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2023 (1) TMI 826 - AT - Income TaxDisallowance of deduction u/s 80P (2)(d) - interest received from deposits kept in co-operative bank - HELD THAT - Allowability of the deduction claimed by the Assessee u/s. 80P (2)(d) of the Act, is no longer Res-Integra having being decided by the co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd 2022 (9) TMI 650 - ITAT MUMBAI by settling the issue in favour of the assessee by distinguishing the judgment rendered by Hon'ble Supreme Court in case of Totgar's Co-operative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT and by discussing the decision rendered by Hon'ble Bombay High and Hon'ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d). CIT(A) has erred in upholding the denial of deduction claimed by the Assessee Society u/s. 80P (2)(d) of the Act, hence Assessing Officer is directed allowed the same. Appeals filed by the Assessee are allowed.
Issues Involved:
1. Disallowance of deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest received from deposits in co-operative banks. 2. Non-adherence to jurisdictional Tribunal judgments by the National Faceless Appeal Centre (NFAC). 3. Legality of adjustments made by the Centralized Processing Centre (CPC) under section 143(1) of the Act. Detailed Analysis: 1. Disallowance of Deduction under Section 80P(2)(d): The primary issue revolves around the disallowance of a deduction amounting to Rs. 6,96,725/- under section 80P(2)(d) of the Income-tax Act, 1961. The appellant, a co-operative society, invested surplus funds in various co-operative banks and claimed a deduction on the interest earned from these investments. The Assessing Officer (AO) disallowed this deduction, which was subsequently upheld by the CIT(A) based on the decision of the Karnataka High Court in the case of Totgar's Co-Operative Sales Society Ltd. 2. Non-Adherence to Jurisdictional Tribunal Judgments: The appellant argued that the NFAC erred in not following the judgments of the jurisdictional Tribunal, which had previously ruled in favor of allowing such deductions. The Tribunal cited several cases, including Palm Court M Premises Co-operative Society Ltd., M/s Solitaire CHS Ltd., and others, where it was held that interest income earned by a co-operative society from investments in co-operative banks is eligible for deduction under section 80P(2)(d). 3. Legality of Adjustments by CPC under Section 143(1): The appellant contended that the disallowance made by the CPC under section 143(1) was a debatable issue and thus, the adjustment was bad in law. The Tribunal noted that the issue of allowability of the deduction under section 80P(2)(d) is no longer res integra and has been settled in favor of the assessee by various coordinate benches of the Tribunal. Tribunal's Findings: The Tribunal examined the facts and legal arguments presented by both parties. It was undisputed that the assessee had invested surplus funds in co-operative banks and earned interest income. The Tribunal referenced the decisions of the Hon'ble Karnataka High Court and the Hon'ble Gujarat High Court, which held that interest income earned by a co-operative society from investments in co-operative banks is eligible for deduction under section 80P(2)(d). The Tribunal also reviewed the statutory provisions and previous judicial pronouncements, concluding that the interest income derived from investments with co-operative banks qualifies for the deduction under section 80P(2)(d). The Tribunal emphasized that a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912, and thus, the interest income earned from such investments is deductible. Conclusion: The Tribunal ruled in favor of the appellant, allowing the deduction under section 80P(2)(d) of the Income-tax Act, 1961. The Tribunal directed the Assessing Officer to allow the deduction of Rs. 6,96,725/- claimed by the assessee. Consequently, both appeals filed by the assessee were allowed, and the order was pronounced in the open court on 17.01.2023.
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