2024 (5) TMI 1531 - AT - Income Tax

Deduction u/s. 80P(2)(d) - deposit in Co-operative Banks - HELD THAT - On considering the submissions of both the parties we find that the grounds of appeal raised by assessee is covered by the decision of this Tribunal in assessee s own case for A.Y. 2018-19 2024 (10) TMI 640 - ITAT SURAT held that co- operative societies are eligible for deduction u/s 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to the said bank. This combination in a series of decisions also held that interest earned by cooperative society from cooperative bank is eligible for deduction under section 80P(2)(d). Thus we find that ground of appeal raised by assessee to the extent of interest earned from Surat District Co-operative Bank is allowable. To make more clear the other part of deduction which include interest from other institution except co-operative societies are not eligible. Thus the assessee is allowed relief.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the deduction under Section 80P(2)(d) of the Income Tax Act, 1961, is allowable for interest and dividend income received from cooperative banks.

2. Whether the principle of mutuality is violated by deposits in cooperative banks, thereby affecting the eligibility for deductions under Section 80P(2)(d).

3. The impact of the amendment in Section 194A(3)(v) of the Income Tax Act, which excludes cooperative banks from the definition of "cooperative society," on deductions under Section 80P(2)(d).

4. Whether the introduction of Section 80P(4) excludes cooperative banks from availing deductions under Section 80P(2)(d).

5. Whether the orders of the Commissioner of Income Tax (Appeals) should be upheld or set aside in favor of the Assessing Officer's determinations.

ISSUE-WISE DETAILED ANALYSIS

1. Deduction under Section 80P(2)(d) for Interest and Dividend from Cooperative Banks

Relevant Legal Framework and Precedents: Section 80P(2)(d) allows deductions for income derived by a cooperative society from investments with other cooperative societies. The Tribunal referenced past decisions, including those by the Hon'ble Jurisdictional High Court and the Supreme Court, which have held that cooperative banks qualify as cooperative societies for the purpose of this deduction.

Court's Interpretation and Reasoning: The Tribunal relied on its previous decision in the assessee's own case for A.Y. 2018-19, where it was determined that interest earned from cooperative banks is eligible for deduction under Section 80P(2)(d). The Tribunal emphasized that cooperative banks are fundamentally cooperative societies.

Key Evidence and Findings: The Tribunal noted that the assessee had confined its claim to interest income from the Surat District Cooperative Bank, which was deemed eligible for deduction.

Application of Law to Facts: The Tribunal applied the legal principles established in previous cases to the facts of the current appeals, affirming the deduction for interest income from cooperative banks.

Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the principle of mutuality was violated, and that cooperative banks were distinct from cooperative societies, based on established legal precedents.

Conclusions: The Tribunal concluded that the deduction under Section 80P(2)(d) for interest income from cooperative banks is allowable.

2. Principle of Mutuality and Cooperative Banks

Relevant Legal Framework and Precedents: The principle of mutuality requires a degree of proximity between members of a society and the cooperative bank. The Revenue argued that this principle was violated.

Court's Interpretation and Reasoning: The Tribunal did not find merit in the Revenue's argument, as previous decisions have consistently recognized cooperative banks as cooperative societies for the purpose of Section 80P(2)(d).

Conclusions: The principle of mutuality was not deemed violated, allowing the deduction to stand.

3. Impact of Amendment in Section 194A(3)(v) and Introduction of Section 80P(4)

Relevant Legal Framework and Precedents: The amendment in Section 194A(3)(v) and the introduction of Section 80P(4) were argued by the Revenue to exclude cooperative banks from deductions.

Court's Interpretation and Reasoning: The Tribunal referenced the Hon'ble Supreme Court's decision in Mavilayi Service Co-Operative Bank Ltd, which clarified that Section 80P(4) does not extend to Section 80P(2)(d).

Conclusions: The Tribunal concluded that the amendments did not affect the eligibility of cooperative banks for deductions under Section 80P(2)(d).

4. Orders of the Commissioner of Income Tax (Appeals)

Relevant Legal Framework and Precedents: The Tribunal considered whether the CIT(A)'s decisions should be upheld or the Assessing Officer's orders restored.

Court's Interpretation and Reasoning: For A.Y. 2017-18, the Tribunal affirmed the CIT(A)'s decision, finding no contrary facts or laws. For A.Y. 2020-21, the Tribunal remanded the matter to the Assessing Officer for verification, as the CIT(A) had not considered the complete details submitted by the assessee.

Conclusions: The Tribunal upheld the CIT(A)'s order for A.Y. 2017-18 and remanded the case for A.Y. 2020-21 for further verification.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed that cooperative banks qualify as cooperative societies for the purpose of Section 80P(2)(d) deductions. It also clarified that amendments in Section 194A(3)(v) and Section 80P(4) do not exclude cooperative banks from these deductions.

Final Determinations on Each Issue: The Tribunal dismissed the Revenue's appeal for A.Y. 2017-18, affirming the CIT(A)'s decision to allow the deduction. For A.Y. 2020-21, the Tribunal allowed the assessee's appeal for statistical purposes, directing the Assessing Officer to verify the details and claims.

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