Eligibility of Interest Income for Deduction u/s 80P(2)(d) of Income Tax Act: ITAT Upholds CIT(A)'s Order [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax(Appeals)[CIT(A)]'s order granting relief on the eligibility of interest income for deduction under section 80P(2)(d) of the Income Tax Act,1961.

The Revenue-appellant challenged the order passed by CIT(A) dated 23.08.2023, which was issued under section 250 of the Act,  for the Assessment Year(AY) 2017-18. This order was passed in response to the assessment order under section 143(3) of the Act, dated 15.12.2019.

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In this case,Bongaon Co Operative Credit Society Limited,respondent-assessee filed a return of income on 27.03.2018, reporting 'Nil' income. The AO made two additions: Rs. 35,63,552/- for interest income and Rs. 1,25,19,600/- for unexplained cash credit related to deposits made during the demonetisation period.

The CIT(A)  allowed partial relief on the interest received, granting Rs. 29,11,418/- as it was interest from a cooperative bank and qualified for relief under section 80P(2)(d) of the Act.

The Revenue appealed before the tribunal, raising several points. They claimed the CIT(A) ignored theReserve Bank of India(RBI) notification that banned Specified Bank Notes(SBN) deposits in certain banks. They also argued that the higher SBN deposits during demonetisation were unexplained and should be treated as Unexplained Cash Credit. Finally, they stated that the assessee did not clarify if the large deposits from members were owed to the society.

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The Departmental Representative(DR) referred to the judgment of the Apex Court in M/s Totagars Cooperative Sales Society, reported in 322 ITR 283 (SC), for the issue of interest income earned. The Authorised Representative(AR) supported the findings of CIT(A).

The two member bench comprising Sonjoy Sarma(Judicial Member)and Sanjay Awasthi(Accountant Member) reviewed the arguments and authorities presented by both sides. It noted that the CIT(A) granted relief on interest income by relying on section 80P(2)(d) of the Act, concluding that the amount of Rs. 29,11,418/- was eligible for deduction.

The CIT(A)'s reliance on relevant authorities was deemed appropriate, and the tribunal highlighted two cases where cooperative banks were covered under section 80P(2)(d): (i) Thorapadi Urban Co-op Credit Society Ltd. Vs. Income Tax Officer (296 Taxman 250) and (ii) Principal Commissioner of Income Tax, Hubli Vs. Totagars Cooperative Sale Society (392 ITR 74). As a result, the tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.

To Read the full text of the Order CLICK HERE

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