Deduction u/s 80P(2)(d) available to co-operative society for interest earned from investment with co-operative bank

Marathwada Krishi Vidyapeeth Karmachari Sahkari Patsanstha Ltd Vs PCIT (ITAT Pune)

ITAT Pune held that interest income of co-operative society from investments/ deposits parked with co-operative bank is allowable as deduction to co-operative society under section 80P(2)(d) of the Income Tax Act.

Facts- The appeal is preferred agitating the passing of the order by the ld. Principal Commissioner of Income-tax (PCIT) u/s.263 of the Income-tax Act, 1961 holding that the grant of deduction u/s.80P by the Assessing Officer (AO) in respect of interest income earned from other credit cooperative societies or Nationalised banks led to the passing of erroneous assessment orders prejudicial to the interest of the Revenue.

Conclusion- Held that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co­operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force.

In view of the foregoing, we hold that the impugned orders questioning the deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, cannot be sustained.

FULL TEXT OF THE ORDER OF ITAT PUNE

All the above appeals have been preferred by different assessees in relation to the A.Yrs.2014-15, 2017-18 & 2018-19 agitating the passing of the order by the ld. Principal Commissioner of Income-tax (PCIT) u/s.263 of the Income-tax Act, 1961 holding that the grant of deduction u/s.80P by the Assessing Officer (AO) in respect of interest income earned from other credit cooperative societies or Nationalised banks led to the passing of erroneous assessment orders prejudicial to the interest of the Revenue. Because of the commonness of the issue, we are proceeding to dispose of all the appeals by the consolidated order for the sake of convenience.

2. There is a delay in presenting the appeals of 237 days (ITA 102/PUN/2020), 04 days (ITA No. 431 & 432/PUN/2022), 36 days (ITA No.460/PUN/2022), 05 days (ITA No.504/PUN/2022) and 49 days (ITA No.522/PUN/2022). In some of the appeals, the respective assessees have filed affidavits; whilst in others, prima-facie, the delay pertains to the covid-19 pandemic period. We are satisfied with the reasons so stated for the delay by the respective assessees. Hence, the delay in filing the appeals is condoned by virtue of the affidavits and the judgment of the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314.

3. Further, there is no appearance from the side of the assessees in ITA No.102/PUN/2020, ITA No.460/PUN/2022, ITA 492/PUN/2022 and ITA No.522/PUN/2022 despite notice. We are, therefore, proceeding with these appeals ex parte qua the assessee after hearing the ld. DR.

4. Succinctly, the facts common in all these cases are that the assesses filed returns claiming deduction u/s.80P in respect of interest income which was allowed by the respective AOs. The ld. PCIT(s) invoked the jurisdiction u/s 263 of the Act and disputed the allow ability of the claim of deduction u/s.80P(2)(a)(i) in some cases and under 80P(2)(d) in others, thereby holding the assessment orders to be erroneous and prejudicial to the interest of the Revenue. Aggrieved thereby, the assessees have approached the Tribunal.

5. We have heard the rival submissions and gone through the relevant material on record. It is seen that all the cases are based on the ld. PCIT(s)’ understanding that the allowing of the deduction by the AO(s) u/s 80P is contrary to law. Insofar as the allowability of deduction u/s.8P(2)(a)(i) is concerned, we find that the Pune Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit The Pr.CIT (ITA No.713/PUN/2016) has decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). The position continues to remain the same before this Tribunal also. We thus hold that no exception can be taken to the granting of deduction on interest income by the AO u/s 80P(2)(a)(i) of the Act.

6. Coming to the other cases involving deduction u/s.80P(2)(d) of the Act, it is crystal clear from the language of the provision that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co­operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative society registered under the Act and hence qualify for the grant of the deduction. Similar view has been taken by the Pune Tribunal in several cases including The Sesa Goa Employees Coop. Credit Society Ltd. Vs. ACIT (ITA No.203/PUN/2019) vide order dated 16-11-2022).

7. In view of the foregoing, we hold that the impugned orders questioning the deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, cannot be sustained.

8. In the result, all the appeals are allowed.

Order pronounced in the Open Court on 21^st December, 2022.