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2024 (1) TMI 325 - AT - Income TaxDeduction u/s 80P on interest income - interest income earned from Co-operative Bank is allowable as deduction u/s 80P(2)(d) of the Act or not? - HELD THAT - In view of the consistent decisions taken by the Hon ble Co-ordinate Benches of the Tribunal, the income if any earned by way of interest or dividend from the investments made with any other Co-operative Bank as well, is allowable as deduction under section 80P(2)(d) of the Act. Coming to the instant case, from the orders passed by the authorities below, nothing is clear about the bifurcation of interest amount earned and its is also not clear from which Co-operative banks the interest claimed has been earned and even the Assessee also did not file any bifurcation of the income earned from Co-operative banks before this bench. Thus for just decision of the case and for the ends of justice, the Assessee is directed to file bifurcation of interest/dividend income earned before the AO, who will accordingly grant the deduction qua interest earned from Co-operative Banks only. Appeal filed by the Assessee stands allowed in the aforesaid terms.
Issues Involved:
1. Eligibility of the Assessee for deduction under section 80P(2)(a)(i) of the Income Tax Act. 2. Eligibility of the Assessee for deduction under section 80P(2)(d) of the Income Tax Act for interest income earned from a Co-operative Bank. Summary of Judgment: Issue 1: Deduction under section 80P(2)(a)(i) The Assessee claimed a deduction of Rs. 35,10,345/- under section 80P(2)(a)(i) of the Income Tax Act for AY 2017-18, which was disallowed by the AO. The AO concluded that the Assessee, being engaged in providing credit facilities to its members, falls under the definition of a Primary Co-operative Bank as per section 5(ccv) of the Banking Regulation Act, 1949. Consequently, the Assessee was deemed ineligible for the deduction under section 80P(2)(a)(i) due to the overriding provisions of section 80P(4) read with section 2(24)(viia) of the Income Tax Act. Issue 2: Deduction under section 80P(2)(d) The Ld. Commissioner allowed the Assessee's claim for deduction under section 80P(2)(a)(i) but upheld the AO's disallowance of Rs. 18,09,761/- claimed under section 80P(2)(d) for interest income earned from investments with a Co-operative Bank. The Ld. Commissioner reasoned that after the insertion of section 80P(4), the deduction under section 80P(2)(d) is limited to interest/dividend received from other Co-operative Societies and not from Co-operative Banks, which are considered Urban Commercial Banks. Appeal Decision: The Tribunal focused on whether the interest income earned from Co-operative Banks is deductible under section 80P(2)(d). The Tribunal referenced various decisions, including those of the Hon'ble Supreme Court and Co-ordinate Benches, which consistently held that interest income from Co-operative Banks qualifies for deduction under section 80P(2)(d). The Tribunal emphasized that Co-operative Banks are still Co-operative Societies under section 2(19) of the Act, and therefore, the interest income derived from them is deductible. However, the Tribunal noted that the Assessee did not provide a clear bifurcation of the interest income earned from different Co-operative Banks. For a just decision, the Tribunal directed the Assessee to submit the bifurcation of interest/dividend income earned from Co-operative Banks to the AO, who will then grant the deduction accordingly. Conclusion: The appeal filed by the Assessee was allowed, directing the AO to grant the deduction under section 80P(2)(d) for interest income earned from Co-operative Banks upon submission of the required bifurcation by the Assessee. The decision in ITA No. 2223/Mum/2023 was applied mutatis mutandis to the connected appeals. The order was pronounced in the open court on 30-10-2023.
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