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2024 (8) TMI 346 - AT - Income TaxDeduction u/s 80P (2) (a) (i) and 80P(2) - AO was of the view that deduction u/s 80P(2)(d) is not available to any co-operative society when investment was made in any cooperative bank except two cooperative bank mentioned in the sub-section (4) of Section 80P - HELD THAT - In the case of Kaliandas Udyog Bhavan Premises Coop. Society Ltd. 2018 (4) TMI 1678 - ITAT MUMBAI it is held that though the cooperative bank pursuant to the insertion of subsection (4) of Sec. 80P is no more be entitled for claim of deduction u/s 80P of the Act, but however, as a cooperative bank continued to be a cooperative society registered under the Cooperative Society Act, therefore, the interest income earned by a cooperative society from its investment held that cooperative bank would be entitled for claim of deduction u/s 80P (2) (d). We direct the AO to allow the alternative claim of deduction u/s 80P (2) (d) to the assessee in respect of interest earned/dividend from investment made with the cooperative bank, therefore, the appeal of the assessee is allowed.
Issues Involved:
1. Disallowance under section 80P(2)(a)(i) of the Income Tax Act, 1961 2. Disallowance under section 80P(2)(d) of the Income Tax Act, 1961 3. Disallowance of proportionate deduction for cost of funds deployed in fixed deposits and shares Issue 1: Disallowance under section 80P(2)(a)(i) of the Income Tax Act, 1961: The appellant contested the disallowance of Rs. 1,97,79,808 under section 80P(2)(a)(i) by the Assessing Officer (AO) on the grounds that interest and dividend income from cooperative banks were not part of the business objective. The AO observed that such income did not qualify for deduction under section 80P. The ld. CIT(A) upheld this disallowance. The appellant argued that detailed submissions were made, citing judicial pronouncements and requested allowance of the deduction. However, the ld. CIT(A) dismissed the appeal without justification. The Appellate Tribunal noted that the appellant, a Credit Cooperative Society, was not a cooperative bank and primarily provided credit facilities to its members, distinguishing it from a cooperative bank. Referring to a decision by the ITAT, the Tribunal allowed the deduction under section 80P(2)(a)(i) for interest and dividend income from cooperative banks. Issue 2: Disallowance under section 80P(2)(d) of the Income Tax Act, 1961: The AO disallowed the deduction under section 80P(2)(d) for the appellant, citing the provision inserted by the Finance Act 2006, which excluded cooperative banks from cooperative societies eligible for the benefit of section 80P. The AO concluded that the appellant was not entitled to the deduction under section 80P(2)(d). The ld. CIT(A) affirmed this disallowance. However, the Appellate Tribunal, after considering various ITAT decisions, allowed the alternative claim of deduction under section 80P(2)(d) for interest earned from investments in cooperative banks. The Tribunal emphasized that despite the exclusion of cooperative banks from section 80P benefits, they remained cooperative societies under the Cooperative Society Act, entitling them to the deduction under section 80P(2)(d). Issue 3: Disallowance of proportionate deduction for cost of funds deployed in fixed deposits and shares: The appellant raised an additional ground regarding the disallowance of proportionate deduction for the cost of funds deployed in fixed deposits and shares. However, the Tribunal's decision primarily focused on the disallowances under sections 80P(2)(a)(i) and 80P(2)(d), ultimately allowing the appellant's appeal and directing the AO to permit the alternative claim of deduction under section 80P(2)(d) for interest earned from investments in cooperative banks. The Tribunal's decision was based on the appellant's nature as a Credit Cooperative Society and the interpretation of relevant provisions and judicial precedents. ---
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