The Pune bench of the Income Tax Appellate Tribunal ( ITAT) held that the Interest income earned by the cooperative society on deposits of surplus funds by the scheduled banks is eligible for the deduction under section 80P(2)(ai) and Section 80P(2)(d) of the Income Tax Act,1961.
Kai Fakira Jairam Patil, the appellant assessee was a co-operative credit society registered under Maharashtra Co-operative Societies Act, 1960.
The assessee appealed against the order passed by the National Faceless Appeal Centre ( NFAC) for confirming the order passed by the assessing officer for denied the exemption under section 80P(2)(a)(i) of the Income Tax Act in respect of interest income on deposits made out of the surplus funds in cooperative banks and scheduled banks on the ground that the said income does not qualify for deduction under sections 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act.
During the hearing of the appeal, none appeared on behalf of the assessee and Ramnath P. Murkunde appeared for the department.
The counsel for the department contended that the assessee was entitled to get an exemption under section 80P(2)(a)(i) of the Income Tax Act due to the disqualification which was prescribed by the law.
The bench observed that based on various decisions the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as scheduled bank qualifies for deduction both under the provisions of section 80P(2)(a)i) and section 80P(2)(d) of the Income Tax Act.
It was also observed that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society and the reasons given by the lower authorities for denial of exemption under section 80P(2)(d) of the Income Tax Act was that interest was received from the cooperative bank had no legs to stand as a cooperative bank was also a cooperative society.
The two-member bench comprising S. S. Godar( Judicial) and Inturi Rama Rao (Accountant) directed the assessing officer to re-adjudicate the matter to allow deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act in respect of interest income earned from cooperative bank/scheduled bank while allowing the appeal filed by the assessee.
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