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2024 (1) TMI 27 - AT - Income TaxRevision u/s 263 - As per CIT AO has erroneously allowed the deduction u/s. 80P(2)(a)(i) in respect of interest income earned from Co-operative banks and hence it is prejudicial to the interest of Revenue - HELD THAT - As respectfully following the Hon ble Supreme Court decision in the case of Mavilayi Service Co-operative Bank Limited, 2021 (1) TMI 488 - SUPREME COURT , decision in the case of S-1308, Ammapet Primary Agricultural Cooperative Bank Ltd. 2016 (8) TMI 560 - MADRAS HIGH COURT and Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited, 2022 (6) TMI 770 - ITAT CHENNAI and in view of the above findings that the assessee had earned interest income from deposits from Central Co-operative Bank Tamil Nadu State Apex Co-operative Bank, we are of the view that the Assessing Officer had rightly allowed the claim of deduction u/s. 80P(2)(a)(i) of the Act and hence the revision order is reversed and the appeal of the assessee is allowed.
Issues Involved:
1. Legality of the revision order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act. 2. Entitlement to deduction under Section 80P(2)(a)(i) of the Income Tax Act for interest income earned from Co-operative Banks. Summary: Issue 1: Legality of the Revision Order under Section 263 The appeal concerns the revision order passed by the PCIT, Chennai, which revised the assessment framed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act. The PCIT argued that the AO erroneously allowed the deduction under Section 80P(2)(a)(i) for interest income earned from Co-operative Banks, which was prejudicial to the interest of the Revenue. The PCIT set aside the AO's order to the extent it related to this deduction and directed the AO to carry out necessary verification after giving the assessee an opportunity to be heard. Issue 2: Entitlement to Deduction under Section 80P(2)(a)(i) The assessee, a Co-operative Society, claimed a deduction under Section 80P(2)(a)(i) for interest income earned from deposits with Central Co-operative Bank and Tamil Nadu State Apex Co-operative Bank. The AO initially allowed this deduction. The PCIT, however, contended that this allowance was incorrect because these banks are not governed by the Banking Regulation Act, 1949, and do not hold a license from the Reserve Bank of India. The Tribunal examined various judicial precedents, including the decision of the Hon'ble Madras High Court in the case of Ammapet Primary Agricultural Co-operative Bank Ltd., which supported the assessee's claim. The Tribunal also considered the Supreme Court's decision in Mavilayi Service Co-operative Bank Limited vs. CIT, which clarified that primary agricultural credit societies are entitled to deductions under Section 80P(2)(a)(i) and are not considered co-operative banks under Section 80P(4). The Tribunal concluded that the AO had rightly allowed the deduction under Section 80P(2)(a)(i) for the interest income earned from Central Co-operative Bank and Tamil Nadu State Apex Co-operative Bank. Consequently, the revision order by the PCIT was reversed, and the appeal of the assessee was allowed. Conclusion: The Tribunal held that the assessee is entitled to the deduction under Section 80P(2)(a)(i) for the interest income earned from deposits with Co-operative Banks, reversing the PCIT's revision order. The appeal of the assessee was allowed.
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