2025 (8) TMI 878 - AT - Income Tax

Interest Income from Cooperative Bank Deposits Allowed Deduction Under Section 80P(2)(d)

Satara Z.P. Class Four Employees Coop. Credit Society Ltd. Versus ITO, Ward-2, Satara

Satara Z.P. Class Four Employees Coop. Credit Society Ltd. Versus ITO, Ward-2, Satara - TMI 1. ISSUES PRESENTED and CONSIDERED 1. Whether the delay of 15 days in filing the appeal before the Tribunal can be condoned on grounds of reasonable cause. 2. Whether interest income earned by a Cooperative Credit Society from fixed deposits/investments made with Cooperative Banks qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961. 3. Whether the Assessing Officer's disallowance of deduction claimed under section 80P(2)(d) on interest income from Cooperative Banks is justified. 4. Whether the order of the first appellate authority affirming the disallowance without discussing merits is sustainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Condonation of Delay in Filing Appeal - Relevant Legal Framework and Precedents: The Income-tax Act and procedural rules allow condonation of delay in filing appeals if sufficient cause or reasonable cause is shown. - Court's Interpretation and Reasoning: The Tribunal examined the affidavit filed by the assessee explaining the delay due to appointment of Authorized Representative coinciding with major festivals (Dussehra and Diwali), which caused unavoidable delay. - Key Evidence and Findings: No contrary evidence was presented to disbelieve the assessee's explanation. - Application of Law to Facts: Considering the explanation as reasonable cause, the Tribunal exercised discretion in the larger interest of justice to condone the delay of 15 days. - Treatment of Competing Arguments: No opposing arguments were raised against condonation. - Conclusion: Delay in filing appeal was condoned, and the appeal admitted for adjudication on merits. Issue 2 & 3: Eligibility of Deduction under Section 80P(2)(d) on Interest Income from Cooperative Banks - Relevant Legal Framework and Precedents: Section 80P(2)(d) of the Income-tax Act provides deduction for income by way of interest or dividend derived by a Cooperative Society from its investment with any other Cooperative Society. - Court's Interpretation and Reasoning: The Tribunal noted that the issue is no longer res integra and has been consistently decided by Coordinate Benches in favor of allowing deduction on interest income earned from deposits with Cooperative Banks. Cooperative Banks, although licensed banks, remain Cooperative Societies in essence. - Key Evidence and Findings: The assessee's investment was made with Cooperative Banks, and the interest income earned was claimed as deductible under section 80P(2)(d). The Assessing Officer disallowed the deduction treating the income as 'Income from Other Sources' under section 56. - Application of Law to Facts: Reliance was placed on recent Tribunal precedents where interest income from Cooperative Banks was held eligible for deduction under section 80P(2)(d). The Tribunal followed these precedents and applied the legal principle that Cooperative Banks are Cooperative Societies for the purpose of this section. - Treatment of Competing Arguments: The Assessing Officer's view that Cooperative Banks are banks and not Cooperative Societies for deduction purpose was rejected based on consistent judicial decisions. - Conclusion: The Tribunal held that the assessee is entitled to deduction under section 80P(2)(d) on the interest income earned from Cooperative Banks amounting to Rs. 13,39,682/-. The disallowance by the Assessing Officer and affirmation by the first appellate authority were set aside. Issue 4: Validity of First Appellate Authority's Order - Relevant Legal Framework and Precedents: Appellate authorities are expected to decide appeals on merits after considering relevant facts and law. - Court's Interpretation and Reasoning: The first appellate authority affirmed the Assessing Officer's disallowance without discussing the merits of the case. - Key Evidence and Findings: The Tribunal observed absence of any discussion on merits in the first appellate order. - Application of Law to Facts: The Tribunal found such affirmation without merit discussion unsustainable and set aside the order. - Treatment of Competing Arguments: No justification was provided for non-discussion of merits by the first appellate authority. - Conclusion: The first appellate authority's order was set aside and the matter remanded to allow the deduction claimed by the assessee.