2023 (10) TMI 766 - AT - Income Tax

Deduction u/s 80P - interest income earned by a co- operative society on its investment held with co-operative bank - HELD THAT - As in case of Pr. CIT Anr. Vs. Totgar s Co-operative Sale Society Ltd. 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and State Bank of India 2016 (7) TMI 516 - GUJARAT HIGH COURT had also held that interest income earned by a co- operative society on its investment held with co-operative bank would be eligible for claim of deduction u/s 80P(2)(d) - CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. Assessee society who has earned from its investment of surplus fund parked with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of the disallowance of deduction under section 80P of the Income-tax Act, 1961.
2. Eligibility of interest income earned from investments with cooperative banks for deduction under section 80P(2)(d).

Summary:

Issue 1: Confirmation of the disallowance of deduction under section 80P

The appeals pertain to the disallowance of deductions claimed by Jansevak Co-op Credit Society Ltd. under section 80P of the Income-tax Act, 1961, for the Assessment Years 2014-15 and 2015-16. The assessee's returns were processed under section 143(1), disallowing deductions of Rs. 32,95,430/- and Rs. 26,99,553/- respectively. The CIT(A) upheld the disallowance, relying on the Supreme Court decision in Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC). The assessee appealed to the Tribunal.

Issue 2: Eligibility of interest income earned from investments with cooperative banks for deduction under section 80P(2)(d)

The Tribunal noted that the issue of interest income earned by a cooperative society from investments with cooperative banks being eligible for deduction under section 80P(2)(d) is no longer res integra. The Tribunal referred to its own decision in Palm Court M Premises Co-operative Society Ltd. and other cases where it was held that interest income from investments with cooperative banks qualifies for deduction under section 80P(2)(d). The Tribunal also cited decisions from the Hon'ble Bombay High Court and Hon'ble Gujarat High Court supporting this view.

The Tribunal distinguished the Supreme Court's decision in Totgars Cooperative Sale Society Ltd., noting that it was in the context of section 80P(2)(a)(i) and not section 80P(2)(d). The Tribunal emphasized that cooperative banks are still considered cooperative societies under the Act, and thus, interest income from such banks is eligible for deduction under section 80P(2)(d).

Conclusion:

The Tribunal concluded that the CIT(A) erred in upholding the disallowance of the deduction claimed under section 80P(2)(d). It directed the AO to allow the deduction, thereby allowing the appeal filed by the assessee for statistical purposes. The order was pronounced in the open court on 09/05/2023.