2024 (1) TMI 1028 - AT - Income Tax

Disallowance u/s 80P(2)(d) - interest income received by the assessee society from deposits in saving bank a/c maintained with commercial banks i.e., State Bank of India (SBI) and other banks - HELD THAT - Admittedly, the issues raised in the aforesaid appeals are squarely covered by the decisions of Gramin Seva Sahkari Samiti Maryadit 2022 (3) TMI 75 - ITAT RAIPUR Accordingly, interest received on the Pace 3 surplus fund parked by way of deposits in the Bank is eligible for deduction 80(P)(2)(a)(i). Thus as following the various judgments of the Hon ble High courts (supra), specifically as observed by Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Cooperative Ltd. 2015 (2) TMI 995 - KARNATAKA HIGH COURT following the similar view taken in ANDHRA PRADESH STATE COOPERATIVE BANK LTD 2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT respectfully following the same, we hold that the interest income received on amounts deposited by the assessee society in commercial / nationalised banks shall be eligible for deduction u/s 80P(2)(a)(i) of the Act. Consequently, ground pertaining to impugned controversy is decided in favour of the assessee. Delayed payment of PF- ESI - assessee has submitted that all the payments of EPF were made in time considering the extended grace period of 5 days available to the assessee - HELD THAT - After going through the facts and on a thoughtful consideration of submissions and explanations, it is observed that the aforesaid issues has been dealt with coordinate bench of the ITAT, Raipur in Dilip Construction Company 2023 (6) TMI 1358 - ITAT RAIPUR wherein regarding delay and grace period it has been observed that the assessee was found to have deposited the amount within grace period and hence there is no substance in the grievance of the Revenue. The contention raised by the assessee regarding grace period is found to be acceptable, but subject to verification of the fact that the payments were made in prescribed time including the time available with grace period. Under such facts and circumstances, we direct the Ld. AO to verify the payment details of EPF qua the disallowance made and vacate the same if the same are paid within stipulated time, on the contrary sustain the same if not paid in time, as described herein above.

Summary

Issues Involved:
1. Disallowance of claim under section 80P(2)(d) regarding interest income from deposits in commercial banks.
2. Disallowance on account of delayed payment of PF-ESI under section 36(1)(va).

Summary:

Issue 1: Disallowance of Claim under Section 80P(2)(d)
The common issue pertains to the disallowance of the claim under section 80P(2)(d) regarding interest income received by the assessee society from deposits in saving bank accounts maintained with commercial banks such as SBI. The amounts disallowed for various assessment years are detailed as follows: AY 2013-14: Rs. 2,22,700/-, AY 2017-18: NIL, AY 2018-19: Rs. 75,31,489/-, AY 2020-21: Rs. 87,67,427/-.

The assessee argued that the disallowance was an erroneous application of law, citing various judicial decisions, including the Supreme Court's ruling in the case of Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. vs. Assessing Officer, which emphasized that section 80-P is a benevolent provision intended to promote the growth of the co-operative sector and should be read liberally in favor of the assessee.

The Tribunal referred to the decision in the case of Gramin Seva Sahkari Samiti Maryadit, where it was held that interest earned on surplus funds deposited with a co-operative bank is eligible for deduction under section 80P(2)(a)(i). The Tribunal concluded that the interest income from deposits in commercial banks is also eligible for deduction under section 80P(2)(a)(i), as it is attributable to the business of providing credit facilities to its members.

Issue 2: Disallowance on Account of Delayed Payment of PF-ESI
Another issue raised was the disallowance made in AY 2017-18 on account of delayed payment of PF-ESI. The assessee contended that all EPF payments were made within the extended grace period of 5 days, which was not considered by the lower authorities.

The Tribunal referred to the decision in the case of Dilip Construction Company vs. DCIT, where it was held that the grace period for depositing EPF contributions should be considered. The Tribunal directed the Assessing Officer to verify whether the payments were made within the stipulated time, including the grace period, and to vacate the disallowance if the payments were made in time.

Conclusion:
The appeals filed by the assessee in ITA No 284, 286 & 287/RPR/2023 were allowed, and ITA No 285/RPR/2023 was partly allowed, subject to verification of the payment details of EPF. The order was pronounced in the open court on 30/11/2023.