2016 (1) TMI 1499 - AT - Income Tax

Tribunal grants exemption to cooperative society under section 80P, rules in favor of assessee

Sindhudurg Nagri Sahakari Patpedhi Ltd. Versus ACIT Circle- 2 Kalyan Thane

The Tribunal ruled in favor of the cooperative society, allowing the claim of exemption under section 80P (2)(a)(i) of the Act for interest income from ... Deduction u/s. 80P(2)(d) - interest received from investment with non-cooperative institutions was not allowable as deduction - HELD THAT:- Similar issue had arisen in the appeal filed by the AO for the AY. 2009-10 [2015 (9) TMI 1751 - ITAT MUMBAI], that the Tribunal had dismissed the appeal filed by the AO. He also relied upon the case of Jaoli Taluka Sahakari Patpedhi Maryadit [2015 (9) TMI 170 - ITAT MUMBAI], Mehsana District Cooperative Bank Ltd. [2001 (8) TMI 15 - SUPREME COURT]. Decided in favour of assessee. Issues Involved:1. Claim of exemption u/s. 80P (2)(a)(i) of the Act for interest income from investments.2. Allowance of proportionate expenses against interest income.3. Appeal against the order of the AO and FAA regarding interest income from non-cooperative institutions.4. Comparison with similar cases and Tribunal decisions.5. Decision on effective grounds of appeal for both Assessment Years (AYs).Issue 1: Claim of exemption u/s. 80P (2)(a)(i) of the Act for interest income from investments:The assessee, a cooperative society, had claimed exemption u/s. 80P (2)(a)(i) of the Act for interest income earned from various investments. The AO disallowed the interest received from investments with non-cooperative institutions under section 80P(2)(d) of the Act. The FAA upheld this decision, stating that if income arose from business with third parties, the exemption was not available. The Tribunal referred to similar cases and decided in favor of the assessee, allowing the claim for exemption.Issue 2: Allowance of proportionate expenses against interest income:The AO held that interest from investments with non-cooperative institutions was not allowable as a deduction, limiting the proportionate expenses to Rs. 54,226 instead of the Rs. 4.32 lakhs claimed by the assessee. The FAA upheld the AO's decision on this matter. However, during the hearing, the AR cited previous Tribunal decisions to support the claim, leading the Tribunal to decide in favor of the assessee on this issue as well.Issue 3: Appeal against the order of the AO and FAA regarding interest income from non-cooperative institutions:The assessee challenged the order of the AO and FAA regarding the taxation of interest income from investments in non-cooperative institutions. The FAA had dismissed the appeal, considering the income derived from such investments as taxable income from other sources. The Tribunal, after reviewing similar cases and previous decisions, ruled in favor of the assessee, allowing the appeals for both AYs.Issue 4: Comparison with similar cases and Tribunal decisions:The AR presented similar cases and Tribunal decisions during the hearing to support the assessee's claims. The Tribunal, after considering these references and aligning with previous decisions, decided in favor of the assessee based on the consistency in the treatment of such cases.Issue 5: Decision on effective grounds of appeal for both Assessment Years (AYs):The Tribunal, following its decisions on similar cases and grounds of appeal for previous AYs, allowed the appeals filed by the assessee for both AYs, thereby providing a comprehensive resolution to the issues raised in the appeals.This detailed analysis of the judgment highlights the key legal issues, arguments presented, decisions made by the authorities, and the final outcome of the appeals, providing a comprehensive understanding of the case.