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Facts
The assessee, a cooperative credit society, claimed a deduction of Rs. 41,55,202 for AY 2018-19 on interest and dividend income earned from investments in cooperative banks. The Assessing Officer disallowed this claim, stating that Section 80P(4) excludes cooperative banks from deductions under Section 80P.
Held
The Tribunal held that even with the insertion of sub-section (4) of Section 80P, a cooperative bank continues to be a cooperative society. Therefore, income by way of interest or dividends derived by the assessee society from its investments with a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Act.
Key Issues
Whether income earned by a cooperative credit society from investments in cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
80P(2)(a)(i), 80P(2)(d), 80P(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
O R D E R Per Amarjit Singh (AM): This appeal filed by the assessee is directed against the order passed by the ld. CIT(A) NFAC, dated 25.08.2023 for A.Y. 2018-19. The assessee has raised the following grounds before us: “1. The action of the learned CIT (A) in disallowing the deduction u/s 80P(2) (a) (i) of Rs. 41,55,200 as claimed by the Appellant is erroneous and bad in law.
2. The action of the learned CIT (A) of assessing the income from Interest on Fixed Deposit and Dividend Income of Rs. 41,55,200 u/s 80 P (2) (d) instead of section 80 P (2) (a) (i) is erroneous and bad in law.
3. The action of the learned CIT (A) by not considering the ITAT, Mumbai order already decided in favour of the Appellant in A.Y.2014-15 on the same matter is erroneous and bad in law.
P a g e | 2 Mahapalika Kshetra Madhyamik Shikshak Sahakari Pat Sanstha Maryadit Vs. ITO, Ward 22(2)(1) 4. The appellant craves to leave, add, alter, amend and/or delete any grounds of appeal during the course of appeal.”
2. Fact in brief is that return of income declaring total income of Rs. Nil was filed on 22.09.2018. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 23.09.2019. The assessee is a cooperative credit society and during the year under consideration it has derived income as interest income on investment and dividend from MDCC Bank (Co-operative Bank) to the amount of Rs.41,55,202/-. The assessee has claimed Rs.41,55,202/- as deduction u/s 80P(2) of the Act. The AO was of the view that provision of the IT Act did not extend the deduction to the income received from the investment made with the co-operative banks. The AO stated that vide Finance Act 2006 deduction from income of Co-operative banks as per provision of Sec.80P of the Act has been withdrawn by inserting of Sec.80P of the Act. The AO further stated that section 80P(4) provide that provision of Section 80P shall not apply to co-operative banks, therefore, the assessing officer has disallowed the claim of deduction u/s 80P(2)(d) of the Act.
The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 4. Heard both the sides and perused the material on record. The assessee is cooperative credit society and it provide credit facility/loan to its members and collect deposits from its members. During the year under consideration the assessee society has received interest from Mumbai District Central Cooperative Bank to the amount of Rs.33,36,433/- and dividend of Rs.6,85,440/-. The assessee has claimed deduction u/s 80P(2)(d) of the Act. To claim deduction u/s 80P(2)(d) the income must have been earned by way of investment made with any cooperative society. We consider though the co-operative bank P a g e | 3 Mahapalika Kshetra Madhyamik Shikshak Sahakari Pat Sanstha Maryadit Vs. ITO, Ward 22(2)(1) pursuant to the insertion of sub-section (4) of Section 80P is no mere be entitled for claim of deduction u/s 80P of the Act, but however as a cooperative bank it still continued to be a cooperative society registered under the cooperative society Act therefore, any income by way of interest or dividends derived by the Co-operative Society from its investments with that cooperative bank would be entitled for claim of deduction u/s 80P(2)(d) of the Act. Therefore, we direct the AO to allow the claim of deduction to the assessee cooperative society in respect of interest dividend earned from investment made with the other Cooperative Society being the Co-operative Bank as discussed in this order. Therefore, the appeal of the assessee is allowed. 5. In the result the appeal of the assesse is allowed. Order pronounced in the open court on 06.03.2024 (Kuldip Singh) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 06.03.2024 Rohit: PS