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2024 (4) TMI 1161 - AT - Income TaxDeduction claimed u/s 80P(2)(a)(i) - interest received from the Nationalized Banks - HELD THAT - CIT (A) allowed the appeal of the assessee on this issue by following the decision of 2016 (5) TMI 762 - ITAT AHMEDABAD for AY 2009-10 in assessee s own case. The ITAT has also decided this issue in favour of the assessee for ay 2010-11.Revenue has come in appeal before the ITAT against the decision of ld. CIT (A) granting relief to the assessee for the impugned assessment year. It is abundantly clear that the assessee has deposited its surplus funds with aforesaid banks, and these banks/institutions are not members of the assessee cooperative credit society nor these banks are credit societies, but rather these banks are commercial banks. The interest income arising from deposit of surplus funds made with banks/institution is chargeable to tax u/s 56 of the 1961 Act, and is not an income arising from the business of providing credit facilities to its members. The decision of Totgar Co-operative Sale Society 2010 (2) TMI 3 - SUPREME COURT is relevant. The assessee s claim u/s 80P(2)(a)(i) is not maintainable. There is no evidence on record to substantiate /prove that these funds were invested by the assessee with the Commercial Banks under any statutory requirement with respect to its business activity of providing credit facilities to its members. Alternative claim u/s 80P(2)(c)(ii) - This claim of the assessee cannot be accepted because of the simple and plain language of the statute. The assessee by depositing its surplus funds with banks /institutions who are not members of the assessee nor are these banks are credit societies but are commercial banks, has earned interest income which is income from other sources chargeable to tax u/s 56 - No evidence is brought on record to substantiate that these amounts were deposited with commercial banks under the statutory requirements with respect to its business activities of providing credit facilities to its members, and are not merely surplus funds placed with these commercial banks with a view to earn interest income. The claim of the assessee for deduction u/s 80P(2)(c)(ii) for deduction is not maintainable in the eyes of law, and hence the addition as made by ld. AO is sustained, and the appellate order of ld. CIT (A) is set aside so far as adjudication of this issue is concerned. The Revenue succeeds on this issue. Deduction u/s 80P(2)(d) - interest earned from deposits made with Co-operative banks - Tribunal in 2022 (5) TMI 1063 - ITAT AHMEDABAD in assessee s own case for assessment year 2016-17 allowed the relief to the assessee, we allow the claim of the assessee for deduction u/s 80P(2)(d) with respect to interest income earned from Co-operative Banks. However, none of the authorities below have given a finding that these four entities from whom the interest income is earned by the assessee are Co-operative Banks which are co-operative societies duly registered under the Co-operative Societies Act or under the State Act and to this limited extent we are directing AO to verify the facts before granting relief to the assessee. While allowing the claim of the assessee, we note that principles of res judicate are not applicable to the income tax proceedings, but principles of consistency is to be maintained. Reference is drawn to the decision of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT The assessee succeeds on this issue in the manner as indicated above. We order accordingly.
Issues Involved:
1. Deduction under section 80P(2)(a)(i) of the Income Tax Act for interest received from nationalized banks. 2. Deduction under section 80P(2)(d) of the Income Tax Act for interest received from cooperative banks. 3. Applicability of section 56 of the Income Tax Act concerning interest income from surplus funds. 4. Condonation of delay in filing the appeal by the Revenue. Issue-Wise Detailed Analysis: 1. Deduction under Section 80P(2)(a)(i) for Interest from Nationalized Banks: The Revenue challenged the deduction of Rs. 32,449/- claimed by the assessee under section 80P(2)(a)(i) for interest received from nationalized banks. The AO denied the deduction based on the decision of the Hon'ble Gujarat High Court in the case of State Bank of India v. CIT (2016) and the Hon'ble Supreme Court in Totgar Co-operative Sale Society (2010). The AO argued that interest income from nationalized banks is not eligible for deduction under section 80P(2)(a)(i) as these banks are not members of the cooperative society. The CIT(A) allowed the deduction relying on ITAT's decision in the assessee's own case for earlier years. However, the Tribunal ruled that the interest income from nationalized banks is taxable under section 56 as income from other sources and not eligible for deduction under section 80P(2)(a)(i). The Tribunal also rejected the alternative claim for deduction under section 80P(2)(c)(ii) due to the plain language of the statute and lack of statutory requirement evidence. 2. Deduction under Section 80P(2)(d) for Interest from Cooperative Banks: The assessee claimed a deduction of Rs. 1,62,24,334/- under section 80P(2)(d) for interest received from cooperative banks. The AO denied this deduction, citing the Hon'ble Karnataka High Court's decision in PCIT v. Totgar Co-operative Sale Society (2017). The CIT(A) allowed the deduction based on ITAT's decision in the assessee's own case for the previous assessment year. The Tribunal upheld the CIT(A)'s decision, relying on the Hon'ble Gujarat High Court's rulings in State Bank of India v. CIT and Surat Vankar Sahakari Sangh Ltd. v. ACIT, which allowed deductions for interest earned from cooperative banks. However, the Tribunal directed the AO to verify that the entities from which interest was earned are indeed cooperative banks registered under the Cooperative Societies Act. 3. Applicability of Section 56 for Interest Income from Surplus Funds: The AO argued that interest income from surplus funds deposited with nationalized and cooperative banks should be taxed under section 56 as income from other sources, not eligible for deductions under sections 80P(2)(a)(i) or 80P(2)(d). The Tribunal agreed with the AO regarding nationalized banks but upheld the deduction for cooperative banks, subject to verification of their status as cooperative societies. 4. Condonation of Delay in Filing the Appeal: The Revenue filed the appeal 73 days late due to administrative reasons. The Tribunal condoned the delay, noting no serious objection from the assessee and proceeded to hear the appeal on merits. Conclusion: The Tribunal partially allowed the Revenue's appeal for the assessment year 2017-18, denying the deduction for interest from nationalized banks but allowing it for cooperative banks, subject to verification. The Tribunal's decision for the assessment year 2017-18 applied mutatis mutandis to the assessment year 2018-19, resulting in a similar partial allowance for that year.
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