2024 (4) TMI 647 - AT - Income Tax

Eligibility of the assessee for exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) - interest income earned by a cooperative society from the schedule banks - appellant is a cooperative society engaged in the business of providing credit facilities to its members and accepting deposits from its members. It does not enjoy any license to carry on the business of banking from Reserve Bank of India. HELD THAT - Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT and Vaveru Co-operative Rural Bank Ltd 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s 80P(2)(a)(i) of the Act. Similar view has been taken by the Hon ble Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samit 2023 (1) TMI 783 - CALCUTTA HIGH COURT and Chennai Central Cooperative Bank Ltd. 2023 (1) TMI 1088 - MADRAS HIGH COURT The interest income earned on fixed deposits with cooperative bank/scheduled bank partakes character of the business income, which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Therefore, direct the Assessing Officer to allow the exemption u/s. 80P(2)(a)(i) and section 80P(2)(d) of the Act. Thus, the grounds of appeal filed by the assessee stand allowed.

Summary

Issues involved:
The judgment deals with the eligibility of a Cooperative credit society for exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the Income Tax Act, 1961, specifically focusing on the allowability of exemption for interest income earned from cooperative banks.

Eligibility for exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the Act:
The appellant, a Cooperative credit society, filed an appeal against the order of the National Faceless Appeal Centre regarding the assessment year 2018-19. The Assessing Officer had brought to tax the interest earned on fixed deposits with cooperative banks, stating it does not qualify for deduction u/s 80P(2)(a)(i) of the Act. The Tribunal considered various judicial opinions and held that interest income earned on fixed deposits with cooperative/scheduled banks qualifies for deduction u/s 80P(2)(a)(i) of the Act. Citing relevant court decisions, the Tribunal allowed the exemption u/s 80P(2)(a)(i) and section 80P(2)(d) of the Act, ultimately allowing the appeal filed by the assessee.

Conclusion:
The judgment clarified the eligibility of a Cooperative credit society for exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the Income Tax Act, emphasizing that interest income earned on fixed deposits with cooperative/scheduled banks qualifies for deduction. The decision was based on a thorough analysis of relevant court precedents and resulted in the allowance of the appeal filed by the assessee.