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2024 (8) TMI 281 - AT - Income TaxDeduction u/s. 80P(2)(d) - interest income earned by the assessee from FDR maintained with Ahmedabad District Co-operative Bank Limited and also interest on saving bank account - HELD THAT - We decide this issue in favour of the assessee that interest income earned from deposits with Cooperative Banks shall be allowed as deduction u/s 80P(2)(d). However, similar directions as were given by Division Bench in the appellate order in the case of Sardar Patel Co-operative Credit Society Limited 2024 (4) TMI 1161 - ITAT AHMEDABAD are now given by me to the AO to verify that the entity from whom the interest income is claimed to have been earned by the assessee namely Ahmedabad District Co-operative Bank is Cooperative Bank which is a Co-operative societies duly registered under the Co-operative Societies Act or under the State Act, and to this limited extent we directed AO to verify the facts before granting relief to the assessee. Interest income received by assessee from saving bank account maintained with Axis Bank - As the same shall not be allowed as deduction, keeping in view decision of Hon ble Supreme Court in the case of Totgar 2010 (2) TMI 3 - Supreme Court as well decision of Sardar Patel Co-operative Credit Society Limited supra . The assessee has claimed that it has not invested surplus funds in its bank account, but there is no evidence to support its contentions. The appeal of the assessee is partly allowed as indicated above.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Deduction under Section 80P of the Income-tax Act, 1961, for interest income from FDR and savings bank account. 3. Treatment of interest income from cooperative banks versus scheduled banks. 4. Applicability of the Supreme Court decision in Totgar Co-operative Sales Society Limited vs. ITO. 5. Rectification application under Section 154. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed 111 days beyond the stipulated time under Section 253(3) of the Income-tax Act, 1961. The delay was attributed to the pendency of a rectification application under Section 154 filed by the assessee with the Commissioner of Income-Tax (Appeals) [CIT(A)]. The Tribunal observed that the assessee had a bona fide reason for the delay, as the rectification application was filed to correct an apparent mistake in the appellate order. The Tribunal condoned the delay, emphasizing the principle that courts should prioritize substantial justice over technicalities, referencing the Supreme Court decision in Collector of Land Acquisition, Anantnag v. Mst. Katiji. 2. Deduction under Section 80P for Interest Income: The assessee claimed deductions under Section 80P for interest income from Fixed Deposit Receipts (FDR) and savings bank accounts. The Assessing Officer (AO) disallowed the deduction, citing the Supreme Court decision in Totgar Co-operative Sales Society Limited vs. ITO, which held that interest on bank deposits does not qualify for deduction under Section 80P. The CIT(A) upheld this view, but the assessee argued that the interest was from a cooperative bank, not a scheduled bank, and thus should be eligible for deduction under Section 80P(2)(d). 3. Treatment of Interest Income from Cooperative Banks vs. Scheduled Banks: The assessee maintained that the interest income was received from Ahmedabad District Co-operative Bank, a cooperative bank, and not from Axis Bank, a scheduled bank. The Tribunal noted that interest income from deposits with cooperative banks is eligible for deduction under Section 80P(2)(d), as supported by the Gujarat High Court decisions in Surat Vankar Sahakari Sangh Ltd. v. ACIT and State Bank of India v. CIT. The Tribunal directed the AO to verify that Ahmedabad District Co-operative Bank is a cooperative bank registered under the Cooperative Societies Act or the State Act before granting relief. 4. Applicability of the Supreme Court Decision in Totgar Co-operative Sales Society Limited vs. ITO: The AO applied the Totgar decision to disallow the deduction for interest income from FDR and savings bank accounts. However, the Tribunal distinguished the facts of the present case, noting that the interest was from a cooperative bank, not a scheduled bank. The Tribunal emphasized that interest income from cooperative banks is deductible under Section 80P(2)(d), aligning with jurisdictional High Court rulings. 5. Rectification Application under Section 154: The assessee filed a rectification application under Section 154 with the CIT(A), claiming that the interest income was mistakenly considered as received from Axis Bank instead of Ahmedabad District Co-operative Bank. The CIT(A) dismissed the application, citing a system deficiency under the faceless regime, where the appellate order was not retrievable. The Tribunal noted that the assessee should not suffer due to system deficiencies and directed the AO to address this issue at an appropriate level. Conclusion: The Tribunal partly allowed the appeal, granting the deduction under Section 80P(2)(d) for interest income from deposits with cooperative banks, subject to verification by the AO. The deduction for interest income from the savings bank account with Axis Bank was disallowed, following the Totgar decision. The Tribunal emphasized the need for consistency and substantial justice, referencing relevant High Court and Supreme Court decisions. The Tribunal also highlighted the importance of addressing system deficiencies to prevent undue hardship to taxpayers.
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