2024 (8) TMI 164 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest income earned from a scheduled bank - HELD THAT - We find that issue related with the deduction u/s 80(P)(2)(d) is squarely covered by the series of decisions in Surat Vankar Sahakari Sangh Ltd. 2016 (7) TMI 1217 - GUJARAT HIGH COURT as well as by decisions of this Tribunal in favour of assessee including in the case of Vishal Co-operative Housing Services Society Limited 2024 (2) TMI 1407 - ITAT SURAT wherein it was held that Co-operative Banks are primarily the Cooperative Society and the interest earned on deposit with Co-operative banks are eligible for deduction under section 80P(2)(d) - Decided in favour of assessee.

Summary

Issues:
- Treatment of business income as income from other sources
- Disallowance of deduction under section 80P(2)(d)
- Interpretation of section 80P(2)(d) for interest income from Co-operative Bank
- Direction by Ld. CIT(A) regarding deduction under section 80P(2)(d)

Analysis:

1. The appeal stemmed from an order under section 250 of the Income-tax Act, 1961 by the Learned Commissioner of Income-tax (Appeals) concerning the assessment year 2017-18. The appellant, a co-operative credit society, contested the treatment of its business income as income from other sources and the disallowance of deduction under section 80P(2)(d) by the Assessing Officer.

2. The appellant claimed deductions under section 80P(2)(a)(i) for interest earned on fixed deposits and business income derived from providing credit facilities to its members. The Assessing Officer disallowed the deduction under section 80P(2)(a)(i) and treated it as income from other sources. Additionally, the deduction under section 80P(2)(d) was disallowed, leading to the appellant's appeal before the Ld. CIT(A).

3. The Ld. CIT(A) directed the Assessing Officer to allow the deduction under section 80P(2)(a)(i) as claimed by the appellant and also allowed the deduction under section 80P(2)(d) but directed that no deduction should be granted on interest income from a scheduled bank. The appellant challenged this order before the Tribunal, arguing that interest income from the Co-operative Bank should be eligible for deduction under section 80P(2)(d).

4. The Tribunal considered the submissions and examined relevant case laws. It noted that the issue of deduction under section 80P(2)(d) for interest earned on fixed deposits with Co-operative Banks had been addressed in previous decisions favoring the assessee. The Tribunal found no reason to deviate from the established view that interest earned on deposits with Co-operative banks qualifies for deduction under section 80P(2)(d).

5. The Tribunal disagreed with the direction of the Ld. CIT(A) to disallow deduction under section 80P(2)(d) on interest earned from a scheduled bank, citing jurisdictional High Court decisions supporting the eligibility of such interest income for deduction. Consequently, the Tribunal allowed the grounds raised by the appellant regarding the deduction under section 80P(2)(d) and dismissed the infructuous ground related to section 80P(2)(a)(i).

6. Ultimately, the Tribunal partly allowed the appeal of the assessee, emphasizing the eligibility of interest income from Co-operative Banks for deduction under section 80P(2)(d) and rejecting the direction to disallow such deduction for interest from scheduled banks. The appeal was concluded with the pronouncement of the order on 30/05/2024.