2024 (6) TMI 791 - AT - Income Tax

Allowability of exemption u/s 80P(2)(d) - interest income earned by a cooperative society from the cooperative bank - HELD THAT - This issue is no longer res integra as the issue was decided by the Co-ordinate Bench of the this Tribunal in the case of The Ugar Sugar Works Kamgar Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society 2021 (11) TMI 1117 - ITAT PANAJI wherein held so long as the appellant society had not obtained any licence from Reserve Bank of India for the purpose of banking business it cannot be termed as cooperative bank. We hold that the appellant status continued to be a cooperative society though interest income as received from its members. Thus appellant society qualifies for exemption u/s 80P(2)(a)(i) of the Act. Thus even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act therefore the reasoning given by the lower authorities on this issue cannot be accepted. Therefore I direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. Thus the ground of appeal filed by the assessee stands allowed.

Summary

Issues involved: Allowability of exemption u/s 80P(2)(d) for interest income earned by a cooperative society from a cooperative bank.

The judgment deals with an appeal filed by the assessee against the order of the National Faceless Appeal Centre, Delhi, for the assessment year 2018-19. The appellant, a Cooperative Society, was denied deduction of interest income earned on fixed deposits with a cooperative bank by the Assessing Officer. The NFAC confirmed this decision based on relevant case laws. The appellant then appealed to the Tribunal. Despite no representation from the assessee, the Tribunal proceeded to hear the case. The main issue at hand was the allowability of exemption u/s 80P(2)(d) for interest income earned by a cooperative society from a cooperative bank. The Tribunal referred to a previous decision in favor of the appellant society and held that the interest income qualifies for deduction under both sections 80P(2)(a)(i) and 80P(2)(d) of the Act, directing the Assessing Officer to allow the deduction. Consequently, the appeal filed by the assessee was allowed.

In the present case, the only issue was the allowability of exemption u/s 80P(2)(d) for interest income earned by a cooperative society from a cooperative bank. The Tribunal considered relevant case laws and previous decisions to conclude that the interest income derived from deposits made with cooperative banks qualifies for deduction under both sections 80P(2)(a)(i) and 80P(2)(d) of the Act. The Tribunal rejected the reasoning of the lower authorities and directed the Assessing Officer to allow the deduction, ultimately allowing the appeal filed by the assessee.