2023 (2) TMI 134 - AT - Income Tax

Deduction u/s 80P(2)(a)(i)/80P(2)(d) - interest income earned from banks - HELD THAT - Hon ble Karnataka High Court in Souharda Credit Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT allowing deduction u/s. 80P on interest income and that in Mantola Cooperative Thrift Credit Society Ltd 2014 (9) TMI 833 - DELHI HIGH COURT not allowing deduction u/s.80P on interest income earned from banks. Both the Hon ble High Courts took into consideration the ratio laid down in the case of Totgar s Cooperative Sale Society Ltd. 2010 (2) TMI 3 - SUPREME COURT - No direct judgment from the Hon ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit 2015 (8) TMI 1085 - ITAT PUNE preferred to go with the view in favour of the assessee by the Hon ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT The position continues to remain the same before this Tribunal also. Eligibility of deduction u/s.80P(2)(d) and after considering the language of the section, it is observed that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative societies registered under the Act, thereby making them eligible for claim of the deduction. Similar view has been taken in several cases including Sesa Goa Employees Coop. Credit Society Ltd. Vs. ACIT 2022 (12) TMI 959 - ITAT PUNE . In series of decisions have held that the co-operative societies are entitled to deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, we hold that the impugned orders do not require any interference. - Appeal of revenue dismissed.

Summary

Issues:
1. Grant of deduction u/s.80P of the Income-tax Act, 1961 for interest and dividend income.
2. Eligibility of deduction u/s.80P(2)(a)(i) and 80P(2)(d) for co-operative societies.
3. Interpretation of the provisions related to deduction for interest income on investments/deposits with co-operative banks.
4. Consistency in the decisions of Pune Benches of the Tribunal regarding deduction u/s.80P for co-operative societies.

Analysis:
1. The appeals by the Revenue challenged the grant of deduction u/s.80P for interest and dividend income by co-operative societies for the assessment year 2018-19. The Assessing Officer initially denied the deduction, but the ld. CIT(A) reversed the assessment order in both cases. The common issue raised in these two appeals led the Tribunal to consolidate the orders for convenience.

2. The Tribunal referred to previous decisions by the Pune Benches in similar cases. In the first appeal, the Tribunal cited the case of Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT, where the availability of deduction u/s.80P on interest income was upheld. The Tribunal also discussed conflicting views from the Hon'ble Karnataka High Court and the Hon'ble Delhi High Court on the matter. Due to the absence of a direct judgment from the jurisdictional High Court, the Tribunal favored the view supporting the assessee, following the Karnataka High Court's decision.

3. Regarding the eligibility of deduction u/s.80P(2)(d), the Tribunal noted that co-operative societies, including those with investments/deposits in co-operative banks, are eligible for the deduction. This interpretation was supported by the definition of a co-operative society under the Act. The Tribunal cited the case of The Sesa Goa Employees Coop. Credit Society Ltd. to reinforce this stance.

4. The Tribunal emphasized the consistent position taken by the Pune Benches in various decisions, affirming that co-operative societies are entitled to deduction u/s.80P for interest income. Based on this established precedent, the Tribunal concluded that the impugned orders did not warrant any interference, leading to the dismissal of both appeals.

In conclusion, the Tribunal upheld the grant of deduction u/s.80P for interest and dividend income by co-operative societies, emphasizing the eligibility of such deductions and the consistent interpretation of the provisions by the Pune Benches.