2024 (3) TMI 203 - AT - Income Tax

Disallowance of deduction claimed u/s 80P - interest earned on deposits pertaining to reserve fund with sponsor Bank - HELD THAT - Coordinate Bench of this Tribunal in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society 2023 (9) TMI 211 - ITAT VISAKHAPATNAM held in favour of the assessee held that the cooperative society is eligible for deduction u/s. 80P(2)(a)(i) of the Act on the interest income received from investment in banks - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance of deduction claimed u/s 80P of the Income Tax Act, 1961.

Summary:

Condonation of Delay:
The appeal filed by the assessee was delayed by 98 days. The assessee explained that the delay was due to the belief that the appeal should be filed after receiving the order from the Income Tax Officer (ITO), Ward-1, Srikakulam. The Tribunal found the explanation reasonable and sufficient, condoning the delay and proceeding to adjudicate the appeal on merits.

Disallowance of Deduction u/s 80P:
The assessee, a primary agricultural Credit Cooperative Society, claimed a deduction u/s 80P(2)(a)(i) of the Act for interest income earned from deposits with Andhra Bank. The Ld. AO disallowed this claim, relying on the decision in the case of M/s. Totgars Cooperative Sale Society Ltd., assessing the total income at Rs. 29,54,372/-. The Ld. CIT(A)-NFAC confirmed the disallowance but allowed deduction for proportionate expenses incurred to earn the interest income.

The Tribunal noted that the facts in the Totgars case were distinguishable. The Tribunal referenced a similar case, Kakateeya Mutually Aided Thrift and Credit Co-op Society, where the deduction u/s 80P(2)(a)(i) was allowed. The Tribunal also referred to the decision of the Hon'ble High Court of Andhra Pradesh in Vavveru Cooperative Rural Bank Ltd., which held that interest income from investments in nationalized banks is eligible for deduction u/s 80P(2)(a)(i).

Respectfully following these precedents, the Tribunal quashed the order of the Ld. CIT(A)-NFAC and allowed the appeal of the assessee, granting the deduction u/s 80P(2)(a)(i) for the interest income earned from deposits with Andhra Bank.

Conclusion:
The appeal of the assessee was allowed, and the disallowance of deduction u/s 80P was overturned. The Tribunal followed the jurisdictional High Court's decision and similar Tribunal rulings to conclude that the interest income is eligible for deduction u/s 80P(2)(a)(i).