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2023 (7) TMI 1272 - AT - Income TaxDeduction u/s 80P - interest income received from the Co-operative Banks - HELD THAT - There is no dispute that the assessee is a Co-Operative Housing Society. Thus, if any income as referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as a deduction. We find that the Hon ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Co-operative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. Section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction under section 80Pwhich is not the facts of the present case. Therefore, we find no merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the assessee. Deduction u/s 80P(2)(d) of the Act, it is also 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) - See KALIANDAS UDYOG BHAVAN PREMISES CO-OP SOCIETY LTD., VERSUS ITO-21 (2) (1) , MUMBAI 2018 (4) TMI 1678 - ITAT MUMBAI - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Eligibility of deduction under section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from investments in Co-operative Banks. Summary: Condonation of Delay in Filing Appeals: The assessee's appeals for the assessment years 2017-18 and 2018-19 were time-barred by 32 and 40 days, respectively. The assessee filed affidavits explaining the delay due to a misunderstanding of the law and lack of full-time accounting staff. The learned Departmental Representative did not object to the condonation of delay. The Tribunal, referencing the Supreme Court's decision in Collector Land Acquisition, Anantnag Vs. MST Katiji and others, condoned the delay, emphasizing that substantial justice should be preferred over technical considerations. Eligibility of Deduction under Section 80P(2)(d): The core issue was the disallowance of the deduction under section 80P(2)(d) of the Act for interest income earned from Co-operative Banks. The assessee, a registered Co-operative Housing Society, claimed this deduction for interest income from investments in Co-operative Banks. The Assessing Officer (AO) and the learned Commissioner of Income Tax (Appeals) [CIT(A)] denied the deduction, arguing that Co-operative Banks are excluded under section 80P(4) and do not qualify as "Co-operative Societies" for this purpose. The Tribunal analyzed the provisions of section 80P(2)(d) and section 80P(4) of the Act. It noted that section 80P(2)(d) allows deductions for interest income derived from investments with any other Co-operative Society. The Tribunal referenced the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. vs CIT, which clarified that section 80P(4) excludes only Co-operative Banks functioning as commercial banks from claiming deductions under section 80P, but does not affect other Co-operative Societies investing in Co-operative Banks. The Tribunal also considered the consistent view of coordinate benches that interest earned from Co-operative Banks qualifies for deduction under section 80P(2)(d). It addressed divergent views from the Karnataka High Court on this issue, opting to follow the interpretation favoring the assessee, as guided by the Supreme Court in CIT v. Vegetable Products Ltd. Conclusion: The Tribunal directed the AO to grant the deduction under section 80P(2)(d) for interest income earned from investments with Co-operative Banks for both assessment years 2017-18 and 2018-19. Consequently, the appeals filed by the assessee were allowed.
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