Capital Co-operative Thrift and Credit Society Vs ITO (ITAT Delhi)
Conclusion: Assessee was entitled for deduction u/s 80P(2)(d) in respect of interest income earned by the assessee from cooperative bank/societies other than scheduled and nationalized banks and was entitled for deduction u/s 80P since such interest income was earned by assessee from out of day to day operations of its business activities and not from any fixed deposits out of surplus funds.
Held: Assessee had appealed against the order dated 12.06.2024 and 18.06.2024 passed by Commissioner of Income Tax (Appeals) [CIT(A)] for the AY 2016-17, 2017-18 and 2018-19,challenging the denial of deduction under section 80P(2)(d) on certain interest incomes. It explained that the AO had denied the section 80P deduction for interest income of Rs. 47,93,807/- from banks and cooperative banks, treating it as “income from other sources” and not allowing related expenses under section 57. Further, if the income was treated as income from other sources, proportionate expenses should be allowed. Additionally, interest from savings accounts should qualify for the deduction as it was earned from regular business deposits. For AY 2018-19, assessee-society raised issues about the late deposit of Provident Fund/Employee State Insurance [PF/ESI], claiming it was a double disallowance, and argued that the assessed income should not exceed the profit shown in the profit and loss account. On appeal. It was held that AO denied the section 80P deduction for interest on fixed deposits with scheduled banks, interest from cooperative banks, and interest from savings accounts used for business operations. For fixed deposits, Tribunal followed previous rulings and stated that the deduction was not allowed but directed the AO to reconsider expenses under section 57 of the Act. Regarding interest from cooperative banks, Tribunal ruled that assessee was entitled to the deduction under section 80P(2)(d), following a Gujarat High Court decision. For savings accounts, the bench allowed the section 80P deduction, as the interest was earned from regular business operations. Tribunal also directed the AO to review the PF and ESI disallowance for AY 2018-19 and to correct the incorrect income assessment raised by assessee.
