2022 (5) TMI 1084 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - interest earned by the society - HELD THAT - We find that the issue is squarely covered in favor of the assessee by the decision of Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. 2017 (8) TMI 536 - SUPREME COURT - Moreover similar issue was elaborately dealt by a larger bench of Honourable Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. Ors. Vs. CIT, Calicut Ors. 2021 (1) TMI 488 - SUPREME COURT and the issue was decided in favour of the assessee.

Summary

Issues:
1. Disallowance of deduction u/s 80P(2)(a)(i) available to the society.
2. Disallowance of deduction u/s 80P(2)(d) in respect of interest earned by the society.
3. Non-consideration of deduction u/s 80P(2)(c) amounting to Rs. 50,000.

Analysis:

Issue 1: Disallowance of deduction u/s 80P(2)(a)(i)
The assessee, an Indian Bank Employees Cooperative Credit Society Limited, claimed a deduction under section 80P for interest receipts/dividend from a Cooperative Bank. The Assessing Officer disallowed the deduction under section 80P(4) of the Income Tax Act, stating it was applicable to the assessee. The CIT(A) upheld this disallowance. However, the ITAT referred to the decision of the Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. and The Mavilayi Service Cooperative Bank Ltd. The ITAT observed that section 80P is a benevolent provision to promote the growth of the cooperative sector and must be read liberally in favor of the assessee. Relying on the Supreme Court's observations, the ITAT set aside the CIT(A)'s order and decided the issue in favor of the assessee.

Issue 2: Disallowance of deduction u/s 80P(2)(d)
The Assessing Officer disallowed the deduction under section 80P(2)(d) for interest earned by the society from a Cooperative Bank. The CIT(A) confirmed this disallowance. However, the ITAT, following the precedent set by the Supreme Court, ruled in favor of the assessee, stating that the entire amount of profits and gains attributable to activities mentioned in section 80P(2) must be given as a deduction. The ITAT's decision was based on the liberal interpretation of section 80P and the exclusion of cooperative banks from section 80P(4).

Issue 3: Non-consideration of deduction u/s 80P(2)(c)
The assessee claimed a deduction under section 80P(2)(c) amounting to Rs. 50,000, which was not considered by the CIT(A). However, the ITAT, following the principles laid down by the Supreme Court, set aside the CIT(A)'s order and decided the issue in favor of the assessee. The ITAT emphasized the liberal interpretation of section 80P and the need to read it in favor of the assessee to promote the growth of the cooperative sector.

In conclusion, the ITAT allowed the appeal, setting aside the CIT(A)'s order and deciding all issues in favor of the assessee based on the liberal interpretation of section 80P and the precedents established by the Supreme Court in similar cases.