2023 (3) TMI 49 - AT - Income Tax

Deduction u/s. 80P(2)(d) - Interest income earned from such Cooperative Society - HELD THAT - Section 80P(2)(d) provides that deduction shall be allowed in respect of any income by way of dividend derived by the Co-operative Society from its investment with any other Co-operative Society . The only requirement for claiming deduction under this provision is that the interest or dividend should be derived by the assessee s Co-operative Society by making investment in any other Co-operative Society. In the aforestated decision of Pune Tribunal the Pune District Central Co-operative Bank 2022 (8) TMI 1291 - ITAT PUNE has already been held to be a Co-operative Society and the assessee before us also has invested and earned interest and dividend income from the same Pune District Central Co-operative Bank. Since, it is a Co-operative Society, the interest earned from investment made in Pune District Central Co-operative Bank are eligible for deduction u/s. 80P(2)(d) of the Act. We set aside the respective NFAC orders for all the three appeals before us and direct the Ld. AO for granting deduction u/s. 80P(2)(d) of the Act to the assessee. The grounds of appeal are allowed.

Summary

Issues:
1. Eligibility of interest and dividend income for deduction u/s. 80P(2)(d) of the Income Tax Act.
2. Classification of Co-op Banks as Co-operative societies for tax deduction purposes.
3. Interpretation of decisions by the Jurisdictional Pune Bench of Hon'ble Tribunal.
4. Validity of NFAC orders.
5. Granting leave to add, amend, or modify grounds of appeal and lead evidence.

Analysis:

Issue 1: Eligibility of interest and dividend income for deduction u/s. 80P(2)(d) of the Income Tax Act
The appeals by the assessee questioned the addition of interest and dividend income from other Co-op Banks to the society's income, contending it was eligible for deduction u/s. 80P(2)(d). The Ld. AO disallowed the deductions, stating the investments were not in a Cooperative Society. NFAC upheld this decision. However, recent Pune Tribunal decisions, including ITA No. 306/PUN/2022, established that income derived from Co-operative Societies like Pune District Central Co-operative Bank is eligible for deduction u/s. 80P(2)(d). The Tribunal directed the Ld. AO to grant the deduction, allowing the appeals.

Issue 2: Classification of Co-op Banks as Co-operative societies for tax deduction purposes
The main contention was whether Co-op Banks are considered Co-operative Societies for tax deduction purposes under section 80P(2)(d). While the Ld. AO and NFAC initially held that Co-op Banks were not Co-operative Societies, subsequent Pune Tribunal decisions clarified that entities like Pune District Central Co-operative Bank are indeed Co-operative Societies. This clarification led to the allowance of deductions for interest and dividend income derived from such entities under section 80P(2)(d).

Issue 3: Interpretation of decisions by the Jurisdictional Pune Bench of Hon'ble Tribunal
The assessee argued that decisions by the Jurisdictional Pune Bench of Hon'ble Tribunal favored their position regarding the deduction u/s. 80P(2)(d). The recent decision in ITA No. 306/PUN/2022 highlighted that income from investments in Co-operative Societies like Pune District Central Co-operative Bank qualifies for deduction, aligning with the assessee's stance.

Issue 4: Validity of NFAC orders
The NFAC orders denying the deduction of interest and dividend income from Co-op Banks were challenged by the assessee. The Tribunal, considering the recent Pune Tribunal decisions, overruled the NFAC orders and directed the Ld. AO to grant the deduction u/s. 80P(2)(d) for the relevant assessment years.

Issue 5: Granting leave to add, amend, or modify grounds of appeal and lead evidence
The appellant prayed for leave to add, amend, or modify the grounds of appeal and lead evidence. The Tribunal allowed the appeals, setting aside the NFAC orders and directing the Ld. AO to grant the deduction u/s. 80P(2)(d) for all three appeals.