2024 (4) TMI 795 - AT - Income Tax

Eligibility of Deduction u/s 80P - bank interest earned from cooperative banks - Assessee is a co-operative society primarily engaged into arranging for prompt payment to beneficiaries of diseased employees - HELD THAT - The income earned by a co-operative society by way of interest derived by from its investment with any other cooperative society, then the whole of such income is deductible. Further the amount of interest received by the assessee from the different cooperative banks; it is not the claim that those banks are also not cooperative societies. It is agreed that those are also the cooperative bank in terms of The Banking Regulation Act, 1949. Therefore even if it is accepted that bank interest on from cooperative banks by the assessee is not the income from the business of the assessee and therefore the claim of the assessee fails under section 80P(2)(a) of the act, but the claim is still allowable and therefore cannot be denied u/s 80P(2)(d) of the act. This issue is also covered in favour of the assessee by the decision of Kerala State Co-Operative Agricultural Rural Development Bank Ltd. 2023 (9) TMI 761 - SUPREME COURT where the deduction was allowable to the state level agricultural and rural development bank, was engaged in providing credit facility to its members . The case of the assessee is on far better footings that these are society of only the employees of Indian oil Corporation. In view of the above facts, we direct the learned lower authorities to allow the deduction to the assessee on interest income earned from various cooperative banks under section 80P(2)(d) of the act. - Appeals of the assessee are allowed.

Summary

Issues:
The judgment involves the issue of whether the assessee is entitled to the deduction of interest income received from cooperative banks under sections 80P(2)(a) or 80P(2)(d) of the Income Tax Act.

Assessment Year 2013-14:
The assessee, a cooperative society, filed an appeal against the denial of deduction under section 80P of the Income Tax Act. The dispute arose from the disallowance of interest income received from cooperative banks. The Assessing Officer disallowed the deduction, leading to the appeal. The CIT-A dismissed the appeal, citing precedents. However, the Tribunal held in favor of the assessee, allowing the deduction under section 80P(2)(d) for interest income from cooperative banks.

Assessment Year 2017-18:
Similar to the previous year, the assessee claimed a deduction under section 80P(2)(d) for interest income from cooperative banks. The Assessing Officer disallowed the deduction, leading to an appeal. The CIT-A upheld the disallowance, leading to the current appeal. The Tribunal, after considering the facts and legal provisions, allowed the deduction under section 80P(2)(d) for interest income from cooperative banks.

Key Points:
The assessee, a cooperative society, primarily facilitates payments to beneficiaries of deceased employees. The issue revolved around whether the interest income from cooperative banks is eligible for deduction under section 80P(2)(d). The Tribunal analyzed the provisions of the Income Tax Act and relevant precedents to conclude that the assessee is entitled to the deduction for interest income earned from cooperative banks. The Tribunal emphasized that the nature of the income and the cooperative society's registration status supported the allowance of the deduction under section 80P(2)(d).

Conclusion:
In both assessment years, the Tribunal allowed the appeals of the assessee, directing the lower authorities to permit the deduction for interest income earned from cooperative banks under section 80P(2)(d) of the Income Tax Act. The Tribunal's decision was based on the cooperative society's nature, registration status, and the specific provisions of the Act regarding deductions for such income.