2023 (5) TMI 161 - AT - Income Tax

Deduction u/s 80P - interest derived from deposits made in various cooperative other banks during the course of scrutiny - HELD THAT - We find merit in assessee s arguments in light of this tribunal s recent order in Lokmangal Nagri Sahakari Path Sanstha Maryadit, Solapur 2022 (12) TMI 355 - ITAT PUNE wherein as admittedly held that the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s 80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s 80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited 2021 (12) TMI 1259 - ITAT PUNE Decided in favour of assessee.

Summary

Issues:
The judgment involves the issue of whether interest income derived from deposits made in cooperative societies is eligible for deduction under section 80P of the Income Tax Act, 1961.

Detailed Summary:

Issue 1: Eligibility of Interest Income for Deduction under Section 80P:
The appeal pertains to the assessment year 2018-2019, challenging the revision directions issued by the Principal Commissioner of Income Tax (PCIT) against the Assessing Officer's allowance of section 80P deduction claim for interest income derived from deposits in cooperative banks. The PCIT deemed the original assessment erroneous, causing prejudice to revenue interests due to the allowance of the deduction. The Revenue supported this stance citing a Karnataka High Court decision. However, the Tribunal found merit in the assessee's arguments, referencing a previous order involving a cooperative society engaged in deposit acceptance and credit provision. The Tribunal held that interest income from cooperative banks qualifies for deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Act.

Issue 2: Jurisdiction of PCIT under Section 263:
The Tribunal examined the validity of the PCIT's assumption of jurisdiction under section 263, which allows revision of assessment orders if found erroneous and prejudicial to revenue interests. Citing Supreme Court decisions, the Tribunal emphasized that the error in the assessment order must be beyond debate for revision. Considering judicial precedents and the nature of interest income earned from cooperative banks, the Tribunal concluded that the PCIT's revision directions were not sustainable in law. The Tribunal noted that the issue was already decided in favor of the assessee by various judicial precedents, including a recent decision of the jurisdictional high court.

Conclusion:
In light of the above analysis, the Tribunal allowed the assessee's appeal, reversing the PCIT's revision directions and restoring the Assessing Officer's original assessment. The Tribunal pronounced the order in favor of the assessee on 02.05.2023.