The Income Tax Appellate Tribunal (ITAT) Pune Bench while deleting the revision order passed under Section 263 of Income Tax Act, 1961 held that interest income earned by cooperative bank on investments made with other cooperative bank is eligible for deduction under Section 80 (2)(a)(i) of Income Tax Act, 1961.
Mahatma Sahakari Griha Rachana Sanstha Maryadit is a cooperative society formed under the Maharashtra Co-operative Societies Act, 1960. It is engaged in the business of accepting deposits from members and providing credit facilities to its members.
The original Return of Income for the assessment year 2017-18 was filed by disclosing total income of Rs.3,11,740/-. Subsequently, the assessee revised the return of income declaring Rs.Nil income after claiming deduction of Rs.6,32,86,382/- under the provisions of Section 80P of the Income Tax Act. Against the return of income assessment was completed by the Assessing Officer accepting the returned income and passed assessment order.
Subsequently, the Principal commissioner of Income Tax issued notice Under Section 263 of Income Tax Act after passing assessment order held that assessing officer failure to examining the taxability of interest earned on the investments made with the cooperative banks, as the same constitutes business income, which constituted the assessment order erroneous
Aggrieved by the assessment order, the assessee filed the appeal before the tribunal.
During the appeal proceedings, Kiran B. Sanmane, appeared on behalf of assessee submitted that eligibility of income earned on the investment made with the cooperative bank was examined by the Coordinate Bench of this Tribunal in the case of M/s. Jan Kalyan Nagri Sahakari Pat. Limited Sanstha for Assessment Year 2014- 15 order.
Keyur Patel, the Counsel for the Revenue, submitted that the Assessing Officer’s failure to examine the taxable income earned on the investments from cooperative banks rendered assessment order erroneous and prejudicial to the interests of the revenue.
It was observed by the tribunal that interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society.
Therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction under Section 80(P)(2)(d) of the Income Tax Act.
Such interest also qualifies for exemption under Section 80P(2)(a)(i) Income Tax Act as held by the Coordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited.
After reviewing the facts and submission the two-member bench of the tribunal comprising R.S. Syal (Vice-President) and Partha Sarathi Chaudhury (Judicial Member) relied upon the decision of the Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. held that interest income earned on the investment of surplus money with banks is also eligible for exemption under Section 80P(2)(a)(i) of the Income Tax Act.
Therefore, the bench allowed the appeal filed by the assessee and dismissed the revision order.
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