2024 (10) TMI 469 - AT - Income Tax

Deduction u/s 80P - interest income on deposit nationalized bank - AO held that the only issue is that the income earned by way of interest on such deposits kept with banks does not qualify for claiming as deduction under Chapter VIA (80P) and deduction claimed under Chapter VIA (80P) was restricted by excluding the amount of interest earned on deposits with Bank - HELD THAT - It is an admitted fact that the assessee is a Co operative Society and the assessee has deposited certain funds with Nationalised Bank and has received interest income which was claimed the as deduction under section Chapter VIA (80P) of the Act. The case of the AO is that the interest income received by the assessee is from income from other sources not eligible for deduction under Chapter VIA (80P) of the Act. We find that similar issue came up for adjudication before the Tribunal, Nagpur Bench, wherein the very same Bench was a party to that order rendered in The Ismailia Urban Co operative Society 2024 (6) TMI 1404 - ITAT NAGPUR wherein the Tribunal has considered this issue in detail and held that interest income earned by the assessee trust is eligible for deduction under Chapter VIA (80P). In the above decision, the Co ordinate Bench has already considered the judgment of the Hon ble Supreme Court in The Totgars Co operative Sale Society Ltd 2010 (2) TMI 3 - SUPREME COURT and held that the facts of this case are distinguishable and not applicable to the facts of the present case. Therefore, following the decision of The Ismailia Urban Co operative Society 2024 (6) TMI 1404 - ITAT NAGPUR set aside the impugned order passed by the learned CIT(A) and hold that the assessee is eligible to claim deduction under Chapter VIA (80P) - Assessee appeal allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for deduction under Section 80P of the Income Tax Act for interest income earned from deposits in nationalized banks.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appeal was filed with a delay of 22 days. The assessee submitted an application for condonation of delay, supported by an affidavit. The Tribunal considered the submissions and the affidavit, concluding that the delay was due to a reasonable cause. The Tribunal found the balance of convenience in favor of the assessee and decided to condone the delay, admitting the appeal for adjudication on merits.

2. Eligibility for Deduction under Section 80P:

The primary issue in the appeal was whether the assessee, a co-operative society, was entitled to a deduction under Section 80P of the Income Tax Act for interest income earned from deposits in nationalized banks. The assessee argued that the funds were deposited in nationalized banks to safeguard members' interests after the collapse of a co-operative bank, and the interest income should be considered business income eligible for deduction under Section 80P.

The Assessing Officer and the CIT(A) disallowed the deduction, reasoning that the interest income from deposits in nationalized banks did not qualify under Section 80P(2)(d), which applies to interest from investments in other co-operative societies. The CIT(A) confirmed the disallowance, noting that the banks involved were scheduled public and private sector banks, not co-operative societies.

The Tribunal reviewed the case and similar precedents, including decisions from the jurisdictional High Court and the ITAT. It referenced cases where interest income from deposits was considered eligible for deduction under Section 80P(2)(a)(i) if the funds were part of the operational funds of the co-operative society and not surplus funds. The Tribunal found that the assessee's situation was similar to those precedents, where funds were maintained for operational purposes and not as surplus.

Citing the decision in The Ismailia Urban Co-operative Society v/s ITO, the Tribunal concluded that the interest income earned by the assessee from deposits in nationalized banks was eligible for deduction under Section 80P. The Tribunal distinguished the facts of the present case from the Supreme Court decision in The Totgars' Co-operative Sale Society Ltd., which dealt with surplus funds.

Conclusion:

The Tribunal set aside the order of the CIT(A), allowing the assessee's appeal and granting the deduction under Section 80P for the interest income. The general grounds raised by the assessee did not require separate adjudication. The appeal was pronounced in favor of the assessee, allowing the claimed deduction.