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Facts
The assessee, a cooperative society, declared total income after claiming deductions under Chapter VI-A. The CPC processed the return, allowing some deductions but disallowing a claim of Rs.5,47,247/- under Section 80P(2)(d) for interest/dividend from investments in other cooperative banks.
Held
The Tribunal held that interest earned by a cooperative society from investments in another cooperative society/bank is eligible for deduction under Section 80P(2)(d) unless it is established that the latter bank possesses an RBI license to do banking business with the public. The Tribunal relied on the Supreme Court decision in Mavilayi Service Co-operative Bank Ltd.
Key Issues
Whether interest income earned by a cooperative society from its investments in other cooperative banks/societies is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
143(1), 80P(2)(d), 80P(2)(b), 80P(2)(c)(ii), 80P, 80P(4)
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
Year: 2021-22 v. M/s. Ottar Karattupalayam- The ITO, MPCS Ltd., Ward-2(1), ED 1311, Erode. Ottar Karattupalayam, Gobichettipalayam, Erode-638 457. [PAN: AAAAO 0208 K] (अपीलाथ�/Appellant) (��यथ�/Respondent) : Ms. S. Mathangi, Advocate अपीलाथ� क� ओर से/ Appellant by : Mr. P.K. Senthil Kumar, ��यथ� क� ओर से /Respondent by Addl.CIT : सुनवाईक�तारीख/Date of Hearing 12.11.2024 : 15.01.2025 घोषणाक�तारीख /Date of Pronouncement आदेश / O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/Addl./JCIT(A)-2, Nagpur, (hereinafter in short "the Ld.CIT(A)”), dated 26.06.2024 for the Assessment Year (hereinafter in short "AY”) 2021-22.
(AY 2021-22) M/s. Ottar Karattupalayam MPCS Ltd. 2. The main grievance of the assessee is against the action of the Ld.CIT(A) dismissing the appeal filed by the assessee against the adjustment made by the CPC u/s.143(1) of the Income Tax Act, 1961 (hereinafter in short ‘the Act’) intimation passed by the CPC disallowing the deduction claimed u/s.80P(2)(d) of the Act to the tune of Rs.5,47,247/-.
Brief facts are that the assessee which is a cooperative society has filed its Return of income (RoI) for AY 2021-22 on 20.12.2021 declaring total income at Rs.1,82,210/- after claiming deduction under Chapter VI- A of the Act amounting to Rs.11,49,812/- being deduction under various sub-clause of sec.80P(2) of the Act, which was processed by CPC u/s.143(1) of the Act on 19.10.2022 determining total income at Rs.7,29,460/- after allowing deduction u/s.80P(2)(b) & 80P(2)(c)(ii), amounting to Rs.5,52,565/- and Rs.50,000/- respectively, but disallowed the claim of deduction u/s.80P(2)(d) amounting to Rs.5,47,247/-, being interest/dividend from investment in other co-operative banks.
Aggrieved, the assessee filed an appeal before the Ld.CIT(A), who dismissed the appeal.
Aggrieved, the assessee is in appeal before us.
(AY 2021-22) M/s. Ottar Karattupalayam MPCS Ltd.
We have heard both the parties and perused the records. The assessee which is a cooperative society has filed its RoI for AY 2021-22 on 20.12.2021 declaring total income at Rs.1,82,210/- after claiming deduction under Chapter VI-A of the Act amounting to Rs.11,49,812/- being deduction under various sub-clause of sec.80P(2) of the Act, which was processed by CPC u/s.143(1) of the Act on 19.10.2022 determining total income at Rs.7,29,460/- after allowing deduction u/s.80P(2)(b) & 80P(2)(c)(ii), amounting to Rs.5,52,565/- and Rs.50,000/- respectively, but disallowed the claim of deduction u/s.80P(2)(d) amounting to Rs.5,47,247/-, being interest/dividend from investment in other co- operative banks. The Ld.CIT(A) has confirmed the action of the CPC on the ground that interest derived by the assessee from its investment with a Co-operative Bank would not be eligible for deduction u/s.80P(2)(d) of the Act. The assessee is before us assailing the impugned action of the Ld.CIT(A). Therefore, we have to examine the impugned action of the Ld.CIT(A) and for that let us reproduce relevant provisions of sec.80P of the Act as well as sub-section 4 of section 80P of the Act which the Ld.CIT(A) referred to justify dismissing the appeal of the assessee which reads as under:
80P.(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2)The sums referred to in sub-section (1) shall be the following, namely:- (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; [(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation - For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.]
The Ld.CIT(A) has assumed that assessee has received interest from Co-operative Banks, but has not considered the assertion made by the assessee that it received interest from Co-operative Bank which was basically a Co-operative Society. The assessee’s assertion made has not been controverted by the department or the Ld.CIT(A). In such a scenario, the CPC’s action of denying the claim can’t be accepted as well as the action of the Ld.CIT(A) confirming the same without any material to disprove the claim/assertion of assessee can’t be countenanced. Since the assessee has received the interest from Co-operative Society/Bank, (AY 2021-22) M/s. Ottar Karattupalayam MPCS Ltd. we are of the view that interest earned by assessee from another Co- operative Society, which in this case a Co-operative Society/Bank is eligible u/s.80P(2)(d) of the Act; unless the Ld.CIT(A)/AO could show that those Co-operative Banks (from whom assessee earned interest on its deposits) possess a license from the RBI to do banking business with the public; and for such a proposition, we rely on the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. & Othrs. V. CIT reported in [2021] 431 ITR 1 (SC); and since, it is not the case of the Ld.CIT(A) that the Co-operative Societies/Bank from whom the assessee has derived interest had possessed license from RBI to do banking business, we are unable to uphold the impugned action of the Ld.CIT(A). Therefore, we hold that unless the assessee earns interest income from a Co-operative Bank which possess RBI license, the assessee cannot be denied the deduction u/s.80P of the Act, which is a benevolent provision enacted by the Parliament to encourage and promote the cooperative sector in general and therefore, must be read liberally and reasonably and if there is ambiguity in favour of the assessee. Therefore, a deduction that is given without any reference to any restriction, or limitation cannot be restricted or limited by implication. Therefore, the Ld.CIT(A) ought not to have denied the claim of assessee. Therefore, we set-aside, the impugned order of Ld CIT(A), and direct the AO to allow the
In the result, appeal filed by the assessee is allowed.