Eligibility for S.80P(2)(d) Deduction on Interest Income from Cooperative Banks: ITAT Upholds CIT(A) Order [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)upheld the Commissioner of Income Tax (Appeals)[CIT(A)]'s order allowing a deduction under Section 80P(2)(d) of Income Tax Act,1961 for interest income earned by the assessee from deposits in cooperative banks.

The Revenue-appellant challenged the order passed by the CIT(A) dated 03.11.2023, for the Assessment year(AY) 2020-21. The grounds raised by the Revenue are that the CIT(A) wrongly allowed a deduction of Rs. 2,27,33,574 under section 80P(2)(d) for interest received from deposits in Co-operative and Nationalized Banks, and also allowed the deduction under section 80P(2)(a)(i) without considering section 57 of the Act.

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In this case,Sardar Patel Cooperative Credit Society Limited, respondent-assessee,provided credit facilities to its members and declared 'Nil' income for the year after claiming deductions under sections 80P(2)(a)(i), 80P(2)(c)(ii), and 80P(2)(d), totaling Rs. 3.23 crore.

The Assessing Officer (AO) found that the society earned Rs. 2.27 crore as interest from cooperative and nationalized banks. The AO denied the deductions under section 80P, treating the interest as "income from other sources," and also disallowed related expenses.

On appeal, the CIT(A) allowed the deduction for interest from cooperative banks under section 80P(2)(d) but denied it for interest from nationalized banks.

The Revenue counsel, citing the AO's order, urged the tribunal to uphold the addition.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The assessee's counsel highlighted that the issue was settled in favor of the assessee in its own case for AY 2016-17 and by recent Gujarat High Court rulings, including PCIT Vs. Ashwinkumar Arban Cooperative Society Ltd. The counsel requested the dismissal of the Revenue's appeal.

The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Annapurna Gupta(Accountant Member)  after giving thoughtful consideration and reviewing the materials available on record, observed that the issue had already been settled by a recent judgment of the Jurisdictional High Court in the case of Ashwinkumar Arban Cooperative Society Ltd. This case had examined the Karnataka High Court and Supreme Court judgments in the case of Totagars Cooperative Sale Society, as well as the amendment in Section 194C(3)(v) of the Act.

The appellate tribunal noted that the interest earned on investments made with a cooperative society engaged in banking business was eligible for deduction under Section 80P(2)(d) of the Act, following the established legal precedents.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The bench  further stated that the revisionary powers under Section 263 could not be invoked by the Principal Commissioner of Income Tax(PCIT), as the deduction under Section 80P(2)(d) was rightly allowed.

In doing so, the tribunal relied on various court decisions and concluded that the assessment was not erroneous, nor prejudicial to the revenue's interest, and thus the Revenue's appeal was dismissed.

To Read the full text of the Order CLICK HERE

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