2024 (7) TMI 335 - AT - Income Tax

Cooperative society entitled to section 80P deduction on interest income from banks and other cooperatives

Shantika Souharda Sahakari Sangha Niyamita/Association of Person (Society) Versus The Assistant Commissioner of Income Tax, National Faceless Assessment Centre, [“NFAC”], Delhi

The ITAT Panaji allowed deduction u/s 80P for interest income from cooperative societies and public sector banks. The tribunal relied on Karnataka HC ... Allowability of deduction u/s 80P - interest income from cooperative societies and public sector undertaking banks - HELD THAT:- We wish to make it clear first of all that case law Karnataka State Souharda Federal Co-operative Ltd [2022 (1) TMI 540 - KARNATAKA HIGH COURT] has already held that “Souhardha” society is indeed a cooperative society within the meaning of sec.2(19) of the Act. Their lordships’ in Mavilayi Service Co-operative Bank Ltd [2021 (1) TMI 488 - SUPREME COURT] also held that such a distinction of nominal/associate members would not bar an assessee from claiming sec.80P deduction. So far as the Revenue’s endeavour to highlight the assessee’s interest income derived from the foregoing institutions is concerned, this tribunal in The Hukkeri Taluk Agri Produce Co-operative Marketing Society Ltd., Dist. Belagavi [2021 (11) TMI 1198 - ITAT PANAJI] has already settled the issue regarding interest income(s) derived from investment(s) made in former category of cooperative institution(s) in assessee’s favour and against the department. The outcome would hardly any different regarding interest income derived from nationalized bank(s) in light of The Vaveru Co-operative Rural Bank Ltd.[2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] has already rejected the Revenue’s very stand.- Decided in favour of assessee. Issues:Allowability of deduction under section 80P for interest income from cooperative societies and public sector undertaking banks.Analysis:The appeal involved the issue of denial of deduction claimed by the appellant under section 80P and addition of Rs. 16,97,700 to the returned income. The Revenue contended that the appellant, a 'Souharda' cooperative society, derived interest income from associate/nominal members without voting rights, which should not be eligible for deduction based on a previous case law. However, the tribunal found no merit in the Revenue's argument, citing precedents that supported the appellant's claim. The tribunal referenced case laws to establish that a 'Souhardha' society qualifies as a cooperative society and that the distinction of nominal/associate members does not bar the appellant from claiming the deduction under section 80P.The tribunal further discussed the issue of interest income derived from investments made in cooperative institutions. It referenced a case involving a cooperative society engaged in marketing agricultural produce, where the denial of deduction under section 80P was overturned. The tribunal emphasized that the income derived by a cooperative society from investments held with other cooperative societies should be exempt under section 80P. It highlighted judgments that supported the appellant's position and rejected the Revenue's argument that interest income from cooperative banks should not be eligible for deduction.Regarding interest income from nationalized banks, the tribunal referred to a case that rejected the Revenue's stance, supporting the appellant's claim. The tribunal accepted the appellant's substantive ground and directed the Assessing Officer to compute the consequential computation as per law. The delay in filing the appeal was condoned, citing the principle of substantial justice. Ultimately, the tribunal allowed the appeal in favor of the assessee, emphasizing the importance of upholding substantial justice in technical matters.