2023 (6) TMI 95 - AT - Income Tax

Denial of deduction u/s 80P - interest income earned from various cooperative banks - HELD THAT - The Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. 2022 (1) TMI 419 - ITAT PUNE that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The payer of interest is also a Co-operative society registered under the Cooperative Societies Act. Respectfully following the decision of the Division Bench, overturn the impugned order and direct to grant deduction u/s.80P(2)(d) on the amount of interest earned from various cooperative banks. Assessee appeal allowed.

Summary

Issues involved:
The denial of deduction u/s.80P of the Income-tax Act on interest income earned from various cooperative banks.

Comprehensive details:
The appeal arises from an order passed by the CIT(A) in National Faceless Appeal Centre (NFAC), Delhi, regarding the assessment year 2018-19. The sole issue raised is the denial of deduction u/s.80P on interest income of Rs.22,52,021/- earned from cooperative banks. The assessee, a cooperative credit society, had this interest income disallowed by the AO under section 80P(2)(d) and added back to total income as 'income from other sources'. The CIT(A) upheld this decision, leading the assessee to approach the Tribunal.

Upon review, it was found that the question at hand pertains to granting deduction u/s.80P on interest income from cooperative banks. Referring to previous decisions by the Pune Benches, it was clarified that co-operative societies are eligible for deduction u/s.80P(2)(d) on interest income from investments/deposits in co-operative banks, provided the banks are registered as per the Co-operative Societies Act. Following a specific case law, the Tribunal overturned the previous order and directed the grant of deduction u/s.80P(2)(d) on the interest earned from various cooperative banks.

As a result of the Tribunal's decision, the appeal was allowed, and the order was pronounced in the Open Court on 26th April, 2023.