ITAT partially allows Revenue's appeal, directs re-adjudication on deductions under sections 80P(2)(c)(ii) and 80P(2)(e).

The ITAT partly allowed the Revenue's appeals, directing the CIT(A) to re-adjudicate issues related to deductions under sections 80P(2)(c)(ii) and 80P(2)(e). The cross objections by the assessee were dismissed.

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Issues Involved:
1. Deletion of addition by disallowing deduction u/s 80P of the Income Tax Act.
2. Eligibility for deduction u/s 80P(2)(d) on interest income from deposits with cooperative banks.
3. Eligibility for deduction u/s 80P(2)(c)(ii) on interest income from savings bank accounts.
4. Eligibility for deduction u/s 80P(2)(e) on rental income from letting out godowns.

Issue-wise Detailed Analysis:

1. Deletion of Addition by Disallowing Deduction u/s 80P:
The Revenue appealed against the deletion of Rs. 2,65,43,871/- for AY 2013-14 and Rs. 1,72,42,513/- for AY 2014-15 by the CIT(A), who allowed the deduction u/s 80P. The AO had denied the deduction on the grounds that the assessee, a cooperative society under liquidation, was not engaged in banking or providing credit facilities to its members. The CIT(A) allowed the deduction, emphasizing that the income was from interest on FDRs with cooperative banks, which qualifies for the deduction u/s 80P(2)(d).

2. Eligibility for Deduction u/s 80P(2)(d) on Interest Income from Deposits with Cooperative Banks:
The Revenue contended that interest income from deposits with cooperative banks does not qualify for deduction u/s 80P(2)(d). However, the CIT(A) and ITAT held that the deduction u/s 80P(2)(d) is permissible if the interest income is derived from investments with any cooperative society, including cooperative banks. The ITAT referenced decisions from various High Courts and the Supreme Court, which clarified that cooperative banks are considered cooperative societies for the purpose of section 80P(2)(d). The ITAT upheld the CIT(A)’s decision allowing the deduction.

3. Eligibility for Deduction u/s 80P(2)(c)(ii) on Interest Income from Savings Bank Accounts:
The CIT(A) did not separately adjudicate the issue of deduction u/s 80P(2)(c)(ii) on interest income from savings bank accounts. The ITAT noted this omission and set aside the issue to the CIT(A) for fresh adjudication. The ITAT emphasized that the CIT(A) should separately consider the eligibility of interest income from savings bank accounts for deduction u/s 80P(2)(c)(ii).

4. Eligibility for Deduction u/s 80P(2)(e) on Rental Income from Letting Out Godowns:
For AY 2014-15, the assessee claimed a deduction u/s 80P(2)(e) on rental income from letting out godowns. The AO disallowed this claim, and the CIT(A) did not discuss it separately. The ITAT set aside this issue to the CIT(A) for proper adjudication, noting that there is no condition for availing the deduction under this provision.

Cross Objections by the Assessee:
The assessee’s cross objections for both assessment years were in support of the CIT(A)’s orders. Since the ITAT upheld the CIT(A)’s decision regarding the deduction u/s 80P(2)(d) and set aside other issues for fresh adjudication, the cross objections were deemed infructuous.

Conclusion:
The ITAT partly allowed the Revenue’s appeals for statistical purposes, directing the CIT(A) to re-adjudicate the issues related to deductions u/s 80P(2)(c)(ii) and 80P(2)(e). The cross objections filed by the assessee were dismissed.

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