AHILYADEVI NAGRI PATH SANSTHA MARYADIT,SOLAPUR vs. PRINCIPAL COMMISSIONER OF INCOME-TAX -4, PUNE

Briefly stated, the facts of the case, are that the assessee is a co-operative society, who filed return its declaring total income at Rs.1.30 lakh. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee claimed deduction u/s.80P in respect of interest income - both from nationalized banks and cooperative banks. The deduction was allowed. However, the ld. PCIT u/s.263 disputed the allowability of deduction in respect of such interest income and declared the assessment order to be erroneous and prejudicial to the interest of the revenue on this score. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

The facts of this case are that the assessee, a co-operative society, filed its return declaring total income at Rs.14,400/- after claiming deduction u/s 80P of the Act amounting to Rs.64,44,881/- in respect of interest from cooperative banks. The AO allowed the deduction. The ld. PCIT disputed the action of the AO on this count by declaring the assessment order to be erroneous and prejudicial to the interest of the revenue.

We have heard both the sides and gone through the material on record. It is seen that the assessees claimed deduction u/s.80P in respect of interest from cooperative banks and nationalized banks which got allowed by the AO, but controverted by the ld. PCIT in the revisionary proceedings. It is seen that the extant cases are based on the ld. PCIT(s)’ understanding that the allowing of the deduction by the AO(s) u/s 80P is contrary to law. Insofar as the allowability of deduction u/s.8P(2)(a)(i) is concerned, we find that the Pune Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016) has decided the question of availability of deduction u/s 80P on interest income by noticing that the Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the (supra). The position continues to remain the same before this Tribunal also. We thus hold that no exception can be taken to the granting of deduction on interest income by the AO u/s 80P(2)(a)(i) of the Act.

Coming to the deduction u/s.80P(2)(d) of the Act, it is crystal clear from the language of the provision that though co-operative banks, other than primary agricultural credit society or a primary co- operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f.

In view of the foregoing, we hold that the impugned orders questioning the grant of deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, cannot be sustained.

In the result, both the appeals are allowed.