2022 (5) TMI 548 - AT - Income Tax

Tribunal grants deduction for interest income from co-operative banks under Section 80P(2)(d)

The Tribunal allowed the assessee's appeals, directing the Assessing Officer to allow the deduction under Section 80P(2)(d) for interest income from ... Deduction u/s 80P claimed on the interest received from the cooperative banks - granting of deduction u/s 80P(2)(d) of the Act to the Cooperative Society - AO was not satisfied with the claim made by the assessee and observed that the cooperative bank is an urban commercial bank and does not fall under the purview of cooperative society referred in the Sec. 80P(2)(d) of the Act and therefore the interest income from cooperative banks has to be taxed under income from other sources and assessed the total income - HELD THAT:- As in M/S PETIT TOWERS CO-OP. HOUSING SOCIETY LTD. VERSUS INCOME TAX OFFICER, 19 (2) (5) MUMBAI [2021 (9) TMI 232 - ITAT MUMBAI] Tribunal has passed the order in the context of the revision order U/sec263 of the Act and relied on the catena of Hon’ble High court and Tribunal decisions were the cooperative society receives/earns interest on deposits with the co-operative bank is eligible for claim of deduction under section 80(2)(d) of the Act. The Ld.AR emphatically substantiated the submissions with the facts, evidences and judicial decisions filed before the lower authorities and find merits in the arguments of the Ld.AR. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to allow the claim of deduction u/sec 80P(2)(d) of the Act on the interest income received /earned from the co-operative banks and allow the appeal filed by the assessee. Issues Involved:1. Ex-parte disposal of appeal by the CIT (Appeals).2. Disallowance of deduction claimed under Section 80P(2)(d) of the Income Tax Act.3. Charging of interest under Section 234A of the Income Tax Act.4. Charging of interest under Section 234B of the Income Tax Act.Issue-wise Detailed Analysis:1. Ex-parte Disposal of Appeal by the CIT (Appeals):The assessee contended that the CIT (Appeals) was not justified in disposing of the appeal ex-parte. The CIT (Appeals) had issued a notice to the assessee to make submissions by a specified date, but the assessee did not file any submissions. Consequently, the CIT (Appeals) decided the case based on the available material and confirmed the Assessing Officer's order.2. Disallowance of Deduction Claimed Under Section 80P(2)(d):The core issue was the disallowance of the deduction of Rs. 1,13,55,556/- claimed under Section 80P(2)(d) for interest income received from deposits with co-operative banks. The Assessing Officer disallowed the deduction, reasoning that the interest income from co-operative banks does not qualify for deduction under Section 80P(2)(d) as it applies only to income from investments with other co-operative societies, not co-operative banks. The CIT (Appeals) upheld this view.However, the Tribunal referred to various judicial decisions, including those by coordinate benches and High Courts, which held that interest income from co-operative banks is eligible for deduction under Section 80P(2)(d). The Tribunal cited cases such as Petit Towers CHS Vs. ITO, Solitaire CHS Ltd Vs. PCIT, and others, which supported the assessee's claim. The Tribunal concluded that a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, and therefore, the interest income from such banks qualifies for deduction under Section 80P(2)(d). The Tribunal set aside the CIT (Appeals) order and directed the Assessing Officer to allow the deduction.3. Charging of Interest Under Section 234A:The assessee argued that the CIT (Appeals) was not justified in upholding the Assessing Officer's order charging interest of Rs. 77,268/- under Section 234A. The Tribunal did not specifically address this issue in the detailed analysis provided, focusing primarily on the deduction under Section 80P(2)(d).4. Charging of Interest Under Section 234B:Similarly, the assessee contested the interest charged under Section 234B, which was Rs. 12,74,922/- instead of Rs. 4,530/- as computed in the return of income. The Tribunal's primary focus was on the deduction under Section 80P(2)(d), and there was no detailed discussion on the interest charged under Section 234B.Conclusion:The Tribunal allowed the assessee's appeals, setting aside the CIT (Appeals) orders and directing the Assessing Officer to allow the deduction under Section 80P(2)(d) for interest income from co-operative banks. The decision was based on various judicial precedents that supported the assessee's claim. The issues related to interest under Sections 234A and 234B were not specifically addressed in detail. The Tribunal's order applied to all the assessment years involved, i.e., 2014-15, 2015-16, 2016-17, and 2017-18.