2023 (3) TMI 819 - AT - Income Tax

Disallowance u/s 80P - interest received from Cooperative Banks - Whether Urban Cooperative Bank come under the ambit of Co-operative Societies? - HELD THAT - The decision of the Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Limited 2021 (1) TMI 488 - SUPREME COURT has taken a view that Section 80P being a benevolent provision enacted by the Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably. Various decisions especially that of Apex Court in Totgar s Co-operative Sales Society Limited 2010 (2) TMI 3 - SUPREME COURT and SBI 2016 (7) TMI 516 - GUJARAT HIGH COURT will not be applicable in the present case to the contest as the assessee has derived interest from member Co-operative Society Bank i.e. Mehsana Urban Co-operative Bank. This fact was not disputed by the Revenue. Urban Cooperative Bank which is coming under the ambit of Co-operative Societies as they are registered under the Societies Act and are into benefit of all the members of the Society. AO as well as the CIT(A) was not right in disallowing the deduction claimed u/s 80P(2)(d) of the Act. - Decided against revenue.

Summary

Issues:
The appeal against the order passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19.

Details:
The assessee, a Co-operative Bank, filed a return of income declaring total income of Rs. Nil. The case underwent limited scrutiny due to discrepancies in disclosed loans/investments compared to capital. The Assessing Officer noted interest income discrepancies and disallowed Rs.17,30,372 claimed under Section 80P(2)(d) as interest received from Mehsana Urban Co-operative Bank, stating Urban Co-operative Banks are not within the ambit of Co-operative Societies.

Being dissatisfied, the assessee appealed before the CIT(A) who upheld the disallowance. The assessee argued entitlement to deduction under Section 80P(2)(d) citing a Supreme Court decision.

The dispute centered on whether interest received from Mehsana Urban Co-operative Bank qualified for deduction under Section 80P(2)(d). The Apex Court's liberal interpretation of Section 80P was crucial, emphasizing the promotion of the co-operative sector. Distinct from previous cases cited, the Mehsana Urban Co-operative Bank was considered a member Co-operative Society Bank, falling under the Co-operative Societies' umbrella and thus eligible for the claimed deduction.

Conclusively, the appeal was allowed, rejecting the disallowance and acknowledging the deduction under Section 80P(2)(d) for the interest received from Mehsana Urban Co-operative Bank.

Order pronounced on March 17, 2023.