Tribunal Rejects Revenue's Appeal, Upholds Deduction Claim for Assessee's Interest Income Despite Late Filing.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order allowing the assessee's deduction claim under Section 80P, including interest income from cooperative bank deposits. The Tribunal found no error in the CIT(A)'s decision, emphasizing that the deduction could be claimed even if the return was filed late.

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Issues Involved:
1. Disallowance of deduction claimed under Section 80P due to late filing of return.
2. Eligibility of interest income from cooperative banks for deduction under Section 80P(2)(d).

Detailed Analysis:

1. Disallowance of Deduction Claimed under Section 80P Due to Late Filing of Return:

The Revenue's primary contention was that the assessee did not file the return of income before the due date but filed it after the issuance of notice under Section 148, and thus, the claim for deduction under Section 80P should be disallowed as per Section 80A(5). The Assessing Officer (AO) disallowed the deduction claimed under Section 80P(2)(a)(i) on the grounds that the return was not filed within the prescribed time under Sections 139(1) or 139(4). The AO emphasized that the deduction cannot be allowed unless claimed in a timely filed return.

The Tribunal examined the provisions of Section 80P read with Section 80A(5) and concluded that there is no requirement in these sections that the return must be filed within the prescribed time under Section 139(1) or 139(4). The critical aspect is whether the claim was made in the return of income filed for the relevant year, even if filed late. The Tribunal referenced the decision of the Kerala High Court in Chirakkal Service Co-operative Bank Ltd. vs. CIT, which held that a return filed beyond the stipulated period could still be accepted and acted upon if proceedings are pending. Therefore, the Tribunal found no merit in the Revenue's argument and upheld the CIT(A)'s decision to allow the deduction.

2. Eligibility of Interest Income from Cooperative Banks for Deduction under Section 80P(2)(d):

The Revenue argued that the interest income earned from deposits kept in cooperative banks is not eligible for deduction under Section 80P(2)(d), referring to the Supreme Court's decision in Totagars Co-operative Sales Society Limited vs. ITO. The AO contended that the interest income should be classified as "other sources" and not business income, thus disqualifying it from deduction under Section 80P.

The Tribunal distinguished the facts of the current case from the Totagars case. It noted that in Totagars, the cooperative society was engaged in trading agricultural produce and parked surplus funds in banks, whereas the current assessee was primarily engaged in providing credit facilities to its members. The funds were deposited in cooperative banks as part of statutory requirements, and the interest earned was integral to the assessee's business activity.

The Tribunal also referenced the Madras High Court's decision in CIT vs. Veerakeralam Primary Agricultural Co-operative Credit Society, which supported the view that credit cooperative societies are entitled to claim deductions under Section 80P for interest income earned from deposits in cooperative banks. Consequently, the Tribunal upheld the CIT(A)'s decision to allow the deduction for interest income under Section 80P(2)(d).

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that allowed the assessee's claim for deduction under Section 80P, including the interest income earned from deposits in cooperative banks. The Tribunal found no error or infirmity in the CIT(A)'s order and upheld the decision to grant the deduction.

Order Pronounced:

The appeal of the Revenue was dismissed on 10th November 2020 at Chennai.

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