decision of the Totgars Co-operative Sales Society Ltd. 2017 (7) TMI 1049 - KARNATAKA HIGH COURT and also the decision of State Bank of India 2016 (7) TMI 516 - GUJARAT HIGH COURT wherein it was observed that the interest income earned by a cooperative society on its investments held with a co- operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. The assessee s case is similar to the above mentioned decision of the co-ordinate bench which has distinguished the facts with the decision of Totagars Co-operative Sales Society (supra) case. For the foregoing reasons, we are of the view that the ld. CIT(A) was not justified in confirming the action of the A.O. From the above observation and by respectfully following the above said decision, we are inclined to allow the appeal filed by the assessee which is on identical facts as that of the above cited decision. Appeal filed by the assessee is allowed.

Summary

Issues:
- Disallowance of deduction u/s. 80P of the Income Tax Act, 1961
- Interpretation of section 80P(2)(d) in relation to interest income from deposits with cooperative banks
- Application of section 143(1)(a) of the Act in disallowing the claim u/s. 80P(2)(d)

Analysis:
1. The appeal was filed challenging the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of deduction u/s. 80P for the Assessment Year 2020-21.
2. The assessee, a cooperative housing society, earned rental income and interest on deposits with cooperative banks. The claim of deduction u/s. 80P was disallowed during processing of returns u/s. 143(1).
3. The dispute revolved around whether the assessee was eligible for deduction u/s. 80P(2)(d) for interest income from deposits in cooperative banks. The assessee argued that cooperative banks are akin to cooperative societies and thus eligible for the deduction.
4. The Revenue contended that interest income from deposits with cooperative banks is similar to income from scheduled banks, making section 80P(2) inapplicable. The CIT(A) held that the income must be closely linked to the business of providing credit facilities to members to be eligible for deduction u/s. 80P(2)(a)(i).
5. The CIT(A) relied on the Karnataka High Court's decision that income eligibility depends on the nature of the activity. The Hon'ble Apex Court upheld this view, stating that interest income was not "income from business" but from "other sources," taxable u/s. 56.
6. The assessee distinguished its case from previous judgments, citing a decision where interest income from cooperative bank investments was eligible for deduction u/s. 80P(2)(d).
7. The Tribunal allowed the appeal, stating that the interest income from cooperative bank investments was entitled to deduction u/s. 80P(2)(d), following the precedent set by the co-ordinate bench. The decision was based on the specific facts and circumstances of the case.

This detailed analysis highlights the core issues, arguments presented, legal interpretations, and the final decision of the Tribunal in favor of the assessee.