Case Law Details
Matar Taluka Local Board Teachers Co-operative Credit Society Ltd. Vs DCIT (ITAT Ahmedabad)
Introduction: In a significant ruling by the Income Tax Appellate Tribunal (ITAT) Ahmedabad, in the case of Matar Taluka Local Board Teachers Co-operative Credit Society Ltd. Vs DCIT, it was decided that deductions under Section 80P of the Income Tax Act, 1961, do not apply to interest earned on Fixed Deposit Receipts (FDRs) from the Bank of Baroda. This decision, passed on 15th December 2023, marks a critical interpretation of the applicability of Section 80P, providing clarity on the scope of deductions for co-operative societies.
Detailed Analysis: The appellant, Matar Taluka Local Board Teachers Co-operative Credit Society Ltd., contested the order dated 09.08.2023 by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18. The core issue revolved around the addition of Rs.69,801/- as interest income from FDRs held with the Bank of Baroda, which the appellant claimed should be eligible for deduction under Section 80P(2)(a)(i) of the Act, given their engagement in providing credit facilities to its members.
The Assessing Officer (AO), however, classified this interest income as “income from other sources,” arguing that the Bank of Baroda is not a co-operative society, thus disqualifying the income from deduction under Section 80P. The AO’s stance was upheld by the CIT(A), leading to the appellant’s appeal to the ITAT.
In its defense, the appellant referenced ITAT’s own decisions in its case for Assessment Years 2018-19 & 2020-21, asserting that similar interest income had been recognized as deductible under Section 80P in the past. Additionally, the appellant argued for the allowance of proportionate expenses incurred in earning the interest income and highlighted the eligibility of interest earned from FDRs with co-operative banks for deduction under Section 80P(2)(d) of the Act, supported by precedents from the Gujarat High Court and Supreme Court decisions.
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