2016 (1) TMI 1235 - AT - Income Tax

Tribunal affirms co-op credit society's deduction claim under Income Tax Act

The Tribunal upheld the CIT(A)'s decision, allowing the co-operative credit society's claim for deduction under Section 80P(2)(d) of the Income Tax Act ... Deduction u/s 80P(2)(d) - interest income on deposits made by the assessee with cooperative bank - whether for the purpose of sec.80P(2)(d), a co-operative bank is considered as a co-operative society? - Held that:- CIT(A) has allowed the claim of the assessee by holding that the co-operative bank cannot be excluded from the co-operative society engaged in the business of banking for the purpose of sec.80P(2)(d). We find that the co-ordinate bench of this Tribunal in case of Menasi Seemeya Group Gramagala Seva Sahakari Sanga Niyamitha [2015 (2) TMI 1094 - ITAT BANGALORE ]held that a Co-operative bank which is also a Co-operative Society cannot be excluded from the purview of benefits available to a Cooperative Society , unless the provisions of the Act so stipulate. It had unequivocally held that the said provision applied to all Co-operative Society including a Cooperative Society engaged in the business of the bank or in other words, a Co-operative Bank. Therefore, the view taken that income by way of interest or dividends earned by the assessee society from the Cooperative bank which was also a Co-operative Society was eligible for deduction cannot be faulted. - Decided in favour of assessee Issues Involved:1. Deduction under Section 80P(2)(d) of the Income Tax Act.2. Validity of reopening of assessment.Issue-wise Detailed Analysis:1. Deduction under Section 80P(2)(d):The primary issue in these appeals was whether the assessee, a co-operative credit society, was eligible for a deduction under Section 80P(2)(d) of the Income Tax Act for interest income earned from deposits made with co-operative banks. The Assessing Officer (AO) had disallowed this deduction, arguing that the interest income should be classified as 'income from other sources' and not eligible for the deduction under Section 80P(2)(d).The assessee contended that the funds were parked with other co-operative societies engaged in banking and that the interest received from these deposits should be eligible for the deduction. The CIT(A) accepted this argument, relying on previous Tribunal decisions which held that restricting the scope of Section 80P(2)(d) only to co-operative societies other than co-operative banks was not in accordance with the law.The revenue argued that the Supreme Court's decision in the case of Totgar Cooperative Sale Society Ltd. vs. ITO (322 ITR 383) supported their position. However, the assessee countered that the Supreme Court's decision pertained to Section 80P(2)(a)(i) and not Section 80P(2)(d), making the issues distinct.The Tribunal reviewed the relevant material and previous decisions, including those in the cases of Menasi Seemeya Group Gramagala Seva Sahakari Sanga Niyamitha and Shri Marikamba Mahila Co-operative Credit Society Ltd., which supported the assessee's position. The Tribunal concluded that a co-operative bank qualifies as a co-operative society for the purposes of Section 80P(2)(d) and upheld the CIT(A)'s decision to allow the deduction.2. Validity of Reopening of Assessment:The cross objections raised by the assessee for the assessment years 2007-08 to 2010-11 challenged the validity of the reopening of assessments. However, since the Tribunal decided the main issue on merits in favor of the assessee, the question of the validity of reopening became academic and was not addressed in detail.Conclusion:The Tribunal dismissed the revenue's appeals and upheld the CIT(A)'s decision, allowing the assessee's claim for deduction under Section 80P(2)(d). Consequently, the cross objections regarding the validity of reopening were also dismissed as they became academic in nature. The judgment was pronounced in the open court on January 22, 2016.