Case Law Details
Subordinate Engineers Association MSEB Co.op. Credit Society Ltd Vs ITO (ITAT Pune)
Introduction: The Income Tax Appellate Tribunal (ITAT) Pune recently delivered a crucial verdict concerning deductions on interest income earned from deposits with nationalized banks, as per Section 80P(2)(a)(i) of the Income-tax Act, 1961. This verdict stemmed from the case Subordinate Engineers Association MSEB Co.op. Credit Society Ltd Vs ITO.
Analysis: The appeal by the assessee arose from the denial of a deduction claim on the interest income of Rs.5,16,876/- earned from Oriental Bank Ltd., a nationalized bank. The ITAT referenced an earlier ruling by the Pune Tribunal, Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT, which allowed a similar deduction. The Tribunal also reviewed conflicting judgments from the Karnataka High Court and Delhi High Court regarding deductions on interest income.
In the absence of a direct ruling from the jurisdictional High Court, the ITAT Pune chose to align with the Karnataka High Court’s decision favoring the assessee. Hence, it overruled the initial order, allowing the interest income earned by Co.op. Credit Society from the deposits kept with a nationalized bank to be eligible for deduction under section 80P(2)(a)(i) of the Act.
Conclusion: The ITAT Pune’s decision in the Subordinate Engineers Association MSEB Co.op. Credit Society Ltd Vs ITO case reaffirms the rights of credit cooperative societies to claim deductions on interest income from nationalized bank deposits. This ruling not only provides clarity on the applicability of Section 80P(2)(a)(i) of the Income-tax Act, 1961, but also emphasizes the importance of jurisdictional interpretations in complex tax matters.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal by the assessee arises out of the order dated 16-01-2023 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2017-18.
2. Succinctly, the facts of the case are that the assessee is a credit cooperative society engaged in the business of providing banking or credit facilities to its members. The assessee filed Subordinate Engineers Association MSEB Co.op. Credit Society Ltd., return claiming deduction u/s.80P(2)(a)(i) of the Act in relation to interest income earned from a nationalized bank, namely, Oriental Bank Ltd., Kolhapur amounting to Rs.5,16,876/-. The Assessing Officer denied the benefit of deduction u/s.80P, which came to be countenanced in the first appeal. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.
3. I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of the assessee despite notice. The sole issue agitated in the extant appeal on the allowability of deduction u/s.8P(2)(a)(i) is no more res integra. I find the Pune Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. 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 Subordinate Engineers Association MSEB Co.op. Credit Society Ltd., 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. Respectfully following the precedent, the impugned order is overturned and the interest income earned from the deposits kept with nationalised bank amounting to Rs.5,16,876/- is allowed as deduction u/s.80P(2)(a)(i) of the Act.
4. In the result, the appeal is allowed.
Order pronounced in the Open Court on 16th May, 2023.
