2021 (10) TMI 571 - AT - Income Tax

Deduction u/s 80P - Assessee is a co-operative society providing credit facilities to its members - entire claim of deduction u/s 80P denied for the reason that the assessee is a co-operative bank and not a co-operative society - HELD THAT - The Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT had held that the co-operative societies providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) - It was further held by the Hon ble Apex Court that section 80P(4) of the I.T.Act is to be read as a proviso. It was stated by the Hon ble Apex Court that section 80P(4) of the I.T.Act now specifically excludes only co-operative banks which are co-operative societies engaged in the business of banking i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. The Hon ble Apex Court had enunciated various principles in regard to deduction u/s 80P - We restore the issue of claim of deduction u/s 80P of the I.T.Act to the files of the A.O. for de novo consideration. Denial of alternative claim of deduction u/s 80P(2)(d) of the I.T.Act stating that since section 80P(4) of the I.T.Act is invoked, the assessee is not entitled to any deduction u/s 80P - We direct the A.O. to verify whether interest / dividend is received by the assessee out of investments made with Cooperative Societies. If the assessee earns interest / dividend income out of investments with co-operative society, the same is entitled to deduction u/s 80P(2)(d) of the I.T.Act. With these observations, I restore the issue to the files of the A.O. CIT(A) has also directed the A.O. to verify whether the assessee has deducted TDS on interest payment to non-members (interest payment exceeding ₹ 10,000 poer annum). The direction of the CIT(A) is in accordance with law, since the assessee ought to have deducted TDS on interest payment to non-members when the payment exceeds ₹ 10,000 per annum. Therefore, the direction of the CIT(A) is upheld. Appeal filed by the assessee is partly allowed for statistical purposes.

Issues:
1. Delay in filing the appeal and condonation of delay.
2. Eligibility of the appellant for deduction u/s 80P(2)(a)(i) of the Income Tax Act.
3. Tax treatment of interest income earned from savings banks, fixed deposits, and investments.
4. Verification of TDS on interest payments exceeding ?10,000 to non-members.

Analysis:
1. The appeal was filed with a delay of 207 days, and the assessee requested condonation of the delay. The Tribunal found no fault on the part of the assessee and accepted the reasons provided for the delay. The delay was condoned, and the case was proceeded with on merits.

2. Regarding the eligibility for deduction u/s 80P(2)(a)(i) of the Income Tax Act, the assessee, a cooperative society, provided credit facilities to its members. The CIT(A) partially allowed the claim based on the judgment of the Supreme Court in a similar case. The Tribunal, following the Supreme Court's decision, remanded the issue to the Assessing Officer for fresh consideration.

3. The treatment of interest income earned from various sources was contested. The CIT(A) disallowed the deduction u/s 80P(2)(d) for interest income not received from cooperative societies. The Tribunal directed the AO to verify if the interest income was earned from cooperative societies for eligibility under section 80P(2)(d).

4. The CIT(A) directed the AO to verify TDS compliance on interest payments exceeding ?10,000 to non-members. The Tribunal upheld this direction, stating it was in accordance with the law. The assessee was required to deduct TDS on such payments.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, remanding certain issues back to the Assessing Officer for further examination. The judgment was delivered on October 12, 2021.

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