2024 (2) TMI 242 - AT - Income Tax

Disallowance of deduction u/s 80P(2)(d) - gross interest receipt/dividend from Co-operative Bank - HELD THAT - We see no reason to take any other view of the matter then the view so taken in the case of Surat Vankar Sahakari Sangh Ltd. 2016 (7) TMI 1217 - GUJARAT HIGH COURT as held Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the cooperative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. Decided in favour of assessee. Addition in respect of rental income earned - We note that assessee has not claimed deduction u/s 80P(2)(d) of rental income - The rental income has been shown by the assessee in the computation of total income separately and paid the taxes thereon as per the income tax rate applicable, therefore the question of disallowance does not arise. We note that deduction under section 80P is available activity-wise and the rental income is not defined as per the section 80P, however assessee has shown the rental income separately and paid the taxes thereon. Hence, the question of disallowance under section 80P of the Act does not arise, specifically when the assessee has never claimed deduction under section 80P of the Act in respect of the rental income. Therefore, we delete the addition.Decided in favour of assessee. Income from sale of crackers - We note that assessee has never claimed the deduction under section 80P of the Act on account of sale of crackers, hence the question of disallowance does not arise -The Ld. Counsel also took us through paper book page no.31 and stated that assessee has shown the crackers sale separately and the sale of crackers has not included in computing deduction under section 80P of the Act. The assessee has never claimed deduction under section 80P in respect of sale of crackers, therefore disallowance under section 80P of the Act does not arise.Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction under section 80P(2)(d) of the Income Tax Act.
2. Disallowance of rental income.
3. Disallowance of income from the sale of crackers.
4. General grounds related to eligible deductions under various subsections of section 80P.

Summary of Judgment:

Issue 1: Disallowance of Deduction under Section 80P(2)(d)
The assessee challenged the disallowance of deduction under section 80P(2)(d) amounting to Rs.6,49,886/-. The Tribunal referenced the Gujarat High Court's decision in Surat Vankar Sahakari Sangh Ltd. vs. ACIT, which supported the assessee's claim. The High Court had held that interest income from investments in cooperative banks is eligible for deduction under section 80P(2)(d). The Tribunal found no reason to deviate from this precedent and deleted the addition, allowing the assessee's ground.

Issue 2: Disallowance of Rental Income
The assessee contested the addition of Rs.3,94,590/- as rental income, arguing that it had not claimed any deduction under section 80P for this income. The Tribunal noted that the rental income was separately shown and taxed, and no deduction under section 80P was claimed for it. Therefore, the disallowance was deemed unwarranted, and the addition was deleted, allowing the assessee's ground.

Issue 3: Disallowance of Income from Sale of Crackers
The assessee disputed the disallowance of Rs.78,02,133/- related to income from the sale of crackers, asserting that no deduction under section 80P was claimed for this income. The Tribunal observed that the assessee maintained separate books for the sale of crackers and had not included this income in the section 80P deduction computation. Consequently, the disallowance was found to be unjustified, and the addition was deleted, allowing the assessee's ground.

Issue 4: General Grounds
The Tribunal noted that the general grounds related to eligible deductions under various subsections of section 80P did not require specific adjudication.

Conclusion:
The appeal filed by the assessee was allowed in its entirety, with all contested disallowances being deleted. The order was pronounced on 21/12/2023 in the open court.