2023 (2) TMI 1017 - AT - Income Tax

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

M/s. Golden Gulshan Cooperative Housing Society Ltd. Versus Assistant Director of Income Tax, CPC Mumbai

The Tribunal allowed the appeal, directing the AO to allow the deduction under Section 80P(2)(d) for interest income earned from investments with ... Deduction u/s.80P(2)(d) - assessee society earned interest income - HELD THAT:- Hon’ble High Court of Karnataka in case of Pr. CIT & Anr. Vs. Totgar’s Co-operative Sale Society Ltd. [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank of India [2016 (7) TMI 516 - GUJARAT HIGH COURT] had held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. Thus we are of the considered view that assessee society who has earned an amount from its investment of surplus fund with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. Appeal filed by the assessee is allowed. Issues Involved:1. Disallowance of deduction claimed under Section 80P(2)(d) of the Income Tax Act.2. Jurisdiction and power of the CPC under Section 143(1) of the Income Tax Act.3. Charging of interest under Section 234B of the Income Tax Act.4. Charging of interest under Section 234C of the Income Tax Act.Detailed Analysis:1. Disallowance of Deduction under Section 80P(2)(d):The core issue revolves around the disallowance of a deduction claimed by the assessee, a cooperative housing society, under Section 80P(2)(d) of the Income Tax Act. The assessee had earned interest income of Rs. 5,04,021 from investments made with cooperative banks and claimed this amount as a deduction. The Assessing Officer (AO) disallowed this deduction, which was subsequently upheld by the CIT(A). The Tribunal referred to the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. vs. ITO and various other judgments, including those from the High Courts of Karnataka and Gujarat, which held that interest income earned by a cooperative society from investments with cooperative banks is eligible for deduction under Section 80P(2)(d). The Tribunal concluded that the assessee is entitled to this deduction and directed the AO to allow it.2. Jurisdiction and Power of CPC under Section 143(1):The assessee contended that the Centralized Processing Center (CPC) had no power to make the adjustment disallowing the deduction under Section 80P(2)(d) as it was beyond the scope of adjustments permissible under Section 143(1) of the Act. The Tribunal did not explicitly address this issue in its final decision but focused on the eligibility of the deduction under Section 80P(2)(d), which it upheld in favor of the assessee.3. Charging of Interest under Section 234B:The assessee argued that the interest charged under Section 234B of the Act was wrongly applied. Section 234B pertains to interest for defaults in payment of advance tax. The Tribunal did not provide a detailed discussion on this issue in the judgment, as the primary focus was on the eligibility of the deduction under Section 80P(2)(d).4. Charging of Interest under Section 234C:Similar to the issue under Section 234B, the assessee contended that the interest charged under Section 234C was wrongly applied. Section 234C deals with interest for deferment of advance tax. Again, the Tribunal did not delve into this issue in detail, focusing instead on the main issue of the deduction under Section 80P(2)(d).Conclusion:The Tribunal allowed the appeal filed by the assessee, directing the AO to allow the deduction under Section 80P(2)(d) for the interest income earned from investments with cooperative banks. The judgment emphasized the precedent set by higher courts, affirming that such interest income is eligible for deduction under the said provision. The issues regarding the CPC's jurisdiction and the charging of interest under Sections 234B and 234C were not extensively discussed, as the primary relief sought by the assessee was granted.