Loading judgment…
Facts
The assessee, a credit co-operative society, claimed a deduction of Rs. 54,62,354/- under section 80P(2)(a)(i) for interest income derived from surplus funds invested in co-operative banks. The Assessing Officer and CIT(A) denied this deduction, treating the interest income as 'Income from Other Sources' and ruling it ineligible under either section 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act, 1961.
Held
The Tribunal, relying on various High Court decisions and coordinate bench judgments, held that interest income earned by a co-operative society from investments made with other co-operative banks is eligible for deduction under section 80P(2)(d) of the Income Tax Act, 1961. The Tribunal allowed the assessee's alternate plea for deduction under section 80P(2)(d), finding the issue covered in favour of the assessee by established judicial precedents.
Key Issues
Whether interest income earned by a credit co-operative society from funds invested in other co-operative banks is eligible for deduction under section 80P(2)(a)(i) or, alternatively, under section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
80P(2)(a)(i), 80P(2)(d), 80P(4), 57, 143(1), 263, 2(19)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI RAHUL CHAUDHARY, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE MS PADMAVATHY S, AM & SHRI RAHUL CHAUDHARY, JM I.T.A. No. 2094/Mum/2024 (Assessment Year: 2020-21) Dirbadevi Sahakari Patpedi Ltd. ITO, Ward-27(1)(1), Room No. 406, 4th Floor, Tower No.1/Shree Datta Digamber CHS, Pant Nagar, Ghatkopar(E), Vs. No.6, Vashi Station Complex, Mumbai-400075 Vashi-400703. PAN : AAATD7003Q Assessee) : Respondent) Assessee/Appellant by : Shri Rashmikant Modi & Ms. Ketki Rajeshirke, CA Revenue/Respondent by : Smt. Mahita Nair, Sr. DR : 15.07.2024 Date of Hearing : 26.07.2024 Date of Pronouncement O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC) dated 15.03.2023 for Assessment Year (AY) 2020-21. The assessee raised the following grounds of appeal.
“1. On the facts and in the circumstances of the case, the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the disallowance of deduction of Rs. 54,62,354/- claimed by the Appellant u/s 80P(2)(a)(i) of the Income Tax Act, 1961. The Appellant submits that the deduction of Rs. 54,62,354/- claimed u/s 80P(2)(a)(i) be allowed.
2 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd.
On the facts and in the circumstances of the case, the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the action of the Learned Assessing Officer of treating the business profits of Rs. 54,62,354/- as interest income from surplus funds kept with the co-operative banks which is not from regular business activities to claim deduction u/s 80P(2)(a)(i). The Appellant submits that the interest income from various co-operative banks be treated as income from regular business activity and deduction u/s 80P(2)(a)(i) be allowed. 3. On the facts and in the circumstances of the case, the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the action of the Learned Assessing Officer of treating the interest income from various co-operative banks as Income from Other Sources and therefore, not eligible for deduction u/s 80P(2)(d) of The Income Tax Act, 1961. Without prejudice to the above, the Appellant submits- On the facts and in the circumstances of the case, the Appellant submits that it is eligible for deduction u/s 80P(2)(d) in respect of the income earned by way of interest from various co- operative banks. The Appellant submits that the deduction u/s 80P(2)(d) be allowed. 4. On the facts and in the circumstances of the case, the Appellant submits that the Hon'ble Commissioner of Income Tax (Appeals) erred in not considering and not distinguishing the case of Appellant's own case wherein the deduction u/s 80P(2)(a)(i) was allowed on similar facts. The Appellant submits that the decision of the Appellant's own case be relied upon. 5. The Appellant craves leave to reserve to itself the right to add, after, amend or annul any of the grounds of appeal at or before the time of hearing and to produce such further evidences, documents and papers as may be necessary.” 2. The assessee is a credit co-operative society engaged in the business of accepting deposits from Members and providing credit facility to Members. The assessee filed return of income for the year under consideration on 07.01.2021 declaring Nil income after claiming a deduction of Rs.54,62,354/- under section
3 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. 80P(2)(a)(i) of the Income Tax Act, 1961 (the Act). The Assessing Officer (AO) noticed that the deduction claimed by the assessee is against the interest income earned out of investments of surplus funds of the Society in Co-operative Bank. The AO was of the view that the interest income thus earned is to be treated as Income from Other Sources and not Profits and gains of Business & Profession of assessee. Accordingly, the AO denied the deduction under section 80P(2)(a)(i) of the Act by placing reliance on the decision of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. Vs. CIT (CIVIL APPEAL NOS. 7343-7350 OF 2019 dated 12.01.2021). Aggrieved the assessee filed further appeal before the CIT(A) who confirmed the disallowance made by the AO.
