2023 (4) TMI 480 - AT - Income Tax

Deduction u/s. 80P(2)(d) - interest income earned from two Bank - CIT(Appeals) observed that u/s. 80P(2)(d) interest income earned from investments with any other co-operative society is eligible for deduction and not from co-operative/nationalized banks - as observed by the AO that the surplus funds were invested in Fixed Deposits as investments in Co-operative Bank Nationalised Bank - HELD THAT - As in Totagars Co-operative Sale Society 2017 (7) TMI 1049 - KARNATAKA HIGH COURT has decided in the issue observing substantial questions of law framed above are thus answered in favour of the Revenue and against the assessee and it is held that the income by way of interest earned by the assessee co-operative society during the Assessment Years 2007-2008 to 2011-12 on the investments made in the co-operative bank are not eligible for deductions under Section 80P(2)(d) -Thus the appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility of deduction under Section 80P(2)(d) of the Income Tax Act, 1961 on interest income from fixed deposits with co-operative banks and nationalized banks.

Condonation of Delay:
The assessee filed an appeal with a delay of 57 days, explaining that the delay was due to the order being found in the 'Promotions Category' of their email. The Tribunal accepted the explanation and condoned the delay, citing the Hon'ble Apex Court judgment in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471, stating there was "sufficient and reasonable cause for the delay."

Eligibility of Deduction under Section 80P(2)(d):
The assessee, a cooperative society, claimed a deduction under Section 80P(2)(d) for interest income earned from fixed deposits with The Mysore and Chamrajnagar District Co-operative Central Bank Ltd. and Punjab National Bank. The AO disallowed the claim, treating the interest income as "income from other sources" under Section 56, not operational income, thereby denying the deduction. The CIT(Appeals) upheld the AO's decision, stating that cooperative banks are not the same as cooperative societies and are governed by the Banking Regulation Act, 1949.

The Tribunal referenced the jurisdictional High Court's judgment in PCIT v. Totagars Co-operative Sale Society (2017) 83 taxmann.com 140 (Karnataka), which clarified that interest income from investments in cooperative banks is not eligible for deduction under Section 80P(2)(d), as cooperative banks are excluded from the term 'cooperative society' for the purposes of this deduction.

The Tribunal also noted that the legislative intent, as clarified by amendments and judicial precedents, excludes cooperative banks from the benefits of Section 80P(2)(d). Therefore, the interest income earned from fixed deposits with cooperative banks and nationalized banks is not deductible under Section 80P(2)(d).

Conclusion:
The Tribunal dismissed the appeal, upholding the CIT(Appeals)'s decision to disallow the deduction under Section 80P(2)(d) for interest income from fixed deposits with cooperative banks and nationalized banks, following the jurisdictional High Court's judgment and legislative intent. The assessee is, however, eligible for setting off of losses as per law.