2015 (2) TMI 281 - AT - Income Tax

Taxability of the interest and dividend income income earned by the assessee credit Co-operative society - AO declined to allow benefit of deduction u/s. Sec. 80P(2)(a)(i) treating the said interest income as a borrowing part of its business activities - Held that - There is no ambiguity in the language of Sec. 80P(2)(d). Sindhudurg District Central Co-operative Bank Ltd. is a Co-operative Society though engaged in the business of banking and hence, the assessee is entitled to claim the deduction in respect of the interest earned or received from the Sindhudurg District Central Co-operative Bank Ltd. On the plain reading of the language used in Sec. 80P(2)(d) in our opinion it is an independent deduction other than that of Sec. 80P(2)(a)(i). We, therefore, hold that the interest income earned on the fixed deposit or any other bank account with Sindhudurg District Central Co-operative Bank Ltd. is allowable as a deduction on gross basis u/s. 80P(2)(d) of the Act. - Decided in favour of assessee.

Summary

Issues involved:
- Taxability of interest income earned by the assessee credit Co-operative society
- Allowability of deduction under Sec. 80P(2)(d) for interest and dividend income

Analysis:

Issue 1: Taxability of interest income earned by the assessee credit Co-operative society:
The appeals were filed by three different assessees challenging the orders of the Ld. CIT(A) regarding the taxability of interest income earned by a Cooperative Credit Society. The Assessing Officer declined to allow the benefit of deduction under Sec. 80P(2)(a)(i) of the Income-tax Act, treating the interest income as part of the business activities. The assessee claimed deduction under Sec. 80P(2)(d) but was also rejected. The ITAT Pune held that the interest income earned from a Co-operative Society, such as Sindhudurg District Central Co-operative Bank Ltd., is eligible for deduction under Sec. 80P(2)(d) of the Act. The Tribunal relied on the decision of ITAT, Chandigarh, and emphasized that the language of Sec. 80P(2)(d) allows for an independent deduction. Therefore, the interest income earned was allowed as a deduction.

Issue 2: Allowability of deduction under Sec. 80P(2)(d) for interest and dividend income:
The Tribunal also considered the dividend income received on shares of Sindhudurg District Central Co-operative Bank Ltd. The ITAT Pune allowed the dividend income as a deduction under Sec. 80P(2)(d) based on the same reasoning applied for interest income. The Tribunal referred to a similar case where the issue was decided in favor of the assessee. The ITAT Pune upheld the claim for deduction under Sec. 80P(2)(d) for both interest and dividend income, emphasizing that the cooperative bank's status as a cooperative society is crucial for eligibility. The Tribunal dismissed the revenue's appeal and confirmed the deduction for the assessee.

In conclusion, the ITAT Pune allowed the appeals of the assessees, holding that the interest and dividend income earned from a Co-operative Society, like Sindhudurg District Central Co-operative Bank Ltd., is eligible for deduction under Sec. 80P(2)(d) of the Income-tax Act. The Tribunal's decision was based on the clear language of the provision and previous judgments supporting the assessee's claim for deduction.