2018 (3) TMI 1825 - AT - Income Tax

Partial Upholding of CIT(A) Decision on Deductions for Cooperative Society

I.T.O., Ward- 35 (3), Kolkata Versus Kolkata Reserve Bank Employees Co-op. Credit Society Ltd.

The Tribunal partially upheld the CIT(A)'s decision, allowing deductions for interest income from bank deposits under section 80P(2)(a)(i) for a ... Deduction u/s 80P (2)(a)(i) - whether the assessee would be entitled to deduction u/s 80P(a)(2)(i) of the Act on interest earned on deposits with bank? - HELD THAT:- Treatment of interest earned on provident fund and rental income as attributable to banking business 'and this qualifying for deduction u/s 8OP(2)(a)(i) of the Act. We hold that the issue is squarely covered in favour of the assessee by the decision of the Tribunal and the Jurisdictional High Court in assessee's own case. Deduction under the provisions of section 80P(2)(a)(i) - HELD THAT:- Deduction is available to the assessee from the business of banking or providing credit facilities the members. The issue before us is with regard to the income earned by the assessee from the running and maintenance of holiday homes for the members. Thus, in our considered view the same cannot be allowed as deduction under the provisions of section 80P(2)(a)(i) Issues Involved:1. Deletion of addition on account of Income from Investment.2. Deletion of addition on account of Income from Holiday Home.3. Eligibility of interest income from bank deposits for deduction under section 80P(2)(a)(i) read with section 80P(2)(d).4. Qualification of interest income from non-cooperative banks for deduction under section 80P(2)(a)(i) read with section 80P(2)(d).5. Allowance of deduction under section 80P(2)(a)(i) on income from Holiday Home.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Income from Investment:The Assessee, a Cooperative Society, claimed a deduction under section 80P(2)(a)(i) for interest income earned from investments in various banks. The AO treated the interest income of Rs. 6,07,21,269/- from nationalized banks as 'Income from Other Sources' under section 56, denying the deduction under section 80P(2)(a)(i). The CIT(A) allowed the deduction, relying on judicial precedents, including the South Eastern Railway Employees Co-operative Credit Society Limited case, which distinguished the Totgars Co-operative Sales Society Ltd. case on facts. The Tribunal upheld the CIT(A)'s decision, following its own ruling in the Assessee's case for A.Y.2012-13, which allowed the deduction under section 80P(2)(a)(i).2. Deletion of Addition on Account of Income from Holiday Home:The AO added Rs. 5,11,980/- earned from maintaining holiday homes, treating it as non-eligible for deduction under section 80P(2)(a)(i). The CIT(A) reversed this, allowing the deduction. However, the Tribunal, referencing its earlier decision in the Assessee's case for A.Y.2012-13, held that income from holiday homes does not qualify for deduction under section 80P(2)(a)(i), and thus, allowed the revenue's appeal on this ground.3. Eligibility of Interest Income from Bank Deposits for Deduction under Section 80P(2)(a)(i) Read with Section 80P(2)(d):The AO contended that interest income from nationalized banks does not qualify for deduction under section 80P(2)(a)(i) as it is not attributable to the business of providing credit facilities to members. The CIT(A) disagreed, citing multiple judgments that allowed such deductions for cooperative societies engaged in providing credit facilities. The Tribunal upheld the CIT(A)'s view, emphasizing consistency with its previous rulings and the jurisdictional High Court’s decision in similar cases.4. Qualification of Interest Income from Non-cooperative Banks for Deduction under Section 80P(2)(a)(i) Read with Section 80P(2)(d):The AO allowed deduction only for interest income from the West Bengal Co-operative Bank, a registered cooperative society, under section 80P(2)(d). The CIT(A) and Tribunal, however, extended the deduction to interest income from nationalized banks, following prior judicial interpretations that distinguished the Totgars Co-operative Sales Society Ltd. case and supported deductions for credit societies.5. Allowance of Deduction under Section 80P(2)(a)(i) on Income from Holiday Home:The Tribunal reiterated its stance from the Assessee's case for A.Y.2012-13, denying the deduction for income from holiday homes under section 80P(2)(a)(i), as such income is not from the business of banking or providing credit facilities to members.Conclusion:The Tribunal's judgment partially upheld the CIT(A)'s decision, allowing deductions for interest income from bank deposits under section 80P(2)(a)(i), while denying deductions for income from holiday homes. The appeal by the revenue was partly allowed, maintaining consistency with previous rulings and judicial precedents.