2024 (5) TMI 1459 - AT - Income Tax

Deduction u/s 80P(2)(d) - addition of interest income earned on FDs with cooperative banks and nationalised banks holding that the said interest does not qualify for deduction u/s 80P(2)(d) - HELD THAT - The Co-ordinate Bench of the Tribunal in the case of The Ugar Sugar Works Kamgar Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society . 2021 (11) TMI 1117 - ITAT PANAJI held in favour of the appellant society held that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Thus, we direct the AO to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. The grounds of appeal filed by the assessee stands allowed.

Summary

Issues:
- Appeals filed against NFAC orders for AYs 2017-18, 2018-19, and 2020-21.
- Disallowance of deduction claimed under section 80P(2)(d) for interest income.
- Interpretation of eligibility for exemption under section 80P(2)(a)(i) and 80P(2)(d) for interest income from cooperative and nationalized banks.

Analysis:
AY 2017-18:
- The appellant, a Cooperative Society, filed a return for AY 2017-18 declaring Nil income after claiming deductions under Chapter VIA of the Act.
- The AO disallowed the deduction claimed under section 80P(2)(d) for interest income earned on FDs with cooperative and nationalized banks.
- NFAC confirmed the AO's action based on Karnataka and Gujarat High Court decisions.
- The appellant appealed to the Tribunal, but no representation was made by the appellant during the hearing.
- The Sr. DR supported the lower authorities' orders citing a Bangalore Tribunal decision.
- The only issue was the eligibility of the appellant for exemption under section 80P(2)(a)(i) or 80P(2)(d) for interest income from banks.
- The Tribunal referred to its earlier decision and held in favor of the appellant, allowing the deduction under both sections for interest income from cooperative and scheduled banks.

AYrs. 2018-19 & 2020-21:
- The facts in the appeals for these years were identical to AY 2017-18.
- The decision in AY 2017-18 was held applicable to the appeals for these years.
- Consequently, all three appeals were allowed in favor of the assessee.

In conclusion, the Tribunal allowed the appeals for AYs 2017-18, 2018-19, and 2020-21, directing the AO to allow deductions under section 80P(2)(a)(i) and 80P(2)(d) for interest income earned from cooperative and nationalized banks. The Tribunal's decision was based on the interpretation of relevant provisions and previous decisions favoring the assessee's eligibility for the exemptions claimed.