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2024 (6) TMI 941 - AT - Income TaxDeduction u/s 80P(2)(d) - interest received from the Co-operative Banks - assessee submitted that it is a Co-operative Housing Society and has made investments in fixed deposits with Co-operative Banks and earned interest income from savings in Co-operative Banks and interest income from term deposits in Co-operative Banks - as per AO interest income which was earned from the term deposit has been reported in the financial statements under the head Repair and Maintenance Fund and Sinking Fund and is not offered as income in the Profit and Loss account - AO held that the Co-operative Bank cannot be considered as Co-operative Society and therefore the Co-operative Bank has rightly been excluded from availing the benefits of deduction under section 80P HELD THAT - We find that in Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Co-operative Banks which are Co-operative Societies and also possesses a licence from RBI to do banking business - the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus we are of the considered view 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 under section 80P of the Act which is not the facts of the present case. Therefore we find no merits in the aforesaid reasoning adopted by the AO in denying deduction under section 80P(2)(d) of the Act to the assessee. As regards the claim of deduction under section 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. Denial of deduction u/s 80P(2)(d) - interest income which was directly credited to Repair and Maintenance Fund and Sinking Fund - CIT(A) did not grant any relief to the assessee on the basis that claim of deduction on the interest income would require a revised return of income for which the time has elapsed - HELD THAT - We find that in Goetz India Ltd. 2006 (3) TMI 75 - SUPREME COURT and Pruthvi Brokers and Shareholders Pvt. Ltd 2012 (7) TMI 158 - BOMBAY HIGH COURT as held that the appellate authority can entertain a fresh claim made by the assessee even if such a claim was not made in return of income or by way of revised return of income. In the present case it is undisputed that the interest income was also earned by the assessee from its deposits in Co-operative Bank i.e. Saraswat Co-operative Bank Ltd. Since the AO has now considered the aforesaid interest income as income from other sources and added the same to the total income of the assessee we are of the considered view that in view of our findings rendered in foregoing paragraphs the assessee is also entitled to deduction under section 80P(2)(d) of the Act on the aforesaid interest income -As a result grounds raised by the assessee are allowed.
Issues Involved:
1. Deduction under section 80P(2)(d) of the Income Tax Act, 1961 for interest income earned from investments with Co-operative Banks. 2. Eligibility of interest income directly credited to "Repair and Maintenance Fund" and "Sinking Fund" for deduction under section 80P(2)(d) of the Act. Detailed Analysis: 1. Deduction under section 80P(2)(d) for Interest Income Earned from Investments with Co-operative Banks: The Revenue contested the allowance of deduction under section 80P(2)(d) for interest income earned from investments with Co-operative Banks, arguing that the legislative intent of section 80P excludes Co-operative Banks from availing such deductions. The Assessing Officer (AO) disallowed the deduction, stating that Co-operative Banks cannot be considered Co-operative Societies and are excluded under section 80P(4). However, the learned Commissioner of Income Tax (Appeals) [CIT(A)] allowed the deduction, following the decision in Amore Commercial Premises Co-op Society Ltd. Upon appeal, the Tribunal upheld the CIT(A)'s decision, emphasizing that section 80P(4) only excludes Co-operative Banks functioning at par with commercial banks. The Tribunal noted that the Supreme Court in Mavilayi Service Co-operative Bank Ltd. v/s CIT clarified that section 80P(4) excludes only those Co-operative Banks that lend money to the public. Therefore, the Tribunal concluded that the exclusion under section 80P(4) does not apply to the assessee, a Co-operative Housing Society, and upheld the deduction under section 80P(2)(d) for the interest income from Co-operative Banks. 2. Eligibility of Interest Income Credited to "Repair and Maintenance Fund" and "Sinking Fund" for Deduction under Section 80P(2)(d): The assessee claimed that interest income of Rs. 30,19,574, directly credited to "Repair and Maintenance Fund" and "Sinking Fund," should also be eligible for deduction under section 80P(2)(d). The AO treated this interest income as "income from other sources" and added it to the total income, as it was not included in the profit and loss account. The CIT(A) denied the deduction, stating that the claim required a revised return, which was not filed within the permissible time. The Tribunal, however, referred to the Supreme Court ruling in Goetz India Ltd. v/s CIT and the jurisdictional High Court ruling in CIT v/s Pruthvi Brokers and Shareholders Pvt. Ltd., which allow appellate authorities to entertain fresh claims even if not made in the original or revised return. The Tribunal found that the interest income was indeed earned from deposits in Co-operative Banks and, following its earlier findings, allowed the deduction under section 80P(2)(d) for the interest income of Rs. 30,19,574. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under section 80P(2)(d) for interest income from Co-operative Banks. It also allowed the assessee's appeal, granting the deduction for interest income credited to "Repair and Maintenance Fund" and "Sinking Fund." The Tribunal ruled that section 80P(4) does not apply to the assessee and that appellate authorities can entertain fresh claims for deductions.
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