Interest/Dividend Income received from co-operative bank is deemed to have received from cooperative society: ITAT Allows Deduction u/s 80 P to TN Special Police [Read Order]
The Tribunal directed the AO to grant deduction under section 80P(2)(d) of the Act in respect of interest / dividend income received from Kanchipuram Central Co-operative Bank Ltd.
80p - deduction - Taxscan
80p - deduction - Taxscan
In a recent Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that interest/dividend Income received from co-operative bank is deemed to have received from cooperative society and allowed deduction under section 80 P of the Income Tax Act, 1961.
Tamil Nadu Special Police, the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) passed under section 250 of the Income Tax Act, 1961 (‘the Act’). The relevant Assessment Year is 2018-19.
The assessee is a Thrift and Credit Society registered under the Tamil Nadu Co-operative Societies Act, 1983. For assessment year 2018-19, the assessee did not file its return of income. On examination of the Insight portal by the AO, it was noticed that assessee has made huge cash withdrawals and cash deposits.
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To examine the source of the same, the case was reopened by issuance of notice under section 148 of the Act on 31.03.2022. In response to the notice under section 148 of the Act, the assessee society filed its return of income on 10.01.2023 declaring ‘nil’ taxable income after claiming deduction under section 80P of the Act amounting to Rs.3,20,14,435/-.
During the course of reassessment proceedings, the AO noticed that the assessee had earned interest income (Rs.24,62,766) and dividend income (Rs.1,30,48,614) from Kanchipuram Central Co-operative Bank Ltd., totaling to Rs.1,55,11,380/-.
The AO completed the assessment under section .147 r.w.s. 144B of the Act vide order dated 02.03.2023. In the said reassessment order, the AO treated the income received from Kanchipuram Central Co-operative Bank Ltd., as ‘income from other sources’ thereby disallowing the claim of deduction made by the assessee society under section.80P(2)(a)(i) / 80P(2)(d) of the Act.
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The AO also referred to the assessment completed for assessment year 2020-21, wherein a similar addition was made as regards the receipt from Kanchipuram Central Co-operative Bank Ltd. It is held that this income does not fall within the meaning of expression "Profits and Gains of Business "as the same cannot be said to be attributable to the activities of the society of providing credit facilities to its members. Therefore the income earned by the assessee is nothing but "Income from Other Sources" liable to be taxed .
Aggrieved by the reassessment order dated 02.03.2023, the assessee filed appeal before the First Appellate Authority (FAA). The FAA confirmed the addition made by the AO. The FAA after extracting the above findings of the AO concluded that during the course of appellate proceedings, assessee has not produced any substantial evidence contradicting the findings of the AO.
Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. None was present on behalf of the assessee however, we proceed to dispose off the appeal after hearing the DR. The DR strongly relied on the findings of the AO and the FAA.
The AO for assessment year 2020-21, had made an identical addition by treating the interest / dividend received from Kanchipuram Central Co-operative Bank Ltd., as ‘income from other sources’, thereby disallowed the claim of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Act.
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The Tribunal took note of the AR’s submission and certificate of the Cooperative Department, Government of TamilNadu and held that Kanchipuram Central Co-operative Bank Ltd., was registered as a cooperative society under the Tamil Nadu Co-operative Societies Act, 1983.
The two member Shri George George K, Vice President and Shri Amitabh Shukla, Accountant Member held that interest/dividend income received from co-operative bank is deemed to have been received from cooperative society since it has been registered under the Tamil Nadu Co-operative Societies Act.
In light of the above order of the Tribunal in assessee’s own case for assessment year 2020-21, which had concluded that Kanchipuram Central Co-operative Bank Ltd., is a co-operative society registered under the Tamil Nadu Co-operative Societies Act, 1983, the court that the said order will have a binding effect for this assessment year also namely AY 2018-19.
The Tribunal directed the AO to grant deduction under section 80P(2)(d) of the Act in respect of interest / dividend income received from Kanchipuram Central Co-operative Bank Ltd.
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