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2023 (9) TMI 150 - AT - Income TaxDeduction denied u/s 80P(2)(d) - interest and dividend received from cooperative bank/cooperative society from the investments made in other cooperative banks - assessee is a cooperative society and is carrying on the activities of marketing agricultural produce grown by the members and providing credit facilities to the members by advancing loans to them - HELD THAT - In the instant case, the amount which was invested in banks to earn interest was not any amount due to its members. Further the claim of the assessee in u/s 80P(2)(d) was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to its members, as there were no takers. Therefore they had deposited the money in a co-operative bank again which interest/dividend was earned. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. See Andhra Pradesh State Co-operative Bank 2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT . We respectfully following the view taken in the case of PCIT Anr. Vs. Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and State Bank Of India 2016 (7) TMI 516 - GUJARAT HIGH COURT hold that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. It is directed that the interest earned by the assessee from commercial banks may be considered under the head income from other sources and relief may be granted as available to the assessee u/s 57 of the Act in accordance with law. Accordingly ground No. 2 and 3 raised by the assessee stands partly allowed for statistical purposes.
Issues involved:
The appeal concerns the denial of deduction under section 80P(2)(d) of the Income Tax Act on interest and dividend received from cooperative banks/cooperative societies for the assessment years 2015-16 to 2018-19. Issue 1: Disallowance of deduction under Chapter VIA The assessee, a cooperative society, engaged in various activities including marketing agricultural produce, providing credit facilities, and trading in agricultural implements. The scrutiny revealed a claim of deduction under section 80P of the Act, specifically under sections 80P(2)(a), 80P(2)(d), and 80P(2)(e). The AO disallowed the claim under section 80P(2)(d) for interest and dividend received from cooperative societies. The CIT(A) partially allowed the claim, stating that the assessee was not eligible for deduction under sections 80P(2)(a)(i) and 80P(2)(d) of the Act. The Tribunal considered the submissions and precedents, including the decision of the Hon'ble Supreme Court in a similar case, and held that the interest income earned by the cooperative society from investments in cooperative banks is eligible for deduction under section 80P(2)(d) of the Act. The Tribunal also directed that interest earned from commercial banks should be considered under 'income from other sources' for relief under section 57 of the Act. Separate Judgement by Hon'ble Karnataka High Court: The Tribunal referred to the conflicting decisions of the Hon'ble Karnataka High Court regarding the eligibility of cooperative societies to claim deduction under section 80P(2)(d). While one judgment denied the deduction, another judgment allowed it. The Tribunal followed the view favoring deduction, as upheld by the Hon'ble Karnataka High Court in a specific case. The Tribunal also cited a decision by the Hon'ble Gujarat High Court supporting the eligibility of cooperative societies for deduction under section 80P(2)(d) based on interest income from investments in cooperative banks. The Tribunal concluded that the interest income earned by a cooperative society from investments in cooperative banks qualifies for deduction under section 80P(2)(d) of the Act, aligning with the aforementioned judicial interpretations.
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