2024 (11) TMI 72 - AT - Income Tax

Tribunal Allows Appeal with 450-Day Delay, Grants Deduction for Cooperative Bank Interest Income Under Income Tax Law.

The Tribunal condoned a 450-day delay in filing the appeal, admitting it for adjudication. It held that interest income from deposits with Cooperative ... Deduction u/s. 80P - interest earned from deposits held with Cooperative Banks - HELD THAT:- Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s. 80P. Section 80P(2)(d) of the Act refers to the interest from Cooperative Society but it has been consistently held by this Tribunal (Pune Benches) that Cooperative banks are basically Cooperative Societies except that they get license for doing the banking business. Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. [2024 (6) TMI 791 - ITAT PUNE] held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s. 80P(2)(d) of the Act. Thus, where the assessee made investment with the Cooperative Banks in regard to the funds which it was required to maintain as per the guidelines provided in the Societies Act applicable to the assessee society and hold that the assessee is eligible for deduction u/s. 80P(2)(d) of the Act for the interest income earned from Cooperative Bank - Decided in favour of assessee. Issues:Delay in filing the appeal before the Tribunal, Disallowance of deduction under section 80P of the Income Tax Act, 1961, Disallowance of proportionate deduction under section 57, Eligibility of interest income from deposits with Cooperative Banks for deduction under section 80P.Delay in filing the appeal before the Tribunal:The appeal filed by the assessee was delayed by 450 days. The assessee cited reasonable cause for the delay, stating that the changing office bearers and failure of the consultant to track the appeal status contributed to the delay. The Departmental Representative opposed condonation of the delay. However, the Tribunal, considering the reasons mentioned in the affidavit, condoned the delay in the larger interest of justice, admitting the appeal for adjudication on merits.Disallowance of deduction under section 80P of the Income Tax Act, 1961:The assessee, a Cooperative Society, claimed a deduction under section 80P for interest received from investments in Cooperative Banks. The Assessing Officer disallowed the deduction, concluding that interest earned from deposits with Cooperative Banks is not eligible for deduction under section 80P. The CIT(A) upheld the disallowance, leading to the appeal before the Tribunal. The Tribunal noted that the issue was whether interest earned on deposits with Cooperative Banks is eligible for deduction under section 80P. After analyzing the relevant provisions and precedents, the Tribunal held that the interest income from deposits with Cooperative Banks is eligible for deduction under section 80P(2)(d) of the Act. The Tribunal referred to previous decisions and set aside the CIT(A)'s findings, allowing the appeal and deleting the disallowance.Disallowance of proportionate deduction under section 57:The assessee also raised a ground for the disallowance of proportionate deduction under section 57 against the income assessed as Income from Other Sources under section 56 of the Act. However, this issue was not the primary focus of the Tribunal's decision, as the main grievance of the assessee was related to the disallowance under section 80P.Eligibility of interest income from deposits with Cooperative Banks for deduction under section 80P:The Tribunal analyzed the nature of the funds deposited with Cooperative Banks by the assessee, noting that they were created as per the guidelines of the Societies Act governing the assessee society. The Tribunal interpreted section 80P(2)(d) of the Act, which pertains to interest or dividend derived by a Cooperative Society from its investment with another Cooperative Society. The Tribunal held that Cooperative banks are essentially Cooperative Societies and allowed the deduction for interest income earned from deposits with Cooperative Banks under section 80P(2)(d). The Tribunal relied on previous decisions and set aside the CIT(A)'s findings, allowing the appeal and deleting the disallowance.In conclusion, the Tribunal allowed the appeal of the assessee, holding that the interest income from deposits with Cooperative Banks is eligible for deduction under section 80P(2)(d) of the Income Tax Act, 1961.