Cooperative Society's Deduction for Interest Income Upheld: ITAT Affirms Applicability of Section 80P(2)(a)(i.

The ITAT upheld the decision of the CIT(A), allowing the assessee, a cooperative society, the deduction u/s 80P(2)(a)(i) of the Act for interest income from fixed deposits. The Tribunal dismissed the Revenue's appeal, affirming the deduction's applicability based on legal precedents and the cooperative's business activities.

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Issues Involved:
The appeal involves the disallowance of deduction u/s 80P(2)(a)(i) of the Act claimed by the assessee, the legality of keeping fixed deposits in credit State Cooperative Apex Ltd. and other banks, and the applicability of precedent judgments in similar cases.

Deduction u/s 80P(2)(a)(i) Disallowance:
The assessee, a cooperative society, was engaged in extending credit facilities and accepting deposits from members. The dispute arose when the deduction u/s 80P(2)(a)(i) of the Act claimed by the assessee was disallowed by the ld.AO for the assessment year 2017-18. The assessee had kept fixed deposits in credit State Cooperative Apex Ltd. and other banks out of its surplus funds, earning interest amounting to Rs.2,78,23,521/-. The assessee contended that the deduction had been allowed in previous years and relied on the decision of the CIT(A),NFAC, for the assessment years 2012-13 and 2014-15. The present CIT(A), NFAC, Delhi passed an order in favor of the assessee, allowing the deduction u/s 80P(2)(a)(i) of the Act.

Judgment and Precedent Application:
During the appeal, the assessee's counsel referenced a judgment by the coordinate Bench in the case of M/s Kammavari Credit Co-operative Society Ltd., which supported the assessee's position. The Co-ordinate Bench observed that the interest income earned by the cooperative society was attributable to its business activity, especially from investments with other cooperative societies, exempt under u/s 80P(2)(a)(i) of the Act. The assessee's argument was further supported by the judgment of the jurisdictional High Court in the case of M/s. Guttigedarara Credit Cooperative Ltd. The Ld.CIT(A) upheld the assessee's claim based on these precedents, leading to the dismissal of the appeal by the Revenue.

Conclusion:
The Tribunal found that the issue was squarely covered in favor of the assessee, and the deduction u/s 80P(2)(a)(i) of the Act was rightly allowed by the ld.CIT(A). Considering the legal precedents and the facts of the case, the Tribunal upheld the order passed by the ld.CIT(A) and dismissed the appeal of the Revenue. The appeal was deemed devoid of merit, and the decision was pronounced in the open court on 14th December 2023.

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