2024 (8) TMI 285 - AT - Income Tax

Disallowance of deduction u/s. 80P(2)(d) - interest received by the assessee from The Sabarkantha District Central Co-operative Bank - HELD THAT - As in 2024 (4) TMI 1160 - GUJARAT HIGH COURT issue stood decided in favour of the tax-payer. 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 us to the AO to verify that the entity from whom the interest income is claimed to have been earned by the assessee namely The Sabarkantha District Central Co-operative Bank, Khedbrahma which is claimed to be a Co-operative societies is duly registered under the Cooperative Societies Act or under the State Act, and to this limited extent, we are directed AO to verify the facts before granting relief to the assessee. The appeal of the assessee is allowed as indicated above.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Allowability of deduction under Section 80P(2)(d) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed 9 days beyond the stipulated time under Section 253(3) of the Income Tax Act, 1961. The assessee attributed the delay to an inadvertent mistake by the accountant, who forgot to file the appeal on time. The Secretary of the assessee Society later discovered the oversight, and immediate steps were taken to file the appeal, resulting in a 9-day delay. The Senior Departmental Representative (D.R.) did not object to the condonation of the delay. The Tribunal considered the contentions of both parties and concluded that the assessee had shown reasonable and sufficient cause for the delay. The Tribunal emphasized that courts should favor substantial justice over technicalities unless there is clear malafide intent. Citing the Supreme Court's decision in Collector of Land Acquisition, Anantnag v. Mst. Katiji, the Tribunal condoned the delay and decided to hear the appeal on merits.

2. Allowability of Deduction Under Section 80P(2)(d):
The primary issue for adjudication was the allowability of a deduction of Rs. 2,55,000 under Section 80P(2)(d) of the Income Tax Act, 1961, concerning interest received from The Sabarkantha District Central Cooperative Bank, Khedbrahma. The assessee, a Co-operative society, had claimed a deduction under Section 80P for interest income from deposits with Co-operative Banks. The Assessing Officer (AO) denied the deduction, citing the Supreme Court's decision in Totgar Co-operative Sale Society Limited v. ITO. However, the Commissioner of Income Tax (Appeals) [CIT(A)] allowed pro-rata expenses under Section 57 but upheld the disallowance of the deduction under Section 80P(2)(d).

The assessee appealed to the Tribunal, relying on the appellate order in its own case for the preceding assessment year (2017-18), where the Tribunal had allowed the deduction. The Tribunal noted that the Gujarat High Court in Surat Vankar Sahakari Sangh Ltd. v. ACIT and State Bank of India v. CIT had ruled in favor of allowing such deductions under Section 80P(2)(d) for interest income from deposits with Co-operative Banks. The Tribunal also referred to its own decisions in similar cases, including the assessee's case for the previous assessment year, where the deduction was allowed.

The Tribunal held that the interest income earned from deposits with Co-operative Banks should be allowed as a deduction under Section 80P(2)(d). However, it directed the AO to verify that The Sabarkantha District Central Co-operative Bank, Khedbrahma, from which the interest income was earned, is a Co-operative society registered under the relevant Co-operative Societies Act or State Act. The Tribunal emphasized maintaining consistency and referred to the Supreme Court's decision in Radhasoami Satsang v. CIT, which underscores the importance of consistency in income tax proceedings.

Conclusion:
The Tribunal condoned the 9-day delay in filing the appeal and allowed the deduction under Section 80P(2)(d) for interest income from deposits with Co-operative Banks, subject to verification by the AO. The appeal was allowed in favor of the assessee.