2024 (3) TMI 770 - AT - Income Tax

Deduction u/s 80P - interest earned on deposits parked with Krishna Co-operative Central Bank Limited - contention of the Ld. AO and the Ld. DR is that interest accrued on Reserve Fund Deposits is not eligible for deduction U/s 80P - HELD THAT - Respectfully following the decision of Vavveru Cooperative Rural Bank Ltd 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT and Kakateeya Mutually Aided Thrift and Credit Co-op Society Limited 2023 (9) TMI 211 - ITAT VISAKHAPATNAM wherein held interest income should be allowed as deduction u/s. 80P(2)(a)(i), thus we are inclined to quash the order passed by the Ld.CIT(A) and allow the appeal of the assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for deduction u/s 80P of the Act on interest income from deposits with a Cooperative Bank.

Summary:

Condonation of Delay:
The assessee filed an appeal with a delay of 93 days before the Ld. CIT(A)-NFAC. The assessee sought condonation of delay by submitting an affidavit explaining the reasons for the delay. However, the Ld. CIT(A)-NFAC found the reasons unconvincing and dismissed the appeal without condoning the delay, citing the lack of a plausible explanation.

Eligibility for Deduction u/s 80P:
The primary issue was whether the assessee was eligible for deduction u/s 80P with respect to the interest earned on deposits parked with Krishna Cooperative Central Bank Limited. The Ld. AO disallowed the deduction, arguing that the interest income was from surplus or idle funds and relied on the Supreme Court decision in Totgars Co-operative Sale Society Ltd vs. ITO [2010] 322 ITR 283 (SC). The Ld. AO added Rs. 27,00,393/- to the income, treating it as 'income from other sources.'

The Tribunal examined the facts and found them distinguishable from the Totgars case. It noted that the interest income was from operational funds, not surplus or idle funds. The Tribunal referenced the decision of the Hon'ble High Court of Andhra Pradesh in Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another [2017] 396 ITR 0371 (AP), which allowed deduction u/s 80P(2)(a)(i) for interest income from investments in banks.

The Tribunal also cited a similar decision by a coordinate Bench in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society, which supported the assessee's claim. Based on these precedents, the Tribunal quashed the order of the Ld. CIT(A) and allowed the appeal of the assessee, granting the deduction u/s 80P(2)(a)(i).

Conclusion:
The appeal was allowed in favor of the assessee, and the order of the Ld. CIT(A) was quashed. The Tribunal upheld the eligibility for deduction u/s 80P(2)(a)(i) on the interest income from operational funds deposited with Krishna Cooperative Central Bank Limited.