2024 (6) TMI 1415 - AT - Income Tax

Deduction u/s. 80P(2)(a)(i)/80P(2)(d) - interest income earned from cooperative banks - 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. We are of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule banks qualify for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) 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 other cooperative banks. The grounds of appeal filed by the assessee stands allowed.

Summary

Issues:
Eligibility for exemption u/s. 80P(2)(a)(i) or u/s 80P(2)(d) of the Act in respect of interest income earned from cooperative banks.

Analysis:
The appellant, a Cooperative Society, filed an appeal against the National Faceless Appeal Centre's order for the assessment year 2020-21. The appellant claimed deduction u/s. 80P(2)(a)(i) of the Act, but the Assessing Officer disallowed the deduction for interest earned on deposits made with cooperative banks. The NFAC confirmed this decision based on Supreme Court judgments. The appellant appealed to the Tribunal, arguing that Pune Bench decisions supported their claim for deduction u/s. 80P(2)(a)(i)/80P(2)(d).

The Tribunal considered the issue of exemption u/s. 80P(2)(a)(i) or u/s 80P(2)(d) in detail. Referring to previous decisions, the Tribunal noted that income derived by a cooperative society from investments with other cooperative societies is exempt under section 80P(2)(d). The Tribunal highlighted that interest income from cooperative banks qualifies for deduction under both sections 80P(2)(a)(i) and 80P(2)(d). Citing relevant case law, the Tribunal emphasized that interest income on deposits made with cooperative banks is eligible for deduction.

The Tribunal referenced a Co-ordinate Bench decision that supported the appellant's position, emphasizing that interest income earned by a cooperative society on deposits with cooperative banks qualifies for deduction under section 80P. The Tribunal disagreed with the lower authorities' reasoning and directed the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) for interest income from cooperative banks. Consequently, the Tribunal allowed the appeal filed by the assessee, pronouncing the order in June 2024.