Tribunal Rejects Revenue's Application; Upholds Deduction of Interest Income for Cooperative Societies u/s 80P(2.

The Tribunal dismissed the Revenue's Miscellaneous Application, finding it not maintainable due to the absence of any identifiable mistake of fact or law. The Tribunal upheld its original decision regarding the deduction of interest income under section 80P(2) of the Income-tax Act, 1961, aligning with the Full Bench ruling of the jurisdictional HC. It instructed the Assessing Officer to evaluate the assessee's activities for compliance with the Kerala Co-operative Societies Act, 1969, and to assess the eligibility of interest income from investments with co-operative banks for deduction. The assessee was allowed to contest the AO's order based on the latest SC decision.

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Issues involved:
The judgment deals with a Miscellaneous Application filed by the Revenue against the Order under section 254(1) of the Income-tax Act, 1961, regarding the deduction of interest income under section 80P(2) for the assessment year 2015-16.

Details of the Judgment:

Issue 1: Entitlement to Deduction of Interest Income under Section 80P(2):
The Revenue contended that the interest income on deposits with co-operative banks or treasuries should not be considered part of the assessee's business of providing credit to its members and hence not deductible under section 80P(1) r/w s. 80P(2)(a)(i). The Revenue argued that the decision in Kizhathadiyoor Service Co-operative Bank Ltd. (ITA No.525/Coch/2014) should be reviewed as cooperative societies are distinct from co-operative banks.

Issue 2: Review of Impugned Order:
The Tribunal directed the Assessing Officer to examine the activities of the assessees to determine compliance with the Kerala Co-operative Societies Act, 1969, for granting deductions under section 80P(2)(a)(i). The Tribunal also instructed the AO to assess the eligibility of interest income from investments with co-operative banks for deduction under section 80P(2), aligning with the activities expected of a co-operative society.

Conclusion:
The Tribunal found the Revenue's Miscellaneous Application to be not maintainable as no mistake of fact or law was identified. The Tribunal clarified that its decision was based on the Full Bench ruling of the jurisdictional High Court, not the earlier order cited by the Revenue. The Tribunal upheld its original decision and dismissed the Revenue's application, allowing the assessee to contest the AO's order based on the latest Supreme Court decision.

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