The Pune Bench of Income Tax appellate Tribunal (ITAT) held that interest income from Business investment earned by Cooperative Society is eligible for deduction under section 80(2)(a) of the Income Tax Act.
Abhinandan Gramin Bigar (assessee) is a cooperative society filed its Income Tax Return (ITR) for Assessment Year 2020-2021 declaring NIL income and claimed deduction of Rs. 48,49,699 under section 80P(2)(a)(i) of the Act.
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The Assessing Officer (AO) found that the assessee society made investment in various cooperative banks and earned interest of Rs. 38,81,431. The AO disallowed the claim of the deduction and added the Interest Income to the head ‘Income from other Sources’.
The assessee filed an appeal before the Commissioner of Income Tax (appeals)[CIT(A)] against the order of the AO. However the CIT (A) confirmed the order of the AO and dismissed the appeal of the assessee. The assessee further appealed to ITAT.
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The Tribunal noted that no one appeared on behalf of the assessee. However the assessee filed a statement before the tribunal. The assessee in the written submission highlighted that the assessee society is legally bound to invest funds on cooperative banks.
The assessee in written submission relied on the judgement of Pune ITAT Niphad Nagari Sahakari Patsanstha Ltd which allowed the deduction for the interest income under section 80P(2)(a)(i) of the act.
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On the other hand, the counsel for the revenue, relied on the orders of the AO and CIT(A). The counsel sought to dismiss the appeal.
The tribunal observed the judgment of the High Court of Andhra Pradesh Vavveru Cooperative Rural Bank Ltd. which held that the Interest Income earned by investing income derived from Business and Profession by cooperative society is eligible for deduction.
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The tribunal also noted that the ITAT Pune Bench in the case of Yashwant Nagari Sahakari Patsanstha Maryadit held that the assessee eligible for deduction under section 80P(2)(a)(i) of the act.
The bench comprising Vinay Bhamore (Judicial Member) and Dr. Dipak P. Ripote (Accountant Member) held that the assessee eligible for deduction under section 80P(2)(a)(i) of the act.
Therefore, the tribunal directed the AO to allow the deduction. Thereby, the appeal of the assessee was allowed.
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