2024 (1) TMI 1034 - AT - Income Tax

Reopening of assessment u/s 147 - Allowability of deduction u/s 80P(2)(a) or 80P(2)(d) - interest income earned by the assessee from the co-operative banks - HELD THAT - The reasons state that the benefit of deduction under Section 80P(2)(d) of the Act is not available on interest received from investment made with co-operative banks and therefore, such deduction is required to be disallowed. The impugned assessment order is 2013-14, the notice u/s 148 of the Act was issued on 31st March, 2019. There was no tangible material available with AO to reopen the concluded assessment year beyond four years. Thus, the reopening has been made merely on reappraisal of facts available in the original assessment proceedings culminating into an assessment order under Section 143(3) of the Act. Therefore, the assessee succeeds on ground no.1 itself. Deduction 80P(2)(a) - The provisions of Section 80P (4) of the Act specifically denies deduction only to co-operative banks. The assessee is admittedly not a co-operative bank. AO instead of treating the assessee as credit co-operative society considered the assessee as primary co-operative bank without any basis. In view of the above facts, we hold that interest income earned by the assessee on fixed deposits with the co-operative banks are eligible for deduction under Section 80P(2)(d) of the Act. We also find that in case of Kerala State Co-Operative Agricultural Rural Development Bank Ltd 2023 (9) TMI 761 - SUPREME COURT where in decision of Mavilayi Service Co-operative Bank Ltd 2021 (1) TMI 488 - SUPREME COURT has also allowed the claim of assesses u/s 80P (2) (d) of the Act. Thus, now the issue is squarely covered in favour of the assessee. In view of this on both the grounds of reopening as well as on the merits the orders of the lower authorities are reversed and the learned Assessing Officer is directed to grant assessee s deduction under Section 80P(2)(d) of the Act. Accordingly, the appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves appeals filed by the assessee for various assessment years regarding the allowability of deduction under Section 80P(2)(a) or 80P(2)(d) of the Income-tax Act, 1961, related to interest income earned from cooperative banks.

A.Y. 2013-14:
The assessee contested the validity of reopening of assessment, denial of deduction under Section 80P(2)(a) and (d) of the Act, and the application of the judgment of the Honorable Supreme Court. The Assessing Officer denied the deduction under Section 80P(2)(a) and (d) of the Act, considering the assessee as a primary cooperative bank. The CIT (A) allowed the deduction under Section 80P(2)(d) based on the Supreme Court decision and directed the assessment of interest earned from cooperative banks separately.

A.Y. 2014-15:
The same issues as in A.Y. 2013-14 were raised, and the CIT (A) partly allowed the appeal. The Tribunal reversed the lower authorities' orders, holding that the assessee is eligible for deduction under Section 80P(2)(d) of the Act.

A.Y. 2017-18:
The Assessing Officer disallowed the deduction under Section 80P(2)(a) and (d) of the Act. The CIT (A) directed eligibility for deduction under Section 80P(2)(d) only from cooperative societies and banks without RBI licenses. The Tribunal allowed the appeal, granting deduction under Section 80P(2)(d) for interest income from cooperative banks.

A.Y. 2018-19 and 2020-21:
Similar issues of denial of deduction under Section 80P(2)(d) for interest income from cooperative banks were raised. The Tribunal allowed the appeals, following the reasoning from previous years and granting the deduction under Section 80P(2)(d) of the Act.

Conclusion:
The Tribunal allowed all five appeals filed by the assessee, holding that interest income earned from cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961. The orders of the lower authorities were reversed, and the Assessing Officer was directed to grant the deductions accordingly.