2023 (4) TMI 796 - AT - Income Tax

Tribunal grants deduction to assessee for interest from co-op banks under Section 80P(2)(d)

M/s. Ishwar Bhavan Co-operative Housing Society Ltd Versus CIT (A), NFAC Delhi

The Tribunal allowed the assessee's appeal, holding that the assessee is entitled to deduction under Section 80P(2)(d) for interest received from ... Deduction u/s.80P(2)(d) - interest received from Co-operative banks - assessee is a co-operative housing society - HELD THAT:- For cooperative banks or cooperative societies which are carrying on banking business but not registered with RBI, they would be entitled for deduction u/s.80P(2)(a)(i) of the Act and would not be hit by the provisions of Section 80P(4) of the Act. The Hon’ble Supreme Court Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] had taken cognizance of the CBDT Circular dated 28/12/2006 containing the explanatory notes on provisions contained in the Finance Act 2006 and the CBDT clarification dated 09/05/2008 while laying down the aforesaid proposition. The fact of co-operative societies investing in co-operative banks were never disturbed by this decision. Hence, we hold that the reliance placed by the ld. DR on the aforesaid decision of the Hon’ble Supreme Court would not advance the case of the Revenue as they are factually distinguishable. Accordingly, by placing reliance on the co-ordinate Bench decision of this Tribunal in the case of Tulsiani Chambers Premises Co-operative Society Ltd [2022 (5) TMI 548 - ITAT MUMBAI] which are reproduced hereinabove, we hold that assessee society would be entitled for deduction u/s.80P(2)(d) of the Act in respect of interest received from co-operative banks. Accordingly, the ground raised by the assessee on this issue is allowed. Issues Involved:1. Eligibility for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, in respect of interest received from Co-operative banks.2. Levy of interest under Sections 234B and 234C of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Eligibility for Deduction under Section 80P(2)(d):The primary issue is whether the assessee, a co-operative housing society, is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, in respect of interest received from co-operative banks. The assessee received interest income from Maharashtra State Co-operative Bank and Saraswat Co-operative Bank, totaling Rs.8,26,789/-. The assessee claimed this amount as a deduction under Section 80P(2)(d) in their return of income. However, the CPC denied this deduction while processing the return under Section 143(1). The CIT(A) upheld the CPC's decision, relying on the Supreme Court rulings in Totgars Co-operative Society Ltd vs ITO (322 ITR 283) and Mavilayi Service Co-operative Bank Ltd. and others vs. CIT (431 ITR 1), concluding that the deduction under Section 80P(2)(d) applies only to interest earned from co-operative societies and not from co-operative banks.The Tribunal, however, found that the issue is covered by the decision in Tulsiani Chambers Premises Co-operative Society Ltd vs ITO (ITA Nos.2459-2462/Mum/2021), where it was held that interest income derived by a co-operative society from its deposits with a co-operative bank is eligible for deduction under Section 80P(2)(d). The Tribunal cited multiple cases supporting this view, including Petit Towers CHS Vs. ITO, Solitaire CHS Ltd Vs. PCIT, and Land End CHS Ltd Vs. ITO, amongst others. It was noted that the co-operative banks, despite the insertion of sub-section (4) to Section 80P, continue to be co-operative societies registered under the Co-operative Societies Act.The Tribunal further referred to the statutory provision of Section 80P(2)(d), which allows deduction of interest income derived from investments with any other co-operative society. The Tribunal emphasized that the term 'co-operative society' includes co-operative banks, thus making the interest income from co-operative banks eligible for deduction under Section 80P(2)(d). The Tribunal also noted that the Supreme Court's rulings in Totgars and Mavilayi were distinguishable on facts and did not apply to the issue at hand.Consequently, the Tribunal directed the Assessing Officer to allow the deduction under Section 80P(2)(d) for the interest income received from co-operative banks, thereby allowing the assessee's appeal on this issue for both assessment years.2. Levy of Interest under Sections 234B and 234C:The second issue pertains to the levy of interest under Sections 234B and 234C of the Income Tax Act, 1961. The Tribunal noted that these are consequential in nature and do not require specific adjudication. Therefore, no detailed analysis was provided for this issue.Conclusion:In conclusion, the Tribunal allowed the assessee's appeals, holding that the assessee is entitled to deduction under Section 80P(2)(d) for the interest received from co-operative banks. The levy of interest under Sections 234B and 234C was deemed consequential and did not require specific adjudication. The order was pronounced on 24/02/2023.