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2024 (5) TMI 516 - AT - Income TaxDisallowance of deduction claimed u/s 80P - interest and dividends received from investments made with DCCB - whether the assessee is eligible for deduction u/s 80P with respect to the interest income earned on deposits parked with District Cooperative Central Bank, or not? - HELD THAT - It is an admitted fact that the assessee has claimed deduction u/s 80P of the Act. The contention of the AO and the DR is that any income by way of interest or dividends derived the Co-operative Society from its investments with any other cooperative society is eligible for deduction. Revenue Authorities have also placed relied on the decision of Hon ble Supreme Court of India in the case of M/s Totgars Cooperative Sale Society Ltd 2010 (2) TMI 3 - SUPREME COURT wherein it was held that investment of surplus on hand not immediately required in Short Term deposits and securities by a co-operative society providing credit facilities to members or marketing agriculture produce to member . However, in the instant case, the facts are distinguishable and hence, in my view, the ratio laid down in the case of M/s Totgars Cooperative Sale Society Ltd.(supra) shall not be applied to the instant case. On similar set of facts, in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society 2023 (9) TMI 211 - ITAT VISAKHAPATNAM held in favour of the assessee the assessee has invested surplus funds out of the activities carried out as per the provisions of section 80P(2)(a) of the Act. We therefore by respectfully following the jurisdictional High Court are of the view that interest income should be allowed as deduction U/s. 80P(2)(a)(i) of the Act and thereby the Ld. CIT(A)-NFAC has rightly held by deleting the addition made by the Ld. AO and hence we find no infirmity in the order of the Ld. CIT(A)-NFAC. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction claimed u/s 80P of the Income Tax Act, 1961. Summary: Disallowance of Deduction u/s 80P: This appeal by the assessee challenges the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (Ld. CIT(A)-NFAC) concerning the assessment year (AY) 2018-19. The assessee, a Primary Agricultural Cooperative Credit Society, filed its return of income admitting a total income of Rs. 81,870/- after claiming a deduction of Rs. 42,07,008/- u/s 80P(2) of the Income Tax Act, 1961. The case was scrutinized, and the Ld. Assessing Officer (AO) disallowed the deduction of Rs. 15,04,982/- received as interest and dividend income from investments made with the District Cooperative Central Bank (DCCB), arguing that the income was not eligible for deduction u/s 80P(2)(d) as it was derived from a Cooperative Bank and not a Cooperative Society. On appeal, the Ld. CIT(A)-NFAC confirmed the disallowance but allowed the assessee the benefit of deduction for proportionate costs and expenses incurred to earn the interest income. Aggrieved, the assessee appealed to the Tribunal, arguing that the investments were made in compliance with statutory regulations and that the income should be eligible for deduction u/s 80P of the Act. The Ld. Departmental Representative countered that the income derived from DCCB did not qualify for deduction u/s 80P(2)(d) as it was not from a Cooperative Society. After hearing both sides, the Tribunal noted that the facts of the case were distinguishable from the precedent set by the Hon'ble Supreme Court in Totgars Cooperative Sale Society Ltd vs. ITO. The Tribunal referred to the decision of the jurisdictional High Court of Andhra Pradesh and Telangana in Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax, which held that interest income from investments in banks by cooperative societies is eligible for deduction u/s 80P(2)(a)(i) of the Act. The Tribunal also cited a similar decision by the Coordinate Bench in Kakateeya Mutually Aided Thrift and Credit Co-op Society Limited. Based on these precedents, the Tribunal concluded that the interest income earned by the assessee from DCCB should be allowed as a deduction u/s 80P(2)(a)(i) of the Act. Consequently, the Tribunal quashed the order of the Ld. CIT(A)-NFAC and allowed the appeal of the assessee. Conclusion: The appeal of the assessee is allowed, and the disallowance of deduction u/s 80P is quashed. Pronounced in the open Court on 27th March, 2024.
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