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2023 (7) TMI 904 - AT - Income TaxDeduction u/s 80(P)(2)(d) - Interest income earned on investment in Fixed Deposit with a cooperative bank. - intimation u/s 143(1) disallowing deduction - HELD THAT - The decision of case of Totagars Cooperative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT the principle laid down was elaborately taken into account in case of Mavilayi Service Cooperative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT The Hon ble Apex Court categorically stated that the cooperative societies which earned interest income on its investment made with cooperative bank would be eligible for claim of deduction u/s 80P(2)(d) - Thus, the interpretation given by the CIT(A) while dismissing the appeal of the assessee is not correct and therefore, in light of the decision of the Hon ble Apex Court in case of Mavilayi Service Cooperative Bank Ltd. (supra) is applicable in the present case. Hence, the appeal of the assessee is allowed.
Issues:
The judgment involves issues related to disallowance of deduction claimed under Section 80P(2)(d), additional income tax demand under Section 143(1), and levying interest under Section 234B & 234C. Disallowed Deduction under Section 80P(2)(d): The assessee, a Cooperative Housing society, claimed a deduction of Rs. 4,89,194/- under Section 80P(2)(d) of the Income Tax Act for interest income earned on investments in Fixed Deposit with a Cooperative Bank. The Ld. CIT(A) disallowed the deduction without providing reasons. The appellant argued that as per the Supreme Court's decision in the case of Citizen Cooperative Society Ltd, a cooperative society earning interest income from investments in a cooperative bank is eligible for the deduction under Section 80P(2)(d). The Hon'ble Apex Court's ruling in the case of The Mavilayi Service Co-operative Bank Ltd further supported the appellant's claim. The ITAT Ahmedabad held that the interpretation given by the CIT(A) was incorrect, and the appellant was entitled to the deduction under Section 80P(2)(d) based on the Supreme Court's decisions. Therefore, the appeal of the assessee was allowed. Additional Income Tax Demand under Section 143(1): The return of income for A.Y. 2021-22 was processed under Section 143(1) by the CPC, resulting in a total income computation that did not grant the claimed deduction under Section 80P(2)(d). This led to a demand of Rs. 1,91,510/-. The appellant contended that a cooperative society earning interest on deposits in a cooperative bank is entitled to exemption under Section 80P, and the demand was contrary to the law. The ITAT Ahmedabad agreed with the appellant's argument and held that the demand was incorrect based on the provisions of the Act and rules. Therefore, the additional income tax demand was deemed wrong, and the appeal was allowed in favor of the assessee. Levying Interest under Section 234B & 234C: The CPC charged interest under Section 234B of Rs. 34,588/- and under Section 234C of Rs. 9,863/-, which the appellant deemed as void ab initio. The appellant argued that levying interest on a cooperative society for interest earned on deposits in a cooperative bank was not a valid adjustment under Section 143(1)(a) of the Act. The ITAT Ahmedabad concurred with the appellant's stance, stating that the charging of interest was contrary to the facts and circumstances of the case, as well as the provisions of the Act and rules. Therefore, the levying of interest under Section 234B & 234C was deemed incorrect, and the appeal of the assessee was allowed.
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