2022 (11) TMI 536 - AT - Income Tax

Deduction u/s.80P(2)(a)(i) - AO held the assessee to be a primary Cooperative Society and hence, not eligible for deduction in terms of section 80P(4) - CIT-A Partly reversed the order of the AO rejected the assessee s claim towards interest on long term investments/deposits held for a period more than one year, which was held to be Income from other sources on which, the deduction us.80P(2)(a)(i) and u/s.80P(2)(d) was not eligible and AO was directed to allow cost of the fund, if any and proportionate administrative expenses in respect of such income u/s. 57(iii) - HELD THAT - Interest income on short term deposits for a period less than one year has been held to be business income and hence, eligible for deduction u/s.80P(2)(a)(i). The ld. DR could not draw my attention towards any provision drawing a distinction between deposits/investments held for a period of more than one year to be treated as Income from other sources and for a period less than one year as Business income . It is seen that the assessee falls under the jurisdiction of Hon ble Karnataka High Court. In Tumur Merchants Souharda Credit Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT has held the amount of interest received from deposits kept with banks as eligible for deduction u/s.80P of the Act. In view of the fact that the relevant distinction between the short term deposits and long term deposits and the consequential eligibility and non-eligibility for deduction u/s.80P, is not borne out from the impugned order, I am of the considered opinion that it would be just and fair if the impugned order is set aside and the matter is restored to the file of the ld. CIT(A). Thus order accordingly and direct him to pass a speaking order and to make a mention of the relevant provision, if any, under which such a distinction has been drawn. He will also take into consideration the ratio of the above said judgment of the Hon ble Karnataka High Court. Needless to say, the assessee will be allowed reasonable opportunity of hearing. Appeals are allowed for statistical purposes.

Summary

Issues:
Delay in filing appeals before the Tribunal, eligibility of deduction u/s.80P(2)(a)(i) for a Cooperative Society, distinction between short term and long term deposits for deduction u/s.80P, setting aside of impugned orders by the Tribunal.

Delay in filing appeals before the Tribunal:
The judgment addresses a delay of 140 days in filing the appeals before the Tribunal by the assessee. The Tribunal, after considering the reasons provided in the affidavit by the assessee, condones the delay and admits the appeals for hearing.

Eligibility of deduction u/s.80P(2)(a)(i) for a Cooperative Society:
The primary issue revolves around the eligibility of a Cooperative Society for deduction u/s.80P(2)(a)(i) of the Income Tax Act. The Assessing Officer (AO) initially held the assessee to be a primary Cooperative Society and denied the deduction under section 80P(4). However, the ld. CIT(A) reversed this decision, allowing various deductions under section 80P(2) for the business activities of the Cooperative Society. The Tribunal concurred with the CIT(A) and held that the assessee qualifies as a Cooperative Society entitled to deductions under section 80P(2).

Distinction between short term and long term deposits for deduction u/s.80P:
A critical aspect of the judgment involves the distinction between short term and long term deposits for the purpose of claiming deductions under section 80P. The Tribunal noted that the ld. CIT(A) allowed deductions for interest incomes except for long term investments/deposits held for more than one year. The Tribunal found no legal provision justifying this distinction and referred to a relevant judgment by the Hon'ble Karnataka High Court. Consequently, the Tribunal set aside the impugned order and directed the ld. CIT(A) to re-examine the matter, considering the absence of a clear distinction between short term and long term deposits for deduction u/s.80P.

Setting aside of impugned orders by the Tribunal:
The Tribunal set aside the impugned orders for all the appeals, directing the ld. CIT(A) to revisit the decisions in light of the absence of a clear legal basis for distinguishing between short term and long term deposits for deduction u/s.80P. The Tribunal emphasized the importance of providing a reasoned order and considering relevant legal precedents, particularly the judgment of the Hon'ble Karnataka High Court. The assessee was granted a reasonable opportunity of hearing in the revised proceedings.

The judgment, delivered by Shri R.S. Syal, Vice President of the Appellate Tribunal ITAT PANAJI, concluded by allowing all the appeals for statistical purposes and setting a date for the order pronouncement in the Open Court on 09th November 2022.