2022 (12) TMI 1164 - AT - Income Tax

Tribunal allows appeals against revisionary orders under Income-tax Act, upholds deduction for cooperative bank interest income.

The Tribunal allowed both appeals challenging revisionary orders passed by the ld. Principal Commissioner of Income-tax under section 263 of the ... Revision u/s 263 - assessees claimed deduction u/s.80P in respect of interest from cooperative banks and nationalized banks which got allowed by the AO - HELD THAT:- Insofar as the allowability of deduction u/s.8P(2)(a)(i) is concerned, we find that the Pune Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit [2019 (4) TMI 682 - ITAT PUNE] has decided the question of availability of deduction u/s 80P on interest income by noticing that the Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit [2015 (8) TMI 1085 - ITAT PUNE] has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed in Tumkur Merchants Souharda Credit Cooperative Ltd. [2015 (2) TMI 995 - KARNATAKA HIGH COURT] allowing deduction u/s. 80P on interest income and that of Mantola Cooperative Thrift Credit Society Ltd. [2014 (9) TMI 833 - DELHI HIGH COURT] not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. [2010 (2) TMI 3 - SUPREME COURT]. No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). The position continues to remain the same before this Tribunal also. We thus hold that no exception can be taken to the granting of deduction on interest income by the AO u/s 80P(2)(a)(i) of the Act. Deduction u/s.80P(2)(d) of the Act, it is crystal clear from the language of the provision that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative societies registered under the Act and hence qualify for the grant of the deduction. Similar view has been taken by the Pune Tribunal in several cases including The Sesa Goa Employees Coop. Credit Society Ltd. [2022 (12) TMI 959 - ITAT PUNE] We hold that the impugned orders questioning the grant of deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, cannot be sustained. Appeals are allowed. Issues:1. Revisionary orders passed by ld. Principal Commissioner of Income-tax u/s.263 of the Income-tax Act, 1961.2. Allowability of deduction u/s.80P in respect of interest income from cooperative banks and nationalized banks.3. Interpretation of provisions u/s.80P(2)(a)(i) and u/s.80P(2)(d) of the Act.Issue 1: Revisionary orders under section 263:The judgment deals with appeals by two different assessees challenging revisionary orders passed by the ld. Principal Commissioner of Income-tax u/s.263 of the Income-tax Act, 1961 for the assessment year 2017-18. The Tribunal consolidated the appeals due to a common issue raised for convenience.Issue 2: Allowability of deduction u/s.80P on interest income:In the first appeal (ITA No.278/PUN/2022), the assessee, a co-operative society, claimed deduction u/s.80P for interest income from nationalized and cooperative banks. The AO allowed the deduction, but the ld. PCIT disputed it under section 263. The Tribunal examined the case law and held that the deduction u/s.80P(2)(a)(i) for interest income from cooperative banks was allowable based on precedents and the Act's provisions.In the second appeal (ITA No.279/PUN/2022), a similar situation arose where the AO allowed the deduction claimed by the co-operative society for interest income from cooperative banks, but the ld. PCIT challenged this decision. The Tribunal analyzed the provisions of section 80P and upheld the allowability of the deduction u/s.80P(2)(a)(i) for interest income from cooperative banks.Issue 3: Interpretation of provisions u/s.80P(2)(a)(i) and u/s.80P(2)(d) of the Act:The Tribunal discussed the interpretation of provisions u/s.80P(2)(a)(i) and u/s.80P(2)(d) of the Act. It clarified that the deduction u/s.80P(2)(a)(i) for interest income from cooperative banks was permissible based on relevant case law and the Act's language. Additionally, it explained that co-operative societies, as defined under section 2(19) of the Act, were eligible for deduction u/s.80P(2)(d) on interest income from investments/deposits with registered co-operative societies. The Tribunal cited previous judgments to support the eligibility of co-operative societies for such deductions.In conclusion, the Tribunal allowed both appeals, emphasizing that the impugned orders questioning the grant of deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income were not sustainable based on the provisions and precedents cited.Order:Both appeals were allowed, and the order was pronounced in the Open Court on 22nd December 2022.