2023 (6) TMI 437 - AT - Income Tax

Deduction u/s. 80P - interest income earned from nominal members - assessee is a cooperative credit society engaged in the business of providing credits facilities to its members - AO did not allow the deduction on the net interest income which action came to be countenanced in the first appeal - HELD THAT - It is seen that the extant issue of granting deduction on the interest income received from nominal members is no more res integra in view of several orders passed by the Tribunal holding the same in favour of the assessee. The Tribunal in The Vainganga Nagari Sahakari Pat Sanstha Ltd. 2021 (6) TMI 758 - ITAT NAGPUR has decided the issue in favour of the assessee held that definition of member given in section 2(19) of the Maharashtra Act takes within its sweep even a nominal member and there is no distinction between a duly registered member and nominal member. In view of the above discussion, we overturn the impugned order and direct to grant deduction u/s 80P(2)(a)(i), as claimed by the assessee. Non-granting of deduction u/s. 80P in respect of Electricity Commission - assessee carried out the activity of collection of electricity bills from customers and then depositing it with the Maharashtra State Electricity Distribution Company Limited (MSEDCL) - HELD THAT - It is seen that this issue has been decided in favour of the assessee in Bhagyalaxmi Nagri Sahakari Patsanstha Meryadit 2022 (3) TMI 772 - ITAT PUNE the activity of earning commission from collection of bills relating to MSEDCL has been held as eligible business activity and resultantly allowed granted deduction u/s. 80P. DR fairly conceded the position but relied on the impugned orders on this score. Commission income on collection of bills from MSEDCL has been made eligible for deduction u/s. 80P(2)(a) on the ground of the same being in the nature of business activity, allow the assessee s claim in respect of similar commission income - Thus allow deduction on such commission income.

Summary

Issues:
1. Non-granting of deduction u/s. 80P for interest income from nominal members.
2. Non-granting of deduction u/s. 80P for income earned from insurance fees.
3. Non-granting of deduction u/s. 80P for electricity commission.

Issue 1:
The first issue pertains to the non-granting of deduction u/s. 80P for interest income earned from nominal members by a cooperative credit society. The Tribunal referred to past decisions supporting the allowance of such deductions under Section 80P(2)(a)(i) of the Income-tax Act, emphasizing that the term 'Member' includes nominal members as per relevant state Acts. Citing the Maharashtra Act and Kerala Act, it was established that loans given to nominal members are eligible for deduction under Section 80P(2)(a)(i). Relying on precedent, the Tribunal overturned the previous order and directed the grant of deduction u/s. 80P(2)(a)(i) for the interest income from nominal members.

Issue 2:
The second issue regarding the non-granting of deduction u/s. 80P for income earned from 'insurance fees' was not pursued by the appellant's representative and was consequently dismissed as not pressed.

Issue 3:
The third issue involved the non-granting of deduction u/s. 80P for electricity commission received by the assessee for collecting electricity bills. The Tribunal, in line with a previous decision, allowed the deduction under Section 80P for such electricity commission. The Tribunal noted that the commission income from activities such as collecting bills from the Maharashtra State Electricity Distribution Company Limited (MSEDCL) was considered eligible for deduction under Section 80P(2)(a) as it was deemed part of the business activity conducted by the assessee. Following the precedent, the Tribunal ordered the allowance of deduction for the electricity commission income.

Conclusion:
In conclusion, the Tribunal partially allowed the appeal, granting deductions under Section 80P for both interest income from nominal members and electricity commission, based on established legal interpretations and precedents. The issue related to income earned from insurance fees was dismissed due to non-pursuance by the appellant's representative.