Cooperative society can claim section 80P deduction on interest from cooperative bank deposits despite post-amendment restrictions

ITAT Pune set aside PCIT's revision order under section 263 regarding section 80P deduction claim. The cooperative society taxpayer had claimed deduction on interest income from deposits in cooperative banks, which AO allowed but PCIT sought to disallow. Tribunal held that while cooperative banks cannot claim section 80P deduction post-amendment, cooperative societies can still claim deduction under section 80P(2)(d) on interest from investments in cooperative banks since they remain registered cooperative societies. AO's view was deemed legally sustainable, making PCIT's revision unjustified. Assessment order under section 143(3) restored in taxpayer's favor.

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Issues Involved:
1. Legitimacy of the PCIT's revision directions under Section 263 of the Income Tax Act, 1961.
2. Eligibility of the assessee for deduction under Section 80P(2)(d) on interest income derived from deposits made in cooperative banks.
3. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Legitimacy of the PCIT's Revision Directions under Section 263:
The primary issue in this case revolves around the legitimacy of the Principal Commissioner of Income Tax (PCIT), Pune-4's revision directions under Section 263 of the Income Tax Act, 1961. The PCIT had revised the Assessing Officer's (AO) regular assessment dated 03-12-2019, terming it erroneous and prejudicial to the interest of the revenue. The PCIT's contention was that the AO had wrongly allowed the assessee's deduction claim under Section 80P for interest income derived from deposits made in cooperative banks.

2. Eligibility of Deduction under Section 80P(2)(d):
The core argument presented by the revenue was based on the Karnataka High Court's decision in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO, asserting that interest income derived from deposits made in cooperative societies does not qualify for deduction under Section 80P(2)(a)(i) read with Section 80P(2)(d) of the Act.

The tribunal, however, found merit in the assessee's arguments, referencing its recent order in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT. The tribunal noted that the PCIT had observed that cooperative banks are commercial banks and not cooperative societies, thus the interest income derived from such banks does not qualify for the deduction under Section 80P(2)(d). However, the tribunal disagreed with the PCIT's view, highlighting that the interest income derived by a cooperative society from its investments in cooperative banks should still be eligible for deduction under Section 80P(2)(d), as cooperative banks are still registered under the Cooperative Societies Act.

The tribunal referenced multiple judicial pronouncements supporting this view, including cases from the High Courts of Karnataka and Gujarat, which held that interest income earned by a cooperative society from investments in cooperative banks is eligible for deduction under Section 80P(2)(d).

3. Condonation of Delay in Filing the Appeal:
The assessee's appeal involved a delay of 02 days. The tribunal considered the reasons for the delay, which were attributed to the unavailability of the assessee's counsel due to health issues. The revenue did not object to the condonation of the delay. The tribunal, finding the reasons justifiable, condoned the delay.

Conclusion:
The tribunal concluded that the AO had taken a plausible view in allowing the assessee's claim for deduction under Section 80P(2)(d) on the interest income earned from deposits in cooperative banks. Therefore, the PCIT had erred in exercising his revisional jurisdiction under Section 263. The tribunal set aside the PCIT's order and restored the AO's original assessment order dated 03-12-2019. The assessee's appeal was allowed, and the delay in filing the appeal was condoned. The order was pronounced in the Open Court on 06th December, 2022.

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