2022 (5) TMI 1062 - AT - Income Tax

Tribunal Allows Delayed Appeal, Grants Deduction for Co-Op Bank Interest

The Dhanera Nagarik Sahakari Mandali Ltd. Versus The ACIT, Circle Palanpur

The Tribunal condoned the 2-day delay in filing the appeal, emphasizing substantial justice over technicalities. Regarding the eligibility of the assessee ... Deduction u/s. 80P - whether the assessee is eligible to claim deduction on interest earned from Co-Operative Bank u/s 80P(2)(d)? - HELD THAT:- Hon’ble Gujarat High Court in the case of State Bank of India [2016 (7) TMI 516 - GUJARAT HIGH COURT] held that that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d). In the case of Surat Vankar Sahakari Sangh Ltd. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] the Gujarat High Court held assessee-co-operative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank. In the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] the Karnataka High Court has held that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. Thus in our view, interest earned by the assessee on surplus held with Banaskantha Dist. Co-operative Bank would be eligible for deduction under Sec.80P(2)(d) - Decided in favour of assessee. Issues involved:1. Condoning the delay in filing the appeal.2. Eligibility of the assessee to claim deduction on interest earned from a Co-Operative Bank under section 80P(2)(d) of the Income Tax Act, 1961.Detailed Analysis:1. Condoning the delay in filing the appeal:The appeal filed by the assessee was noted to be time-barred by 2 days. The Tribunal referred to the case of Collector, Land Acquisition v. Mst. Katiji and emphasized the importance of the principle of substantial justice over technical considerations. The Tribunal observed that a liberal approach should be adopted in condoning the delay, as refusing to do so could result in a meritorious matter being dismissed at the outset, defeating the cause of justice. Considering the minimal delay of 2 days and in the interests of justice, the Tribunal decided to condone the delay in filing the appeal.2. Eligibility of the assessee to claim deduction on interest earned from a Co-Operative Bank:The assessee, a credit Co-Operative Society, had claimed a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 based on interest income earned from various sources, including a Co-Operative Bank. However, the Assessing Officer disallowed a portion of the claimed deduction, specifically the interest income received from the Co-Operative Bank. The Assessing Officer relied on a judgment of the Hon'ble Karnataka High Court to support the disallowance, stating that interest earned on deposits with entities other than primary agricultural co-operative societies was not eligible for deduction under section 80P of the Act.In the appeal, the CIT(A) upheld the Assessing Officer's decision, emphasizing that cooperative banks were excluded from the definition of a Co-operative Society by a finance act, which indicated that they were not entitled to the exemption or deduction under section 80P of the Act. The CIT(A) concluded that the interest earned was taxable under the head 'Income from Other Sources.'However, the Tribunal, in its detailed analysis, referred to various judicial precedents, including judgments of the Hon'ble Gujarat High Court and other cases, which supported the eligibility of a co-operative society to claim deduction under section 80P(2)(d) for interest earned from deposits with a Co-Operative Bank. The Tribunal, aligning with the decisions of the Gujarat High Court and other relevant cases, held that the interest earned by the assessee from the Co-Operative Bank was indeed eligible for deduction under section 80P(2)(d) of the Act. Consequently, the Tribunal allowed the appeal of the assessee, ruling in favor of the eligibility for the deduction.In conclusion, the Tribunal's judgment addressed the issues of condoning the delay in filing the appeal and the eligibility of the assessee to claim a deduction on interest earned from a Co-Operative Bank under section 80P(2)(d) of the Income Tax Act, 1961, providing a comprehensive analysis based on legal principles and judicial precedents.