2023 (11) TMI 328 - AT - Income Tax

Rectification application u/s 254 - Deduction of interest income u/s 80P(2) - reliance on Full bench decision to pass orders - Tribunal had regarded the interest income on deposits with other co-operative banks or treasuries as part of the assessee s business of provision of credit to its members and, therefore, deductible u/s.80P(1) r/w s. 80P(2)(a)(i) - HELD THAT - Revenue s MA is not maintainable. No mistake of fact/s or of law, has been pointed out and, in fact, both the stated grounds are incorrect. Tribunal has decided the appeal under reference not by, as claimed, following it s earlier order in Kizhathadiyoor Service Co-operative Bank Ltd. 2016 (7) TMI 1405 - ITAT COCHIN but by the Full Bench of the Hon ble jurisdictional High Court in CIT v. Mavilayi Service Co-operative Bank Ltd. 2019 (3) TMI 1580 - KERALA HIGH COURT In fact, having found the same as laying the law in the matter, it has directed the AO to examine the applicability of the said decision inasmuch as the impugned appellate order was based on decision/s by the Hon ble Court contrary thereto. The larger bench decision being in favour of the Revenue, a challenge to the impugned order in rectification proceedings could arise at the instance of the assessee. And which again has to be within the time provided therefor by the statute. As regards the claim of interest on investment in cooperative banks as eligible for deduction u/s. 80P(1) r/w s. 80P(2)(d), we find no such direction per the impugned order, even as the Tribunal has no power of review. We cannot though help adding that the said direction, assuming so, is in agreement with the later binding decision in Pr. CIT v. Peroorkadda SCB Ltd. 2021 (12) TMI 1084 - KERALA HIGH COURT No case for interference qua the impugned order is accordingly made out. It is nevertheless open for the assessee to, if so advised, contest the AO s order in the set aside proceedings where and to the extent it is found by it inconsistent with the latest decision by the Hon ble Apex Court in Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT MA dismissed.

Summary

Issues involved:
The judgment deals with a Miscellaneous Application filed by the Revenue against the Order under section 254(1) of the Income-tax Act, 1961, regarding the deduction of interest income under section 80P(2) for the assessment year 2015-16.

Details of the Judgment:

Issue 1: Entitlement to Deduction of Interest Income under Section 80P(2):
The Revenue contended that the interest income on deposits with co-operative banks or treasuries should not be considered part of the assessee's business of providing credit to its members and hence not deductible under section 80P(1) r/w s. 80P(2)(a)(i). The Revenue argued that the decision in Kizhathadiyoor Service Co-operative Bank Ltd. (ITA No.525/Coch/2014) should be reviewed as cooperative societies are distinct from co-operative banks.

Issue 2: Review of Impugned Order:
The Tribunal directed the Assessing Officer to examine the activities of the assessees to determine compliance with the Kerala Co-operative Societies Act, 1969, for granting deductions under section 80P(2)(a)(i). The Tribunal also instructed the AO to assess the eligibility of interest income from investments with co-operative banks for deduction under section 80P(2), aligning with the activities expected of a co-operative society.

Conclusion:
The Tribunal found the Revenue's Miscellaneous Application to be not maintainable as no mistake of fact or law was identified. The Tribunal clarified that its decision was based on the Full Bench ruling of the jurisdictional High Court, not the earlier order cited by the Revenue. The Tribunal upheld its original decision and dismissed the Revenue's application, allowing the assessee to contest the AO's order based on the latest Supreme Court decision.