SINDH CO. OP. CREIDT SOCIETY LIMITED,VADODARA vs. THE DY. CIT, CIRCLE-2(1)(1), VADODARA

The brief facts of the case are that the assessee had filed its return of income for A.Y. 2020-21 on 23.11.2020 declaring total income of Rs.3,74,620/-. The case was selected for complete scrutiny under CASS.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

Ms. Urvashi Shodhan, Ld. AR of the assessee submitted that the interest received from cooperative banks was eligible for deduction under Section 80P(2)(d) of the Act. She explained that the cooperative banks are registered as cooperative societies. Therefore, the interest received from cooperative banks was in the nature of interest derived from investment with other cooperative societies and such interest was eligible for deduction under Section 80P(2)(d) of the Act. In this regard she relied upon the decision of coordinate bench of this Tribunal in the case of Ashapura Cooperative Credit Society Ltd. (178 taxmann.com 18). Regarding the interest received from scheduled banks, the Ld. AR submitted that the AO had disallowed the gross interest received from SBI and IDBI without allowing set off for the expenditure incurred by the assessee for earing that income. She explained that the assessee had claimed deduction under Section 80P of the Act in respect of net interest income only. Further, the AO in the assessment order for AY 2016-17 had also given a finding that only the net interest income from nationalized banks does not qualify for deduction under Section 80P of the Act.

Per contra, Shri Abhijit, the Ld. SR-DR submitted that the cooperative banks which are commercially run cannot be considered as cooperative society. Further that the gross interest income from scheduled banks was rightly disallowed under Section 80P as the assessee was

We has carefully considered the rival submissions. So far as the deduction under Section 80P(2)(d) of the Act in respect of interest received from cooperative banks is concerned, this issue is no longer res integra. The Hon’ble Gujarat High Court in the case of Ashwin Kumar Urban Cooperative Society Ltd. (168 taxmann.com 314)(Gujarat) has held that the cooperative bank is the cooperative society registered under Gujarat State Cooperative Societies Act and accordingly deduction under Section 80P(2)(d) of the Act was admissible to the interest derived from cooperative banks. Accordingly, the AO is directed to allow the deduction claimed under Section 80P(2)(d) of the Act in respect of net interest derived from the two cooperative banks.

As regarding interest received form SBI and IDBI is concerned, this interest does not qualify for deduction under Section 80P(2)(d) of the Act. However, it is found that the assessee had claimed deduction of Rs.38,00,341/- only under Section 80P of the Act in its return of income, as against gross interest of Rs.75,94,885/-. Thus, the deduction claim was not in respect of gross interest but for net interest only. Further, in the assessment order for AY 2016-17, copy of which has been brought on record in the paper-book, the AO had held that only the net interest income from nationalized banks would not qualify for deduction under Section 80P of the Act. In view of this position, we deem it proper to set aside the matter to file of Jurisdictional AO with a direction to disallow only in the net interest income derived from the scheduled banks (SBI and IDBI). The AO

In result the appeal of the assessee is allowed for statistical purpose.