2025 (4) TMI 1084 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest received from co-operative bank - HELD THAT - We find that grounds of appeal raised by the assessee is in fact covered by a series of decision by this Bench as well as other Co-ordinate Benches of Tribunal wherein it has been consistently held that Co-operative Banks are primarily co-operative society and the interest or dividend earned from such Co-operative Bank are eligible for deduction under section 80P(2)(d). Similar view was taken in Sai Ankur Co-operative Housing Society Limited 2025 (2) TMI 115 - ITAT MUMBAI and Totagars Co-operative sales Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT . No contrary facts or law is brought to our notice to take other view. Thus the grounds of appeal raised by the assessee are allowed.

Summary

The core legal questions considered by the Tribunal in this appeal pertain primarily to two issues: (1) whether the delay of 259 days in filing the appeal before the Tribunal should be condoned, and (2) whether the assessee is entitled to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961, on interest income received from a co-operative bank.

Regarding the first issue, the relevant legal framework involves the procedural provisions governing limitation and condonation of delay in filing appeals before the Tribunal. The Tribunal examined the facts surrounding the delay, including the communication of the impugned order and the e-mail addresses provided by the assessee. The assessee contended that the delay was unintentional and due to non-receipt of the order at the e-mail address registered in Form-35, asserting that notices were sent to a different e-mail address. The assessee supported this claim with an affidavit from the Chairman of the society. The Revenue challenged this explanation as a self-serving narrative, emphasizing that both e-mail addresses belonged to the same person and that no sufficient cause for the delay was demonstrated. The Tribunal, however, took a liberal view favoring substantial justice over technicalities, noting the absence of evidence to the contrary and the principle that technical issues should not defeat natural justice. Consequently, the Tribunal condoned the delay of 259 days in filing the appeal before it.

On the second substantive issue concerning the deduction under section 80P(2)(d), the legal framework involves the interpretation of the scope of this provision, which grants deduction to co-operative societies on income derived from certain activities, including interest income from co-operative banks. The Revenue denied the deduction based on a decision of the Bombay High Court in a case involving Quepam Urban Cooperative Society, which was under challenge before the Supreme Court via a Special Leave Petition (SLP). The SLP was admitted but subsequently dismissed by the Supreme Court, thereby upholding the High Court's decision in favor of the assessee. The assessee also relied on a series of decisions from various High Courts and coordinate benches of the Tribunal consistently holding that co-operative banks are primarily co-operative societies and that interest income from such entities qualifies for deduction under section 80P(2)(d). The Tribunal referred specifically to the Supreme Court ruling in PCIT Vs Annasaheb Patil Matadi Kamgar Sahakari Pathpedi (2023), which clarified that a credit co-operative society cannot be termed a co-operative bank and that such credit societies are entitled to exemption under section 80P(2). The Tribunal also cited coordinate bench decisions such as Sai Ankur Co-operative Housing Society Limited vs. ITO and the Karnataka High Court's decision in PCIT Vs Totagars Co-operative Sales Society, which reinforced this interpretation.

The Tribunal found no contrary facts or legal precedents brought by the Revenue to justify denial of the deduction. Applying the law to the facts, it concluded that the assessee was entitled to the deduction claimed under section 80P(2)(d) on interest income received from the co-operative bank. The Tribunal rejected the Revenue's arguments and allowed the grounds of appeal raised by the assessee.

In addressing competing arguments, the Tribunal balanced procedural fairness against the Revenue's emphasis on strict adherence to limitation periods. It favored a pragmatic approach to condonation of delay, emphasizing natural justice and the absence of prejudice to the Revenue. On the substantive tax issue, the Tribunal gave precedence to binding judicial precedents and consistent coordinate bench rulings supporting the assessee's claim, dismissing the Revenue's reliance on pending or dismissed SLPs and contrary views.

The Tribunal's significant holdings include the following verbatim legal reasoning: "Taking a liberal view and keeping the fact in mind that when technical issues are kept against the cause of natural justice, the cause of substantial justice may be proffered." Furthermore, it held that "Co-operative Banks are primarily co-operative society and the interest or dividend earned from such Co-operative Bank are eligible for deduction under section 80P(2)(d)." These principles affirm the Tribunal's commitment to ensuring that procedural delays do not unjustly bar substantive rights and that the definition of co-operative banks for tax deduction purposes must align with judicial precedents recognizing their cooperative society character.

Ultimately, the Tribunal condoned the delay in filing the appeal and allowed the appeal on merit, directing that the deduction under section 80P(2)(d) be granted to the assessee for interest income from the co-operative bank. This decision reinforces the legal position that co-operative societies, including co-operative banks, are entitled to tax benefits under section 80P(2)(d), provided they meet the criteria established in judicial precedents.