The ld. AR submitted that in assessee's own case for AY 2010-11 (ITA No. 6535/Mum/2014 dated 29.06.2016) the Co-ordinate Bench has considered a similar issue and held that the income earned by the assessee from fixed deposits with banks is to be treated as Business Income of the assessee and accordingly would be eligible for deduction under section 80P(2)(a)(i) of the Act. The ld. AR also made the alternate plea that even if the interest income would not be allowed as a deduction under section 80P(2)(a)(i) the same would be eligible for deduction under section 80P(2)(d) and in this regard relied on various decisions of the co- ordinate bench.
The ld. DR on the other hand vehemently argued that the assessee is not entitled for denudation under section 80P(2)(a)(i) since the income earned from deposits with the bank cannot be treated as the Business Income of the assessee. With regard to the alternate claim of the assessee under section 80P(2)(d), the ld. DR submitted that the assessee cannot alter the claim under a difference section before the Tribunal and the same could be done only by filing a revised return of
4 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. income. The ld. DR also relied on the recent decision of the Bangalore Bench of the Income Tax Tribunal in the case of M/s Brahmavara Vyavasaya Seva Vs. ITO (ITA No. 656, 667, 668/Bang/2024 dated 16.05.2023) to submit that the co- ordinate bench has considered the claim of the assessee under both section 80P(2)(a)(i) and 80P(2)(d) to hold that the assessee cannot claim deduction under both the section.
We heard the parties and perused the material on record. The AO has denied the benefit of deduction under section 80P(2)(a)(i) for the reason that the interest income is not attributable business of assessee. The alternate plea of the assessee is that if deduction under section 80P(2)(a)(i) is to be denied, then the assessee should be allowed deduction under section 80P(2)(d) since the coordinate bench in various other cases has been consistently holding the view that the interest income earned by the assessee out of investments with cooperative banks should be allowed as a deduction under section 80P(2)(d). We in this regard notice that in the case of Bhoomi Classic Co-op HSG Soc. Ltd (supra) a similar issue has been considered where it is held that – 5. Heard the rival submissions and perused the material on record. The sole matrix of the disputed issue emphasized by the Ld.AR is in respect of granting of deduction u/s 80P(2)(d) of the Act to the Cooperative Society. The Ld. AR submitted that the interest income derived by a co-operative society from its deposits with the co-operative banks would be entitled for deduction U/sec 80P(2)(d) of the Act. The cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act. Whereas the Coordinate Bench of the Honble Tribunal in the case of M/s Amore Commercial Premises Co-op Society Ltd vs. CPC Karnataka in ITA No. 2873 & 2874/Mum/2022 dated 17-01- 2023 has dealt on the taxability of interest earned on the deposits with the Co- operative Banks at page 2 Para 3 of the order, which is read as under: 3. Briefly stated facts necessary for consideration an adjudication of the issues at hand are :- Assessee being a CoOperative Society has claimed disallowance/deduction u/s. 80P (2)(d) in respect of the interest of Rs.
5 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. 6,96,725/- for parking its funds with Saraswat Co-Operative Bank, Sham Vithal Rao CoOperative Bank and district central CoOperative Bank. However, centralized processing centre (CPC)/ Assessing Officer has disallowed the deduction Claimed by the Assessee u/s 143(1).
Assessee carried the matter before the Ld.CIT(A) by way of filing Appeals who has confirmed the addition by dismissing Appeals. Filling aggrieved Assessee has come up before the Tribunal by way of filing present Appeal.
We have heard the Ld. Authorized Representative of the parties to the Appeals, perused the order passed by the Lower Revenue Authorities and documents available on record in the light of the law applicable thereto.
