2024 (6) TMI 863 - AT - Income Tax

Co-operative society entitled to Section 80P(2)(d) deduction for interest income from co-operative bank investments

ITAT Pune held that a co-operative society remains entitled to deduction under Section 80P(2)(d) for interest income from investments in co-operative ... Deduction under Sec. 80P(2)(a)(i) - interest income from co-operative banks - co-operative society - scope of sub-section (4) of Sec. 80P - revisional jurisdiction under Sec. 263Deduction under Sec. 80P(2)(a)(i) - interest income from co-operative banks - co-operative society - scope of sub-section (4) of Sec. 80P - revisional jurisdiction under Sec. 263 - Whether the assessee is entitled to deduction under Sec. 80P(2)(a)(i) in respect of interest income earned on investments/deposits with co-operative banks and whether the Pr. CIT was justified in invoking revisional jurisdiction under Sec. 263 to set aside the assessment order. - HELD THAT: - The Tribunal held that Sec. 80P(2)(d) (and by parity Sec. 80P(2)(a)(i) claim involving interest) permits deduction where a co-operative society derives interest from investments with any other co-operative society. Although sub-section (4) of Sec. 80P (inserted w.e.f. 01.04.2007) excludes co-operative banks from certain benefits under Sec. 80P, that amendment does not defeat a co-operative society's entitlement to deduction under Sec. 80P(2)(d)/(2)(a)(i) where the recipient of the interest qualifies as a 'co-operative society' as defined in Sec. 2(19). A co-operative bank registered under the Co-operative Societies Act (or corresponding state law) continues to be a 'co-operative society' for this purpose; therefore interest earned by a co-operative society on investments with such a co-operative bank is eligible for deduction. The Tribunal relied on coordinate bench decisions and favourable High Court precedents, observed that conflicting non jurisdictional High Court views should be resolved in favour of the assessee, and concluded that the Assessing Officer had taken a plausible view in allowing the deduction. Consequently, the Pr. CIT erred in exercising revisional powers under Sec. 263 to dislodge the AO's view, and the revisional order was set aside with restoration of the AO's assessment order. [Paras 3, 8, 10]Claim for deduction under Sec. 80P(2)(a)(i) in respect of interest on investments/deposits with co-operative banks is allowable and the order under Sec. 263 dislodging the Assessing Officer's view is set aside; AO's order restored.Final Conclusion: The appeal is allowed: the assessee's deduction under Sec. 80P(2)(a)(i) in respect of interest from co-operative banks is held to be allowable and the revisional order passed by the Pr. CIT under Sec. 263 is set aside, with restoration of the assessment order. Issues Involved:1. Delay in filing the appeal.2. Disallowance of deduction claimed u/s 80P(2)(a)(i) of the Income Tax Act, 1961.Summary:1. Delay in Filing the Appeal:The assessee's appeal for the assessment year 2020-21 involved a delay of 113 days. The delay was condoned based on the assessee's solemn averments and in light of the precedent set by the Supreme Court in Collector, Land Acquisition vs. MST Katiji [1987] 167 ITR 471 (SC), which emphasized that technical aspects should not impede substantial justice.2. Disallowance of Deduction Claimed u/s 80P(2)(a)(i):The primary grievance was the disallowance of a deduction of Rs. 29,60,215/- claimed u/s 80P(2)(a)(i) of the Act, representing interest derived from various co-operative societies/banks. The Tribunal referenced its recent decision in ITA.No.1249/PUN./2018 dated 07.01.2022, which rejected similar arguments by the Revenue.The Tribunal examined the provisions of Sec. 80P(2)(d), which allows for the deduction of interest income derived by a co-operative society from investments with any other co-operative society. The Tribunal noted that the insertion of sub-section (4) to Sec. 80P by the Finance Act, 2006, effective from 01.04.2007, excluded co-operative banks from the purview of Sec. 80P. However, it maintained that co-operative banks, being co-operative societies, still qualify for deductions under Sec. 80P(2)(d).The Tribunal cited several judicial pronouncements supporting the view that interest income earned by a co-operative society from investments with a co-operative bank is eligible for deduction u/s 80P(2)(d). These included decisions from the High Courts of Karnataka and Gujarat and various ITAT benches.Ultimately, the Tribunal found that the Assessing Officer (A.O.) had taken a plausible view in allowing the deduction, and the Principal Commissioner of Income Tax (Pr. CIT) had erred in exercising his revisional jurisdiction u/s 263 of the Act to dislodge the A.O.'s decision. Consequently, the Tribunal set aside the Pr. CIT's order and restored the A.O.'s assessment order.Order:The assessee's appeal was allowed, and the order was pronounced in the open Court on 20.03.2024.