2024 (5) TMI 28 - AT - Income Tax

Exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) - interest income earned by a cooperative society from the scheduled banks - appellant is a cooperative society engaged in the business of providing credit facilities as it does not enjoy any license to carry on the business of banking from Reserve Bank of India - HELD THAT - Referring to various contradictory judgments as following the case of Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit 2018 (12) TMI 1926 - ITAT PUNE taken view in favour of the assessee following the judgment of Tumkur Merchants Souharda Credit Cooperative Ltd 2015 (2) TMI 995 - KARNATAKA 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. Decided in favour of assessee.

Summary

Issues involved:
The eligibility of the assessee for exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the Act.
The allowability of exemption under the provisions of section 80P(2)(a)(i) in respect of interest income earned by a cooperative society from the scheduled banks.

Eligibility for Exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the Act:
The appellant, a Co-operative credit society, filed an appeal against the order disallowing the deduction claimed u/s 80P. The AO disallowed the deduction based on the opinion that the interest income earned is not from the regular course of business. The NFAC restricted the disallowance to a lesser amount. The issue in the present appeal was whether the appellant is eligible for exemption u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the Act. The Tribunal referred to relevant court decisions and held that the appellant is eligible for deduction u/s 80P(2)(a)(i) of the Act. The Tribunal vacated the previous order and directed the Assessing Officer to allow the exemption u/s. 80P(2)(a)(i) of the Act, thereby allowing the grounds of appeal filed by the assessee.

Allowability of Exemption under Section 80P(2)(a)(i) for Interest Income:
Regarding the issue of the allowability of exemption under section 80P(2)(a)(i) for interest income earned by a cooperative society from scheduled banks, there was a difference in judicial opinion among various High Courts. Some courts held that such income is not eligible for exemption, while others took the view that it is attributable to the activities of the society and thus eligible for exemption. The Tribunal considered these differing views and followed the judgment favoring the assessee. It concluded that interest income earned on fixed deposits with cooperative/scheduled banks qualifies as business income eligible for deduction u/s 80P(2)(a)(i) of the Act. Consequently, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to grant the exemption u/s. 80P(2)(a)(i) of the Act, in line with the decision reached.