2021 (11) TMI 1121 - AT - Income Tax

Appellant's Cooperative Society Wins Tax Exemption Case

Belgaum Coal & Coke Consumer Cooperative Association Ltd., Versus ITO, Ward- 1 (1), Belagavi  

The Tribunal ruled in favor of the appellant, a consumer cooperative society, allowing the exemption on interest income received from cooperative banks ... Deduction u/s 80P(2)(d) - income received from cooperative banks - AO as well as CIT(A) was of the opinion that the same does not call for exemption u/s 80P(2)(d) of the Act as they were received from a cooperative bank - HELD THAT:- The reasoning of the lower authorities cannot be sustained in the eyes of law as the cooperative banks also the spies of the cooperative societies and continue to be cooperative society despite the fact that they enjoy the licence from Reserve Bank of India to carry out the business of the banking. Whether the cooperative banks is also cooperative society or not? - This issue was considered in the case of CIT vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] wherein referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] held that the exemption is not to be denied in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. Thus we hold that the interest income earned by the appellant society on investment made with the cooperative bank which are also cooperative societies is exempt from the Income Tax Act u/s 80P(2)(d) of the Act. Therefore, we hold that the lower authorities was not justified in denying the claim of deduction u/s 80P(2)(d) - Decided in favour of assessee. Issues:- Eligibility of exemption of income received from cooperative banks under section 80P(2)(d) of the Income Tax Act, 1961.Analysis:The appellant, a consumer cooperative society, appealed against the denial of exemption on interest income received from cooperative banks under section 80P(2)(d) for the assessment year 2012-13. The Assessing Officer and the CIT(A) held that the income did not qualify for exemption as it was received from a cooperative bank, not a cooperative society. However, the Tribunal disagreed, stating that cooperative banks are still cooperative societies despite being licensed by the Reserve Bank of India. Referring to legal precedents, including a Karnataka High Court case, the Tribunal concluded that interest income from cooperative banks is eligible for deduction under section 80P(2)(d) of the Act. The Tribunal highlighted that the CIT(A) was not justified in denying the deduction and directed the Assessing Officer to allow it.In the absence of a direct judgment from the jurisdictional High Court on the issue, the Tribunal favored the view supporting the assessee taken by the Karnataka High Court over conflicting views. The Tribunal emphasized that the denial of exemption by the Assessing Officer was not a reasonable interpretation of the law. By considering various legal decisions, the Tribunal clarified that the appellant's interest income from cooperative banks, which are also cooperative societies, should be exempt under section 80P(2)(d) of the Act. The Tribunal held that the lower authorities erred in denying the deduction and allowed the appeal, directing the Assessing Officer to grant the deduction under section 80P(2)(d) of the Act.Overall, the Tribunal's decision centered on interpreting the provisions of section 80P(2)(d) and determining the eligibility of exemption for income received from cooperative banks. By analyzing legal precedents and the nature of cooperative banks as cooperative societies, the Tribunal concluded that the appellant's interest income from cooperative banks should indeed be exempt under the specified section of the Income Tax Act, 1961.