2024 (9) TMI 644 - AT - Income Tax

Denial of deduction u/s 80P - assessee was in receipt of interest income derived by or accrued to it from investment held with co-operative banks/institutions in the form of Fixed/Term Deposit Receipt TDR and interest income derived by or accrued to it on the balance of saving account maintained with such co-operative banks/institutions - HELD THAT - Admittedly, the appellant assessee is a housing co-operative society and is neither a credit co-operative society nor a co-operative bank and (b) the payer of interest income to the assessee i.e. PDCC is although is a cooperative bank in common parlance but not a co-operative bank strictly within the meaning assigned in Part V of BRA. In view therefore there is much less merits in application of s/s (4) of section 80P of the Act in denying the 80P(2)(d) deduction to the assessee. We find that, once claimant assessee falls outside the ambit of explanation (a) to section 80P(4) of the Act then denial would be contralegem finds fortified in case of PCIT Vs Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. 2023 (5) TMI 372 - SC ORDER where the assessee was a cooperative credit society engaged in the business of providing credit facilities to its members. The assessee claimed deduction u/s 80P(2)(a)(i) of the Act, but the Assessing Officer disallowed the deduction holding that the assessee is a cooperative bank and hence not eligible to claim deduction as per Section 80P(4) of the Act. The first and second appellate authority and the Hon ble Jurisdictional High Court held in the favour of the assessee holding that assessee is a co-operative society and not a cooperative bank, hence eligible for deduction u/s 80P(2) Section 80P(4) of the Act does not jeopardise the claim of deduction to housing cooperative society u/s 80P(2)(d) in respect of interest/dividend income from investments/share held with other co-operative society irrespective of its classification and status as to whether it attracted disqualification u/s 80P(4) of the Act or not. In consequence we hold that the views adopted by the tax authorities below in our considered opinion are not in conformity with legal position and binding judicial precedents, hence vacated. Resultantly, we reverse the denial of deduction. The grounds stands allowed in favour of assessee.

Summary

Issues:
1. Denial of deduction under section 80P(2)(d) of the Income-tax Act, 1961 to a co-operative housing society for interest income derived from investments held with co-operative banks/institutions.

Analysis:
The judgment pertains to an appeal by a co-operative housing society against the denial of deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest income received from investments in co-operative banks/institutions. The society had filed its return of income claiming the deduction but was summarily processed by the tax authorities, resulting in a dispute over the eligibility of the deduction. The primary issue revolved around the interpretation of section 80P(2)(d) and whether the society met the conditions for claiming the deduction.

The Tribunal analyzed the provisions of section 80P(2)(d) in detail, emphasizing that both the recipient and the payer of the interest/dividend income must be registered under the Co-operative Societies Act to qualify for the deduction. It highlighted that the classification of the societies under different acts was not a determining factor for eligibility. The Tribunal also referenced relevant case laws to support its interpretation of the law and the conditions for claiming the deduction under section 80P(2)(d).

Furthermore, the Tribunal examined the specific case of the co-operative housing society and the co-operative bank from which it received interest income. It noted that the society was registered under the Maharashtra State Co-operative Societies Act, fulfilling the first condition for claiming the deduction. The Tribunal concluded that the denial of the deduction based on the classification of the payer as a co-operative bank was not justified, as the payer did not fall within the definition of a co-operative bank as per the relevant provisions of the Act.

In light of the legal provisions and precedents cited, the Tribunal ruled in favor of the co-operative housing society, allowing its appeal and overturning the denial of the deduction under section 80P(2)(d). The Tribunal held that the tax authorities' decision was not in line with the legal position and established judicial precedents, leading to the reversal of the denial and the allowance of the deduction for the society.

In conclusion, the judgment clarifies the conditions for claiming deductions under section 80P(2)(d) of the Income-tax Act, emphasizing the importance of the registration status of the recipient and payer societies under the Co-operative Societies Act. It underscores that the classification of societies under different acts does not impact the eligibility for deductions, and decisions should align with legal provisions and binding judicial precedents to ensure consistency and fairness in tax assessments.