2021 (5) TMI 635 - AT - Income Tax

Tribunal upholds Co-op bank's deduction claim under sec 80P(2)(d) for interest income, dismissing Revenue's appeal.

The Tribunal dismissed the Revenue's appeal for A.Y. 2013-14 and 2014-15, upholding the Commissioner (Appeals) orders allowing the deduction claim for ... Deduction under section 80P(2)(d) - mutuality - treatment of co-operative banks versus co-operative societies - precedent of coordinate Bench decisions - distinguishing Totagars Co-operative SocietyDeduction under section 80P(2)(d) - treatment of co-operative banks versus co-operative societies - mutuality - precedent of coordinate Bench decisions - distinguishing Totagars Co-operative Society - Deduction under section 80P(2)(d) is allowable in respect of interest income earned on deposits with co operative banks. - HELD THAT: - The Tribunal, following a series of coordinate bench decisions addressing the identical controversy, held that interest income earned by a co operative housing society from deposits with co operative banks qualifies for deduction under section 80P(2)(d). The Assessing Officer's conclusion that co operative banks are excluded by reason of the definition of 'co operative society' and the amendment excluding co operative banks was rejected in view of the coordinate bench jurisprudence which distinguished the Karnataka High Court decision in Totagars Co operative Society. The Tribunal applied those consistent Tribunal precedents to the facts of the appeals and concluded that the assessee is entitled to the deduction claimed, notwithstanding the Assessing Officer's reliance on principles of mutuality and the characterisation of co operative banks as being akin to commercial banks. [Paras 11, 12]Revenue's disallowance was set aside and the deduction under section 80P(2)(d) in respect of interest from co operative banks was allowed.Final Conclusion: Both appeals by the Revenue for A.Y. 2013-14 and A.Y. 2014-15 were dismissed; the orders of the Commissioner (Appeals) allowing the deduction under section 80P(2)(d) in respect of interest earned from co operative banks were upheld. Issues:Challenge to orders dated 15th March 2019 for A.Y. 2013-14 and 20th March 2019 for A.Y. 2014-15 by Revenue regarding disallowance under section 80P(2)(d) for interest income from Co-operative bank.Analysis:1. The appeals were filed by Revenue challenging orders for A.Y. 2013-14 and 2014-15 by the Commissioner (Appeals)-32, Mumbai. Both appeals involved a common issue related to disallowance under section 80P(2)(d) for interest income from Co-operative bank.2. The Assessing Officer disallowed the claim for both years, stating that the deduction is available for investment in co-operative societies, not banks. The AO sought an explanation from the assessee, who submitted a detailed reply. The AO rejected the submissions, citing that interest income from Co-operative banks is not eligible for deduction under section 80P(2)(d) as banks are not considered co-operative societies. The AO added the disallowed amount to the total income.3. The Commissioner (Appeals) directed the AO to allow the deduction under section 80P(2)(d) based on previous decisions. The Revenue challenged this decision, citing the Karnataka High Court judgment in Totagar's Co-operative Society. The Counsel for the assessee relied on Co-ordinate Bench decisions supporting the deduction claim.4. The Tribunal held that the issue of deduction for interest income from Co-operative banks under section 80P(2)(d) is settled by previous Tribunal decisions. The Tribunal upheld the Commissioner (Appeals) order, stating that the assessee, being a Co-operative Society, is entitled to claim the deduction regardless of the source of interest income.5. The Tribunal dismissed the Revenue's appeal for A.Y. 2013-14 and 2014-15, as the issue was already decided in favor of the assessee by the Co-ordinate Bench decisions. The consistent view taken by the Tribunal and the distinction made from the Karnataka High Court judgment supported the allowance of the deduction under section 80P(2)(d) for interest income from Co-operative banks.6. Consequently, both appeals by the Revenue for A.Y. 2013-14 and 2014-15 were dismissed, affirming the orders of the Commissioner (Appeals) and upholding the deduction claim for interest income from Co-operative banks under section 80P(2)(d).