Cooperative society's commission income on bill collection qualifies for section 80P(2)(d) deduction as business activity

The ITAT PUNE ruled in favor of the assessee regarding deduction under section 80P(2)(a)(i) for interest derived from cooperative societies and nationalized/scheduled banks. Following precedent from Rena Sahakari Sakhar Karkhana Ltd, the tribunal held that commission income on bill collection from MSEDCL qualifies for deduction under section 80P(2)(a) as it constitutes business activity, thereby accepting the assessee's section 80P(2)(d) deduction claim.

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Issues Involved:
1. Disallowance of deduction u/s 80(P)(2)(a)(i) of the Income Tax Act.
2. Direct addition to the income of the appellant from gross commission earned from MSEDCL.

Summary:

1. Disallowance of Deduction u/s 80(P)(2)(a)(i):
The assessee challenged the disallowance of a deduction amounting to Rs. 23,62,370/- u/s 80(P)(2)(a)(i) of the Income Tax Act. The lower authorities had declined the deduction, holding that the interest earned from investments in other cooperative societies/nationalized/scheduled banks is taxable under the head "Income from Other Sources" and not "Income from Profits and Gains from Business/Profession." The tribunal referred to its recent coordinate bench's order in ITA.No.1249/PUN./2018 dated 07.01.2022 (The Rena Sahakari Sakhar Karkhana Ltd. vs. PCIT), which held that interest income derived by a cooperative society from its investments with any other cooperative society is eligible for deduction u/s 80P(2)(d). The tribunal concluded that the interest income earned by a cooperative society from its investments held with a cooperative bank is entitled to deduction u/s 80P(2)(d). Consequently, the tribunal accepted the assessee's deduction claim.

2. Direct Addition to Income from Gross Commission Earned from MSEDCL:
The assessee contested the addition of Rs. 15,24,810/- as gross commission earned from MSEDCL without considering the direct expenses of Rs. 16,35,798/- incurred in running the MSEDCL bill collection center, resulting in a net loss of Rs. 1,03,539/-. The tribunal referred to its recent coordinate bench's order in Bhagyalaxmi Nagari Sahakari Path Sanstha Meryadit vs. ITO ITA.Nos.705 & 706/PUN./2021 decided on 14.03.2022, which allowed deduction on commission from MSEDCL bills as it was considered a business activity eligible for deduction u/s 80P(2)(a). The tribunal, following the detailed discussion, accepted the assessee's claim regarding the commission earned from MSEDCL.

Conclusion:
The tribunal allowed the assessee's appeal, granting the deductions claimed u/s 80(P)(2)(a)(i) and for the commission earned from MSEDCL. The order was pronounced in the open Court on 28.02.2024.

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