Case Law Details
Jankalyan Gramin Bigarsheti Sahakari Pathsanstha Maryadit Asond Vs ITO (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune addressed an appeal by a Cooperative Society, Jankalyan Gramin Bigarsheti Sahakari Pathsanstha Maryadit Asond, concerning the denial of a deduction under Section 80P of the Income Tax Act, 1961. The society had claimed deduc-tions under sections 80P(2)(a)(i) and 80P(2)(d), but the Assessing Officer (AO) disallowed the deduc-tion under 80P(2)(d) for interest earned from investments, arguing that the society failed to segregate investments made with cooperative societies and cooperative banks. The National Faceless Appeal Cen-tre (NFAC) upheld the AO’s decision, relying on rulings from the Supreme Court.
However, the ITAT Pune allowed the society’s appeal. The tribunal noted that the core issue was the de-duction under Section 80P(2)(d), which pertains to income derived from investments with other coop-erative societies. The ITAT cited consistent decisions from its Coordinate Benches, including Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. Vs. ITO and The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO. These decisions established that interest earned from deposits with cooperative banks is also eligible for deduction under Section 80P(2)(d), as cooperative banks are essentially cooper-ative societies that have obtained banking licenses.
The ITAT concluded that even if the society’s interest income was from both cooperative societies and cooperative banks, it would still qualify for the deduction under Section 80P(2)(d). Therefore, the tribunal set aside the NFAC’s findings and allowed the deduction of Rs. 35,25,457 claimed by the assessee.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal pertaining to Assessment Year 2020 21 at the instance of assessee is directed against the order dated 30.09.2024 passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) which in turn is arising out of Assessment Order dated 19.09.2022 passed u/s.143(3) r.w.s.144B of the Act.
2. Tersely ,the facts of the case emanating from the record are that the assessee is a Cooperative Society registered under The Maharashtra Cooperative Societies Act, The assessee is engaged in the activity of lending money to the members and accepting deposits from them. The assessee society for the year un-der consideration filed the return of income declaring Nil income after claiming deduction u/s.80P(2)(a)(i) at Rs.41,82,337/- and u/s.80P(2)(d) of the Act at Rs.35,25,457/-. A show cause notice was issued to the assessee as to why the issue related to large claim of deduction under Chapter VI would be allowed u/s.80P of the Act and further calling upon it to provide documentary evidence in re-spect of status claimed as a Cooperative Society and the assessee filed its submissions. The Assessing Officer after considering the submissions of the assessee disallowed the deduction claimed u/s.80P(2)(d) on the interest earned from investment by holding as under :
“As far as issue of interest earned from investment, the assessee is not entitled to claim of deduc-tion u/s 80P(2)(d) particularly when the assessee failed to segregate the investments made with cooperative society and cooperative bank. The P&L A/c dully reflects that the assessee had earned income relat-ed to interest from RDCC, VKGB, Dapoli Urban Bank DNS Investment etc and the assessee has failed to substanti-ate that the same are of pure cooperative society, not even cooperative banks which itself are distinct by way of provision of Sec 80P(4).”
3. Aggrieved assessee filed appeal before the NFAC who vide impugned order confirmed the action of the Assessing Officer on the ground that the assessee is not entitled to deduction u/s.80P(2)(d) of the Act on the ground that the interest earned out of investments made with Nationalized Banks and Coop-erative Banks. While doing so, the ld. NFAC relied on the decisions of Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. and Others Vs.CIT 123 taxman.com 161 and Totagars Cooper-ative Sale Society Vs. ITO 188 taxmann.com 282 (SC).
4. Now the assessee is in appeal before the Tribunal by raising the following solitary ground :
“1. On the facts and circumstances of the case and in law the CIT(A), NFAC erred in confirming the action of the AO of denying deduction under section 80P in respect interest earned by the appellant society on deposits with other co-operative banks, not accepting the submission of the appellant in this respect. The appellant prays that the AO be directed to delete the addition.”
5. When the appeal was called for, none appeared on behalf of the assessee despite due service of no-tice of hearing, I therefore proceed to dispose of the appeal with the able assistance from the Depart-mental Representative exparte qua the assessee.
6. I have heard the Departmental Representative and perused the record placed before me. The solitary issue that arises for my consideration is regarding quantification of deduction u/s.80P(2)(d) of the Act. A perusal of the orders of the lower authorities indicate that claim made has been denied because the assessee failed to segregate the investment made with Cooperative Societies and Cooperative Banks.
7. Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of inter-est or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s.80P of the Act. I find that this issue is no more res integra as the Coordinate Benches of this Tribunal has been consistently holding that the interest income earned out of the FDs/Investments kept with Cooperative Banks is allowable u/s.80P(2)(d) of the Act. I find that this Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., Vs. ITO in ITA No.1365/PUN/2023, dated 01.01.2024 dealing with similar issue after plac-ing reliance on another decision of this Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018, dated 18.11.2021 has held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s.80P(2)(d) of the Act as Cooperative Banks are basically Cooperative Societies only but have turned into Bank on getting necessary banking license.
8. In the light of above discussion, even if the interest income of the assessee society is from Cooperative Societies and Cooperative Banks, then also it is Finding of lower authorities nowhere dispute the fact that alleged sum is interest income received from Cooperative Banks and Cooperative Societies. Since interest from both of them are eligible for deduction u/s.80P(2)(d) of the Act, I therefore set-aside the finding of ld.CIT(A) and allow the alleged claim of deduction u/s.80P(2)(d) at Rs.35,25,457/-. Ground of appeal raised by the assessee is allowed.
9.In the result, the appeal of the assessee is allowed.
Order pronounced on this 06th day of January, 2025.
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