The Deesa Mercantile Co-operative Society Limited Vs ACIT (ITAT Ahmedabad)
Summary: The Income Tax Appellate Tribunal, Ahmedabad ‘B’ Bench, considered the appeal of The Deesa Mercantile Co-operative Society Limited against the ACIT, B.K. Circle, Palanpur, for Assessment Year 2011-12. The dispute concerned deduction under Section 80P(2) of the Income-tax Act, 1961, on interest of Rs. 72,39,179 earned from co-operative banks. In its earlier order dated 14 December 2021, the Tribunal had rejected Grounds 3 to 5 by relying on the Karnataka High Court ruling in PCIT v. Tatagars Co-operative Sale Society, (2017) 83 taxmann.com 140.
The assessee filed Miscellaneous Application No. 09/Ahd/2022, submitting that the earlier order had overlooked the jurisdictional Gujarat High Court decision in State Bank of India v. CIT, [2016] 72 taxmann.com 64, despite that judgment having been relied upon and placed on record. The Tribunal accepted that this constituted a mistake apparent from the record. By order dated 13 April 2022, it recalled the earlier decision only for fresh adjudication of Grounds 3 to 5 relating to the deduction on co-operative bank interest.
Upon rehearing, both sides agreed that the issue was covered in the assessee’s favour by State Bank of India v. CIT. The Tribunal noted the distinction drawn by the Gujarat High Court: interest earned on investments with a co-operative society qualifies for deduction under Section 80P(2)(d), whereas interest from a bank that is not a co-operative society does not. As the disputed interest was admittedly received from co-operative banks, the Tribunal set aside the CIT(A)’s decision and directed the Assessing Officer to allow the deduction. Grounds 3 to 5 and the assessee’s appeal were allowed. The order was pronounced on 17 June 2022.
Cases Discussed:
- State Bank of India Vs CIT — [2016] 72 taxmann.com 64 (Gujarat High Court).
- PCIT Vs Totagars Co-Operative Sale Society (Karnataka High Court) — (2017) 83 taxmann.com 140 .
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
PER P.M. JAGTAP, VICE-PRESIDENT: In this case, the appeal filed by the assessee was earlier disposed of by the Tribunal vide its order dated 14.12.2021 wherein the issue raised in Ground Nos. 3-5 relating to the assessee’s claim for deduction under Section 80P(2) of the Income-tax Act, 1961 (“the Act” in short) in respect of interest earned from cooperative banks amounting to Rs. 72,39,179/- was decided by the Tribunal against the assessee by relying on the decision of Hon’ble Karnataka High Court in the case of PCIT vs. Tatagars Co-operative Sale Society, (2017) 83 taxmann.com 140 (Kar.). Subsequently, the assessee filed a Miscellaneous Application being MA No.09/Ahd/2022 pointing out that the said decision was rendered without taking into consideration the decision of Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT, [2016] 72 Taxmann.com 64, which was relied upon by the assessee and even the copy of the said judgment was placed on record. It was contended on behalf of the assessee that there was thus a mistake apparent from the record in the order of the Tribunal dated 14.12.2021 on this issue and accepting the same, the Tribunal allowed the Miscellaneous Application of the assessee vide order dated 13.04.2022 whereby the order of the Tribunal dated 14.12.2021 was recalled by the Tribunal for the limited purpose of fresh adjudication of Ground Nos. 3 to 5.
2. We have heard the arguments of both the sides on the issue raised in Ground Nos. 3 to 5 of the assessee’s appeal relating to its claim for deduction under Section 80P(2) of the Act in respect of interest income earned from the Cooperative Banks. As agreed by the learned representatives of both the sides, this issue is squarely covered in favour of the assessee by the decision of Hon’ble Gujarat High Court in the case of State Bank of India (supra), wherein it was held that Section 80P(2)(d) specifically exempts interest earned from funds invested in co-operative societies and therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. It was clarified by the Hon’ble Gujarat High Court that interest earned from investments made in any bank, not being a co-operative society, is not deductible under Section 80P(2)(d) of the Act. In the present case, the amount of interest in question was earned by the assessee from co-operative banks and this being the undisputed position, we hold, following the decision of the Hon’ble jurisdictional High Court in the case of State Bank of India (supra), that the said interest income is eligible for deduction under Section 80P(2)(d) of the Act. The impugned order passed by the learned CIT(A) on this issue is, therefore, set aside and the Assessing Officer is directed to allow the claim of the assessee for deduction under Section 80P(2)(d) of the Act. Ground Nos. 3 to 5 of the assessee’s appeal are accordingly allowed.
3. In the result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 17th June, 2022 at Ahmedabad.
