2024 (6) TMI 939 - AT - Income Tax

Deduction 80P(2)(d)/80P(4) - interest income earned from investment with Co-operative Banks - HELD THAT - Section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction u/s 80P of the Act. We also find that in PCIT v/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. 2023 (5) TMI 372 - SC ORDER the Hon ble Supreme Court held that a taxpayer who is merely giving credit to its members cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act and the banking activities under the Banking Regulation Act are altogether different. Therefore, the Hon ble Supreme Court held that the assessee, a co-operative credit society, could not be termed a bank/Co-operative Bank and that being a credit society, it was entitled to exemption under section 80(P)(2) of the Act. Thus, we find no basis in denial of deduction claimed under section 80P(2)(d) of the Act in respect of interest income earned from the investments with Co-operative Banks. Claim of deduction u/s 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) of the Act. We find that the coordinate bench of the Tribunal in Jansevak Co operative Society Ltd. 2023 (2) TMI 1141 - ITAT MUMBAI allowed the deduction claimed by the assessee under section 80P(2)(d). We uphold the plea of the assessee and direct the AO to grant deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with Co-operative Banks. Accordingly, we set aside the impugned order passed by the learned CIT(A). As a result, the grounds raised by the assessee are allowed.

Summary

Issues:
1. Denial of deduction claimed under section 80P of the Income Tax Act.
2. Interpretation of provisions of section 80P(2)(d) regarding interest income earned from investments with Co-operative Banks.
3. Applicability of judicial precedents in determining eligibility for deduction under section 80P(2)(d).

Detailed Analysis:
Issue 1: The appeal challenged the denial of the deduction claimed under section 80P of the Income Tax Act. The assessee's original claim of Rs. 4,07,859 under section 80P(2)(d) was restricted to Rs. 40,115 in the intimation issued under section 143(1) of the Act. The assessee contended that the restriction was due to an inadvertent error in the return of income. The CIT(A) dismissed the appeal, citing the decision in Goetze (India) Ltd. v/s CIT, [2006] 284 ITR 323, stating that the powers of the appellate authority are limited to what the assessing officer should have done.

Issue 2: The dispute centered around the denial of deduction under section 80P(2)(d) for interest income earned from fixed deposits in Co-operative Banks. The tribunal noted that interest income from savings in Co-operative Banks was allowed under section 80P(2)(d), but the income from fixed deposits was disallowed. The tribunal analyzed the provisions of section 80P(2)(d) and emphasized that for the deduction to apply, two conditions must be met: income from investments with another Co-operative Society and the status of the assessee as a Co-operative Society under the Maharashtra Co-operative Societies Act, 1960. The tribunal referred to judicial precedents to support its interpretation.

Issue 3: The tribunal referred to the decisions in Mavilayi Service Co-operative Bank Ltd. v/s CIT, Calicut, [2021] 431 ITR 1 (SC) and PCIT v/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023] 150 taxmann.com 173 (SC) to establish that the assessee, as a co-operative credit society, was entitled to the deduction under section 80P(2)(d) for interest income earned from investments with Co-operative Banks. The tribunal also cited decisions from other high courts and coordinate benches supporting the allowance of such deductions. Consequently, the tribunal directed the assessing officer to grant the deduction under section 80P(2)(d) to the assessee, overturning the CIT(A)'s decision.

Overall, the tribunal allowed the appeal, upholding the assessee's claim for deduction under section 80P(2)(d) of the Income Tax Act for interest income earned from investments with Co-operative Banks, based on the specific provisions of the Act and relevant judicial precedents.