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2022 (9) TMI 970 - AT - Income TaxDisallowance u/s 80P(2)(d) - assessee is primarily a Co-operative Society dividend income and interest income earned from Surat District Co-Operative Bank, which is also primarily a Co- Operative Society - Whether Co-Operative Society is eligible for deduction under section 80P(2)(d) in respect of interest received from Co-Operative Bank without adjusting interest paid to said bank? - HELD THAT - As respectfully following the decision Surat Vankar Sahakari Sangh Ltd. 2016 (7) TMI 1217 - GUJARAT HIGH COURT and in Totagars Co-operative Sales Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT wherein it was held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and interest earned by Co-operative Society from Cooperative Bank would necessarily be deductible. The assessee is primarily a Co-operative Society dividend income and interest income earned from Surat District Co-Operative Bank, which is also primarily a Co- Operative Society, therefore, the assessee is eligible for deduction under section 80P(2)(d). We direct the Assessing Officer to delete the disallowance and allowed deduction under section 80P(2)(d) of the Act. This ground of assessee s appeal is allowed.
Issues Involved:
1. Eligibility for deduction under Section 80P(2)(d) of the Income Tax Act for interest and dividend income earned from a Co-operative Bank. 2. Distinction between Co-operative Banks and Co-operative Societies for the purpose of Section 80P(2)(d). Issue-wise Detailed Analysis: 1. Eligibility for deduction under Section 80P(2)(d) of the Income Tax Act for interest and dividend income earned from a Co-operative Bank: The assessee, a Credit Co-operative Society, claimed a deduction under Section 80P(2)(d) for interest and dividend income earned from deposits with Surat District Co-operative Bank Ltd. The Assessing Officer disallowed this deduction, arguing that Co-operative Banks are different from Co-operative Societies. The assessee's appeal to the NFAC was also dismissed, leading to the present appeal before the Tribunal. The Tribunal considered the written submission from the assessee, which argued that Co-operative Banks should be treated as Co-operative Societies under the Co-operative Society Act, 1912. The assessee relied on various case laws, including the decision of the Hon'ble Apex Court in Mavilayi Service Co-Operative Bank Ltd. vs. CIT, which supports the view that the entire income of a Credit Co-operative Society is eligible for deduction under Section 80P(2)(a)(i). The Tribunal noted that the issue at hand was specifically related to Section 80P(2)(d), which allows a deduction for income by way of interest or dividends derived by a Co-operative Society from its investment with another Co-operative Society. The Tribunal referenced the decision in Surat Vankar Sahkari Sangh Ltd. vs. ACIT by the Hon'ble Gujarat High Court, which held that Co-operative Societies are eligible for deduction under Section 80P(2)(d) for interest received from Co-operative Banks without adjusting for interest paid to the bank. The Tribunal concluded that the assessee, being a Co-operative Society, is entitled to the deduction under Section 80P(2)(d) for the interest and dividend income earned from Surat District Co-operative Bank, which is also a Co-operative Society. The Tribunal directed the Assessing Officer to delete the disallowance and allow the deduction under Section 80P(2)(d). 2. Distinction between Co-operative Banks and Co-operative Societies for the purpose of Section 80P(2)(d): The Tribunal addressed the distinction made by the Assessing Officer between Co-operative Banks and Co-operative Societies. The Tribunal referred to the decision in Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. vs. PCIT, where it was held that for the purpose of Section 80P(2)(d), a Co-operative Bank should be considered as a Co-operative Society. This interpretation aligns with the decision of the Hon'ble Karnataka High Court in Totagars Co-operative Sales Society, which also supports the eligibility of Co-operative Societies for deductions under Section 80P(2)(d) for interest earned from Co-operative Banks. The Tribunal emphasized that the provision of Section 80P(2)(d) does not distinguish between different types of Co-operative Societies and allows deductions for any income derived from investments in any other Co-operative Society. The Tribunal found that the Assessing Officer and NFAC had erred in not considering the relevant case laws and the statutory interpretation of Section 80P(2)(d). Conclusion: The Tribunal allowed the appeals for both assessment years 2016-17 and 2017-18, holding that the assessee is eligible for the deduction under Section 80P(2)(d) for the interest and dividend income earned from Surat District Co-operative Bank. The Tribunal directed the Assessing Officer to delete the disallowance and allow the deduction as claimed by the assessee. The decision was pronounced in the open court and placed on the Notice Board on 19/09/2022.
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