Undisputedly Assessee Society has invested is surplus funds with Co- Operative banks and earned the interest income to the tune of Rs. 6,96,725/- and claimed it is deduction u/s. 80P (2)(d) of the Act, which has been disallowed by Assessing Officer & confirmed by the Ld.CIT(A) by relying upon decision rendered by Hon’ble Karnataka High Court in case of principle Ld.CIT Vs. Totgar’s Co-Operative Sales Society Ltd.
Issue as to the allow-ability of the deduction claimed by the Assessee u/s. 80P (2)(d) of the Act, is no longer Res-Integra having being decided by the co- ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd. in ITA No.561/M/2021 order dated 09.09.2022 by settling the issue in favour of the assessee by distinguishing the judgment rendered by Hon'ble Supreme Court in case of Totgar's Co-operative Sale Society Ltd. Vs. Income Tax Officer, 188 Taxman 282(SC) and by discussing the decision rendered by Hon'ble Bombay High and Hon'ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act by returning following findings: "8. We have given a thoughtful consideration to the contentions advanced by the Id. Authorized representatives for both the parties in context of the aforesaid issue under consideration. As stated by the ld. A.R, and rightly so, the issue that interest received by a co-operative society on its deposits with co-operative banks would be eligible for deduction w/s 80P(2)(d) of the Act is covered in assessee's favour by orders of the various coordinate benches
6 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. of the Tribunal in the following cases: (i). M/s Solitaire CHS Ltd. Vs. Pr.CIT-26, Mumbai, ITA No.3155/Mum/2019, dated 29.11.2019 (ii). Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum.) (iii). M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017. (iv). Marvwanjee Cama Park Cooperative Housing Society Ltd. V's. ITO-Range 20(2)(2), Mumbai (ITA NO. 6139/Mum/2014, dated 27.09.2017. (v). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. In the aforesaid orders, it has been held by the Tribunal that though the cooperative banks pursuant to the insertion of sub-section (4) to Sec. 80P of the Act would no more be entitled for claim of deduction u/s 80P of the Act, but as a co-operative bank continues to be a co- operative society registered under the Cooperative Societies Act, 1912 (2 of 1912) or under any other law for the time being in force in any State for the registration of cooperative societies, therefore, the interest income derived by a cooperative society from its investments held with a co-operative bank would be entitled for claim of deduction w/s 80P(2)(d) of the Act. We find that the aforesaid issue had exhaustively been looked into by the ITAT, "G" bench, Mumbai in the case of M/s Solitaire CHS Ltd, Vs. Pr.CIT-26, Mumbai ITA No.3155/Mum/2019, dated 29.11.2019, wherein the Tribunal had observed as under: "6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section. 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr.CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2) (d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with cooperative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and
7 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. Rural Development Bank. Observing, that the co- operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2) (d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2) (d) (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 subsection (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely:- (a)......................................................................................... ......... (b)………………………………………………………… ………………………………….. (c)………………………………………………………… …………………………………... (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;" On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other cooperative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co- operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income investments/deposits parked with a co- operative bank. In our considered view, as long as it is proved that the
8 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. interest income is being derived by a cooperative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term cooperative society" had been defined under Sec. 2(19) of the Act, as under:- "(19) "Cooperative society" means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies;" We are of the considered view, that though the cooperative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of cooperative societies, therefore, the interest income derived by a cooperative society from its investments held with a cooperative bank would be entitled for claim of deduction under Sec.80P(2) (d) of the Act. 8. We shall now advert to the judicial pronouncements that have been relied upon by the Id. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH $2 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-20(2)(2). Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. (iv). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under
9 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon"ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec. 80P(2) (d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars cooperative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a cooperative society would not be entitled to claim of deduction under Sec. 80P(2) (d). At the same time, we find, that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2) (d) of the Act. We find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of nonjurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.
Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2) (d) on the interest income earned on its investments/deposits with cooperative
10 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd. banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we "set aside" his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016." As the facts and the issue involved in the present case before us remains the same as were there before the Tribunal in the case of M/s Solitaire CHS Ltd. (supra), wherein the order passed by the Pr. CIT u/s 263 of the Act was quashed, we, thus, respectfully follow the same. Backed by our aforesaid deliberations, we are unable to uphold the view taken by the Pr. CIT that the failure on the part of the A.O to be disallow the assessee's claim for deduction u/s 80P(2)(d) had rendered the assessment order passed by him u/s 143(3) of the Act, dated 31.08.2017 as erroneous in so far it was prejudicial to the interest of the revenue. 9. Accordingly, on the basis of our aforesaid observations, we herein not finding favor with the view taken by the Pr. CIT that the order passed by the A.O u/s 143(3), dated 31.08.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act set-aside the same and restore the order passed by the A.O u/s 143(3) of the Act, dated 31.08.2017."
Hon'ble High Court of Karnataka in case of Pr. CIT & Anr.Vs. Totgar's Co- operative Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and Hon'ble Gujarat High Court in case of State Bank of India vs. CIT (2016) 389 ITR 578 (Guj.) had held that interest income earned by a co-operative society on its investment held with cooperative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. 9. So following the decision rendered by Hon'ble Karnataka High Court (supra) and Hon'ble Gujarat High Court (supra), we are of the considered view that assessee society who has earned an amount of Rs. Rs. 6,96,725/- from its investment of surplus fund with cooperative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act.
11 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd.
Considering the facts, circumstances and the ratio of the judicial decisions. The Honble Tribunal has passed the order and relied on catena of judicial decisions were the cooperative society receives/earns interest on deposits with the co- operative bank is eligible for claim of deduction under section 80(2)(d) of the Act. Accordingly, fallow the judicial precedence, and set aside the order of the CIT(A) and direct the Assessing officer to allow the claim of deduction u/sec 80P(2)(d) of the Act on the interest income from the cooperative banks. And the grounds of appeal filed by the assessee are allowed.
The facts in assessee's case being identical, respectfully following the above decision, we are inclined to allow the alternate plea of the assessee that the assessee is entitled for deduction under section 80P(2)(d) towards the interest income earned from deposits with cooperative banks. Accordingly we direct the AO to allow the deduction under section 80P(2)(d).
With regard to the decision of the Bangalore Bench of the Tribunal relied on by the revenue it is relevant to notice the below observations of the Tribunal –
In light of the aforesaid order of the Tribunal, the AO is directed to examine whether investment with Co-operative Bank is out of statutory compulsions to maintain the SLR, and if so, to grant deduction under section 80P(2)(a)(i) of the Act. In the event it is found that assessee is not entitled to get the benefit under section 80P(2)(a)(i) of the Act, the AO shall also examine whether it is entitled to deduction under section 80P(2)(d) of the Act in light of the recent judgment of the Hon’ble Apex Court in the case of Kerala State Co-operative Agricultural Rural Development Vs. AO (supra). If the assessee is not entitled to benefit of deduction either under section 80P(2)(a)(i) or under section 80P(2)(d) of the Act, the AO shall consider the claim of deduction under section 57 of the Act in respect of the cost of funds for earning such interest income which is assessed as income under the head “Income from Other Sources”. For the direction to grant deduction for the cost of funds, we rely on the judgment of the jurisdictional High Court in the case of Totgar’s Cooperative Sales Society Ltd., Vs. ITO reported in (2015) 58 taxmann.com 35 (Karnataka) (judgment dated 25.03.2015). Further, the AO shall also consider the claim of the assessee raised in its CO in ground 4.1 (supra). It is ordered accordingly.
12 ITA No. 2094/Mum/2024 Dirbadevi Sahakari Patpedi Ltd.
The Tribunal has in the above case has directed the AO to either allow deduction under section 80P(2)(a)(i) if the income is earned out of deposits which are to be compulsorily held to maintain SLR or allow deduction under section 80P(2)(d) as per the decision of the Hon'ble Supreme Court in the case of Kerala State Co-operative Agricultural Rural Development ((2023) 458 ITR 384 (SC)). The Tribunal has further held that the any income not falling within the above two provisions will have to be treated as income from other sources against which the assessee is entitled for deductions under Section 57. Therefore we are not in agreement with the submissions of the revenue that the Tribunal has denied the benefit under both the sections of 80P(2)(a)(i) and 80P(2)(d).
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 26-07-2024. Sd/- Sd/- (RAHUL CHAUDHARY) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Assessee 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai