Loading judgment…
Facts
The assessee, a cooperative society, appealed against the disallowance of its Section 80P deduction claim on interest income earned from deposits with banks and also the disallowance of business expenses. The CIT(A) had refused to condone the delay in filing the appeal.
Held
The Tribunal condoned the delay in filing the appeal. It held that the interest income earned by the cooperative society from investments with banks is eligible for deduction under Section 80P(2)(a)(i) and 80P(2)(d) of the Act, respectfully following various High Court and Tribunal decisions. The disallowance of business expenses was also directed to be deleted.
Key Issues
Whether interest income earned by a cooperative society from its surplus funds invested in banks is eligible for deduction under Section 80P, and if business expenses disallowed due to want of details can be deleted.
Sections Cited
144, 80P, 80P(2)(a)(i), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
Date of hearing 05.06.2025 Date of pronouncement 05.06.2025 ORDER
PER SATBEER SINGH GODARA, JM
This assessee’s appeal for assessment year 2020-21, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1065623980(1), dated 13.06.2024 involving proceedings under section 144 of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
It emerges during the course of hearing that both the learned lower authorities have disallowed the assessee’s section 80P deduction claim under Chapter VI-A of Rs.5,12,10,487/- representing interest income from savings and other deposit accounts etc. thereby treating the same as income from other sources in light of Totgars Co-operative Sale Society Ltd. Vs. ITO, Karnataka [2010] 188 Taxman 282 (SC) followed by yet another disallowance on business expenses amounting to Rs. 98,44,129/- respectively in the assessment order dated 22.09.2022 and upheld in the lower appellate discussion.
Learned departmental representative first of all submits that the CIT(A)/NFAC has refused to condone the assessee’s delay of 280 days in filing of the lower appeal instituted on 03.08.2023 which deserves to be upheld. We find no merit in the Revenue’s first and foremost technical objection as the assessee has explained all the circumstances beyond its control before the lower appellate proceedings. We thus decide the instant delay in assessee’s favour and against the department in light of Collector, Land & Acquisition
2 | P a g e vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC). The above delay in filing the assessee’s lower appeal stand condoned.
The Revenue’s second vehement contention is that both the learned lower authorities have rightly disallowed the assessee’s section 80P deduction claim representing interest income from savings account maintained with nationalized/cooperative banks (supra), as the case may be. We are of the considered view that the Revenue’s instant first and foremost substantive argument hardly deserves to be accepted in light of ITO Vs. Shri Bhairavnath Multistate Cooperative Credit Society Ltd. (2024) 164 taxmann.com 382 (Pune Trib.), as under: “5. We heard the rival submissions and perused the material on record. We find this issue is no more res integra by virtue of catena of decisions passed by the Coordinate Benches of this Tribunal. In the present case, we find that admittedly the interest income was earned from the investments out of surplus funds made with cooperative banks/societies, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s.80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s.80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited Vs. ITO in wherein the Tribunal held as under :- "9. We heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act,1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as 3 | P a g e well as the CIT(A) were of the opinion that the interest earned from third parties or non- members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as 'income from other sources' There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon'ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon'ble Delhi High Court in the case of Mantola Co- operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon'ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon'ble Telangana and Hon'ble Andhra Pradesh High Court in the case of Vaveru Co- operative Rural Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) of the Act. The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12- 2018) has taken view in favour of the assessee following the judgment of Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal
No. 1 & 2 stands allowed."
6. Thus, the order passed by the ld.CIT(A) is in conformity with the settled position of law by virtue of the above discussion. Therefore, we affirm the impugned order directing the Assessing Officer to allow the claim of exemption u/s.80P(2)(a)(i)/80P(2)(d) on the interest income earned on investments made out of surplus funds made with Cooperative banks, Cooperative Societies and Nationalised banks.
7. In the result, the appeal filed by the Revenue is dismissed.”
4 | P a g e The assessee is accordingly entitled for claiming section 80P deduction in very terms.
Lastly, comes the assessee’s business expenditure disallowances of Rs.98,44,129/- made in both the lower proceedings for want of submission of the corresponding relevant details. We hold in light of the CBDT Circular No. 37 of 2016, dated 2nd November, 2016 that once the assessee has already held entitled for claim the above Chapter-VI-A 80P deduction the same only gives right to enhancement of its eligible income; and it is accordingly directed to be deleted in very terms. No other ground or argument has been pressed before us.