2023 (4) TMI 631 - AT - Income Tax

Deduction u/s 80P(2)(c)(ii) - interest income earned from co-operative bank - co-operative bank is a commercial bank and does not fall under the purview of co-operative society referred to in section 80P(2)(d) - AO held that co-operative banks are excluded from the applicability of section 80P of the Act and therefore, even the interest income earned by the assessee from the deposits from the investment made by it with the co-operative bank would not be exempt - HELD THAT - It is pertinent to note that all co-operative banks are co-operative societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the co-operative banks is allowable as a deduction under section 80P(2)(d) of the Act. See Kaliandas Udyog Bhavan Premises Co-op Society Ltd vs ITO 2018 (4) TMI 1678 - ITAT MUMBAI . We uphold the plea of the assessee and direct the AO to grant deduction u/s 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with co-operative banks. Accordingly, we set aside the impugned order passed by the learned CIT(A) - Decided in favour of assessee.

Summary

Issues:
The appeal challenging the order passed under section 250 of the Income Tax Act, 1961 for the assessment year 2018-19 is delayed by 141 days, with the assessee seeking condonation of delay due to unforeseen circumstances beyond their control.

Delay Condonation Issue:
The delay in filing the appeal was condoned by the Appellate Tribunal as the reasons stated by the assessee for seeking condonation fell within the parameters for grant of condonation laid down by the Hon'ble Supreme Court. The Tribunal found sufficient cause for the delay and proceeded to decide the appeal on merits.

Deduction Dispute Issue:
The dispute revolved around the denial of deduction under section 80P(2)(d) of the Act by the Assessing Officer, who disallowed a deduction claimed by the assessee in relation to interest income earned from investments with co-operative banks. The AO held that co-operative banks are excluded from the applicability of section 80P of the Act, leading to the disallowance of the claimed deduction.

Appellate Tribunal Decision:
The Appellate Tribunal remanded the issue to the Assessing Officer for de novo adjudication limited to the aspect of the claim under section 80(2)(c)(ii) of the Act, as the lower authorities had only considered the deduction claim under section 80P(2)(d) and not under section 80(2)(c)(ii).

Legal Interpretation and Decision:
The Tribunal analyzed the provisions of section 80P(2)(d) of the Act, which allows deduction for interest or dividends derived from investments with other co-operative societies. It was established that co-operative banks are also considered co-operative societies, and interest income earned from investments with co-operative banks is eligible for deduction under section 80P(2)(d) of the Act. The Tribunal upheld the plea of the assessee based on previous decisions and directed the AO to grant the deduction. Grounds raised by the assessee were allowed for statistical purposes, and the appeal was allowed accordingly.

Conclusion:
The Appellate Tribunal's decision favored the assessee, allowing the deduction under section 80P(2)(d) for interest income earned from investments with co-operative banks. The appeal was allowed for statistical purposes, and the issue of interest levy under sections 234B and 234C was also addressed in favor of the assessee.