2024 (5) TMI 89 - AT - Income Tax

Deduction u/s 80P - interest income(s) realized from parking of alleged surplus funds in nationalized bank(s)/similar institution(s) involving varying sums - HELD THAT - We find in this factual backdrop that this tribunal s learned co-ordinate bench s order in Rena Sahakari Sakhar Karkhana Ltd. vs. PCIT s 2022 (1) TMI 419 - ITAT PUNE has settled the issue regarding the former limb of interest income derived from cooperative bank(s) etc., in assessee s favour The outcome would be hardly any different qua the latter limb of interest income(s) from public sector bank(s) in light of The Vaveru Co-operative Rural Bank Ltd. 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT that interest income(s) derived from such nationalized/other bank(s) also qualifies for Sec. 80P deduction. We thus reject the Revenue s vehement arguments qua the assessee s sole substantive grievance in very terms.

Summary

Issues Involved:
1. Disallowance of Sec. 80P(2)(a)(i) deduction claims.
2. Eligibility of interest income from cooperative banks for deduction under Sec. 80P(2)(d).
3. Eligibility of interest income from public sector banks for deduction under Sec. 80P.

Summary:

1. Disallowance of Sec. 80P(2)(a)(i) Deduction Claims:
The assessee's appeals challenge the correctness of the lower authorities' action disallowing Sec. 80P(2)(a)(i) deduction claims for interest income realized from parking surplus funds in nationalized banks or similar institutions. Both authorities treated this as income from "other sources" u/s 56 of the Act, not derived from credit facilities provided to members in the regular course of business.

2. Eligibility of Interest Income from Cooperative Banks for Deduction under Sec. 80P(2)(d):
The Tribunal's co-ordinate bench in "The Rena Sahakari Sakhar Karkhana Ltd. vs. PCIT" ruled in favor of the assessee, stating that interest income derived from investments with cooperative banks is eligible for deduction under Sec. 80P(2)(d). The Tribunal observed that cooperative banks, despite the insertion of sub-section (4) to Sec. 80P, continue to be cooperative societies under Sec. 2(19) of the Act. Hence, interest income from such banks qualifies for deduction.

3. Eligibility of Interest Income from Public Sector Banks for Deduction under Sec. 80P:
The Tribunal referred to "The Vaveru Co-operative Rural Bank Ltd., vs. CCIT" which held that interest income from nationalized or other banks also qualifies for Sec. 80P deduction. Thus, the Tribunal rejected the Revenue's arguments and upheld the assessee's claim for deduction.

Conclusion:
The Tribunal allowed the assessee's appeals, ruling that interest income from both cooperative and public sector banks qualifies for Sec. 80P deduction. The necessary computation will follow in consequential proceedings as per law.