2023 (2) TMI 202 - AT - Income Tax

Tribunal allows sec.80P deduction for interest income from banks, confirms cooperative credit society status.

The Tribunal ruled in favor of the assessee, allowing the sec.80P deduction for interest income from cooperative/nationalized banks. It confirmed the ... Deduction u/s 80P - interest income derived from cooperative/nationalized banks - lower authorities held assessee as a cooperative bank and not a cooperative credit society eligible for the impugned deduction - HELD THAT:- We find no merit in Revenue’s arguments. It is made clear that hon'ble apex court’s recent landmark decision in Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] has settled the law in assessee’s favour and against the department so far as its status as a credit cooperative society as well as distinction between nominal and regular members is concerned. Revenue’s arguments on both these twin aspects are rejected therefore outcome is no different regarding the assessee’s interest income derived from cooperative/other banks wherein the tribunal’s recent coordinate bench’s order in Bhimashankar Sahakari Sakhar Karkhana Ltd. Pune[2023 (2) TMI 134 - ITAT PUNE] Revenue is fair enough in not pinpointing any distinction on facts or law so far as the instant issue of sec.80P deduction is concerned. The assessee’s instant sole substantive ground hereinabove succeeds. Issues Involved:- Disallowance of sec.80P deduction of interest income derived from cooperative/nationalized banks.- Status of the assessee as a cooperative bank or a cooperative credit society.- Eligibility of deduction u/s.80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act.Analysis:Issue 1: Disallowance of sec.80P deduction of interest income derived from cooperative/nationalized banks:The assessee challenged the denial of sec.80P deduction for interest income from cooperative/nationalized banks. The Tribunal referred to a recent landmark decision by the apex court in Mavilayi Service Co-operative Bank Ltd. vs. CIT, which favored the assessee's status as a credit cooperative society. The Tribunal rejected Revenue's arguments against the deduction, citing a similar decision in a coordinate bench's order. Ultimately, the Tribunal ruled in favor of the assessee, allowing the deduction under sec.80P.Issue 2: Status of the assessee as a cooperative bank or a cooperative credit society:The dispute revolved around the status of the assessee as a cooperative bank or a cooperative credit society, impacting its eligibility for sec.80P deduction. The Tribunal considered the distinction between nominal and regular members and referenced the Mavilayi case to support the assessee's position as a credit cooperative society. The Tribunal dismissed Revenue's objections regarding the status of the assessee and upheld the assessee's eligibility for the deduction.Issue 3: Eligibility of deduction u/s.80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act:Regarding the eligibility of deduction under sec.80P(2)(a)(i) and 80P(2)(d), the Tribunal analyzed previous decisions by the Pune Benches and other cases. The Tribunal noted that cooperative societies were entitled to deduction u/s.80P(2)(a)(i) and 80P(2)(d) for interest income. It highlighted that the provision did not affect the eligibility of cooperative societies for the deduction. Citing precedents, including The Sesa Goa Employees Coop. Credit Society Ltd. case, the Tribunal affirmed that cooperative societies were eligible for the deduction. The Tribunal concluded that the impugned orders did not require any interference, and the assessee's appeal was allowed accordingly.In conclusion, the Tribunal ruled in favor of the assessee on all the issues raised, allowing the sec.80P deduction for interest income from cooperative/nationalized banks and confirming the assessee's status as a cooperative credit society eligible for the deduction under the Income Tax Act.