2023 (4) TMI 1344 - AT - Income Tax

Deduction claimed u/s 80P(2)(a)(i)/80P(2)(d) - Assessee is a credit cooperative society and provide credit facilities to its members - HELD THAT - As relying on case of Navbharat Urban Cooperative Credit Society Ltd 2021 (12) TMI 780 - ITAT MUMBAI held that interest earned from amount kept with bank is part of the business income of the assessee and income so derived is the profit and gains of business attributable to the activity of carrying of business of providing credit facilities to its members by a cooperative society and is liable to be deducted from the gross total income u/s 80P and also allowed the deduction u/s 80P(2)(a)(i) of the Act. We have also perused the decision of Jaoli Taluka Sahkari Patpedhi Maryadit 2015 (9) TMI 170 - ITAT MUMBAI and Gandhinglaj Taluka Patpedhi Ltd. 2015 (12) TMI 287 - ITAT MUMBAI - Thus direct the A.O to allow the claim of deduction of the assessee u/s 80P(2)(a)(i) of the Act. Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction claimed by the appellant u/s 80P(2)(a)(i) and 80P(2)(d).
2. Interpretation of provisions related to deduction u/s 80P for a cooperative society.
3. Applicability of interest income derived from surplus funds deposited with banks for deduction u/s 80P(2)(a)(i).

Analysis:
1. The appeal was filed against the order disallowing the deduction claimed by the assessee u/s 80P(2)(a)(i) and 80P(2)(d). The assessee contended that the deduction was erroneously disallowed by the CIT(A) despite being entitled to it under the law.

2. The core issue revolved around the interpretation of provisions related to deduction u/s 80P for a cooperative society. The CIT(A) held that only interest derived from credit provided to members is eligible for deduction u/s 80P(2)(a)(i), excluding interest from surplus funds deposited with banks. The appellant argued that interest from surplus funds should also qualify for the deduction.

3. The crucial argument presented was regarding the applicability of interest income derived from surplus funds deposited with banks for deduction u/s 80P(2)(a)(i). The appellant cited various judicial pronouncements, including decisions by ITAT Mumbai and other courts, to support their claim that such interest income should be considered part of the business income of the cooperative society and hence eligible for deduction.

4. After considering the submissions and judicial precedents, the tribunal found merit in the appellant's argument. Citing a decision by the Karnataka High Court, the tribunal held that interest income earned from deposits with banks is attributable to the business of providing credit facilities to members by a cooperative society. As per the court's interpretation, such income is part of the profits and gains of the business and qualifies for deduction u/s 80P(2)(a)(i).

5. Relying on the decision of ITAT Mumbai in a similar case, the tribunal directed the Assessing Officer to allow the deduction u/s 80P(2)(a)(i) for the appellant. The tribunal emphasized that interest income from surplus funds deposited with banks is integral to the business activities of a cooperative society providing credit facilities, hence eligible for the deduction.

6. In conclusion, the tribunal allowed the appeal of the assessee, setting aside the disallowance of the deduction claimed u/s 80P(2)(a)(i). The order was pronounced in favor of the appellant on 26.04.2023, based on the interpretation of relevant legal provisions and judicial precedents supporting the eligibility of interest income from surplus funds for deduction under section 80P.