2024 (2) TMI 888 - AT - Income Tax

Cooperative society's interest income from deposits with cooperative bank qualifies for Section 80P(2)(d) deduction

ITAT Chandigarh allowed a cooperative society's appeal regarding disallowance under Section 80P(2)(d) for interest income on deposits with Kangra Central ... Disallowance u/s 80P(2)(d) - Interest income on deposits placed with Kangra Central Cooperative Bank (KCCB) Ltd. - HELD THAT:- We find that the matter is squarely covered by our own findings in case of Jagadhri Co-operative Marketing Cum Processing Society Ltd [2024 (1) TMI 693 - ITAT CHANDIGARH] what needs to be seen for the purpose of Section 80P(2)(d) is that firstly, the income should be by way of interest earned by Cooperative Society from its investment and secondly such investment should be with any other cooperative society. These are only two conditions which have been provided in the statute as apparent from the plain reading of the provisions of Section 80P(2)(d) of the Act and nothing more has to be read and applied/tested besides these two conditions. More particularly, it is not relevant to examine whether interest income is earned from any specified co-operative activity or for that matter, it is a case of deployment of surplus funds. Section 80P(2)(4) is relevant only where the assessee claiming the deduction under Section 80P of the Act is a cooperative bank and not where a co-operative society is claiming deduction on deposits placed with a co-operative bank. In the instant case, there is an admitted and undisputed fact that the assessee is a Cooperative Society (and not a co-operative bank) registered with Registrar, Cooperative Society, Himachal Pradesh which was engaged in providing short term credit facility to its members besides acting as an agent on behalf of the Government of Himachal Pradesh for supplying the food grains under PDS System. Secondly, the Kangra Central Cooperative Bank Ltd. is also a Cooperative Society registered with Registrar, Cooperative Society and necessary registration certificate has been duly submitted before the lower authorities and the same has not been disputed. Therefore, interest income has been earned on deposits placed with a co-operative society and duly eligible for deduction under section 80P(2)(d) of the Act. No justifiable basis in denying the claim of deduction by the assessee society under section 80P(2)(d) in respect of interest income on deposit placed with Kangra Central Cooperative Bank Ltd and the same is hereby directed to be allowed. Assessee appeal allowed. Issues Involved:1. Delay in filing the appeal.2. Disallowance of deduction under section 80P(2)(d) of the Income Tax Act.Summary:Delay in Filing the Appeal:At the outset, it was noted that there was a delay of 3 days in filing the appeal. After hearing both parties and reviewing the affidavit filed by the assessee, the Tribunal found a reasonable cause for the delay and thus condoned it, admitting the appeal for adjudication.Disallowance of Deduction under Section 80P(2)(d):The assessee, a cooperative society, challenged the action of the CIT(A), NFAC, Delhi in sustaining the disallowance of Rs. 20,51,316/- claimed under section 80P(2)(d) of the Act. The assessee had earned interest income on deposits placed with Kangra Central Cooperative Bank (KCCB) Ltd. The Assessing Officer (AO) disallowed the deduction, arguing that the interest income was from a cooperative bank and not a cooperative society, citing the Karnataka High Court decision in Totagars Co-operative Sale Society Ltd. vs. PCIT.The CIT(A), NFAC, Delhi upheld the AO's order, referencing the Supreme Court's decision in Mavilayi Service Co-operative Bank Limited, which held that a Cooperative Bank is a commercial bank and does not fall under the purview of a Cooperative Society as per Section 80P(2)(d).Tribunal's Findings:The Tribunal referred to its own findings in a similar case, Jagadhri Co-operative Marketing Cum Processing Society Ltd. vs. The Pr. CIT, where it held that for Section 80P(2)(d), the income should be interest or dividend earned by a Cooperative Society from investments with another Cooperative Society. The Tribunal emphasized that the statute requires only these two conditions and nothing more.The Tribunal also noted that the term 'co-operative society' as defined under section 2(19) of the Act includes societies registered under the Co-operative Societies Act, 1912, or any other law in force. It found that the AO had duly examined the facts and allowed the deduction for interest income from Yamuna Nagar Central Co-op Bank Ltd., treating it as a cooperative society.The Tribunal further cited the jurisdictional Punjab & Haryana High Court decision in CIT vs. Doaba Co-op Sugar Mills Ltd., which held that the nature and source of investment are irrelevant for claiming deduction under Section 80P(2)(d) as long as the income is derived from investments with another cooperative society.Conclusion:The Tribunal concluded that the assessee, being a Cooperative Society and not a cooperative bank, was eligible for the deduction under section 80P(2)(d) for interest income earned from deposits with Kangra Central Cooperative Bank Ltd. The appeal was allowed, and the disallowance was directed to be reversed.Order Pronounced:The appeal of the Assessee was allowed, and the order was pronounced in the open Court on 16/02/2024.