2019 (1) TMI 212 - AT - Income Tax

Deduction claimed u/s 80P - Deduction in respect of income of co-operative societies - assessee is co-operative society and registered under Multi-State Cooperative Societies Act, 2002 - Held that - Ratio laid down by the Hon ble Supreme Court in the case of Totgars Co-op. Sale Society Ltd (2010 (2) TMI 3 - SUPREME COURT) cannot be applied to the facts of the credit society and accordingly deduction under section 80P of the Act has been allowed against interest income from deposits with nationalized banks As this issue is squarely covered in favour of the assessee by the decision of the Hon ble Jurisdictional High Court in assessee s own case. In this regard we would like to place reliance upon the decision of the Hon ble Apex Court in the case of CIT vs. Excel Industries 2013 (10) TMI 324 - SUPREME COURT wherein the principle of consistency has been reiterated. Hence when the issue has been decided by the Jurisdictional High Court no convincing reason has been pointed to take a different view, any deviation is not permitted. - Decided in favour of assessee

Issues Involved:
1. Deduction under Section 80P of the Income Tax Act for interest income from deposits with non-cooperative banks.
2. Applicability of the Supreme Court's decision in Totgars’ Cooperative Sale Society Ltd. v. ITO to the present case.
3. Principle of consistency in applying tax laws.

Detailed Analysis:

1. Deduction under Section 80P of the Income Tax Act for interest income from deposits with non-cooperative banks:

The primary issue in these appeals is whether the interest income earned by a cooperative society from deposits with non-cooperative banks qualifies for deduction under Section 80P of the Income Tax Act. The assessee, a cooperative society registered under the Multi-State Cooperative Societies Act, 2002, claimed deductions under Section 80P for interest income from such deposits along with its profits from banking activities. The Assessing Officer (AO) disallowed the deduction, arguing that the interest income from these deposits was not covered under Section 80P(2)(a)(i) or Section 80P(2)(d) of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition made by the AO, leading the Revenue to appeal before the Tribunal.

2. Applicability of the Supreme Court's decision in Totgars’ Cooperative Sale Society Ltd. v. ITO to the present case:

The Revenue relied on the Supreme Court's decision in Totgars’ Cooperative Sale Society Ltd. v. ITO, where it was held that interest income on surplus funds invested in short-term deposits and securities is not eligible for deduction under Section 80P as it constitutes "income from other sources." However, the Tribunal distinguished the present case from Totgars, noting that the assessee is a cooperative credit society solely engaged in providing credit facilities to its members and does not carry out any other activities. The funds in question were operational funds, not surplus funds, and were required to maintain liquidity for the society's business operations. Therefore, the Tribunal concluded that the interest income from these deposits is attributable to the business of banking and qualifies for deduction under Section 80P.

3. Principle of consistency in applying tax laws:

The Tribunal emphasized the principle of consistency, citing previous decisions where similar deductions were allowed to the assessee. The Tribunal referenced decisions from the Kolkata Benches and the Hon'ble Jurisdictional High Court, which had consistently ruled in favor of the assessee in similar circumstances. The Tribunal also noted that the Revenue had accepted these decisions in previous and subsequent years, reinforcing the principle of consistency. The Tribunal found no compelling reason to deviate from these established rulings.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO, allowing the deduction claimed by the assessee under Section 80P. The Tribunal distinguished the present case from the Totgars decision, emphasizing the operational nature of the funds and the principle of consistency in tax rulings. Consequently, the appeals filed by the Revenue were dismissed, and the cross-objections filed by the assessee were deemed infructuous.

Final Order:

The appeals in ITA Nos.1136-338/Chny/2018 filed by the Revenue are dismissed, and the Cross-objections in CO Nos.94 & 95/Chny/2018 filed by the assessee are dismissed as infructuous. The order was pronounced on January 2, 2019, in Chennai.

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