VIJAYRAJ NAGARI SAHAKARI PATSANSTHA MARYADIT,PUNE vs. INCOME TAX OFFICER, WARD 8(3), PUNE

ORDER

PER VINAY BHAMORE, JM:

1. On the facts and in the circumstances of the case and in law the learned Assessing Officer erred in making the disallowance of deduction u/s 80P of the Income Tax Act 1961 of Rs.38,79,392/-, disregarding the appellant’s contentions & submissions in support of its claim.

2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) erred in not understanding the fact that the Investment is made into Co- operative Bank which is primarily registered under the Co- operative Societies Act and engaged in the business of providing banking related services. Your appellant craves for to add, alter, amend, modify, delete all above or any grounds of appeal

before or during the course of hearing in the interest of natural justice.”

3. Facts, in brief are, that the appellant is a cooperative society engaged in business of providing credit facility to its members. The return of income for asstt year 2017-18 was furnished on 26-08-2017 declaring total income of Rs.78,990/-, after claiming deduction of Rs.38,79,392/- u/s 80P of the IT Act. The case was selected for limited scrutiny under CASS in order to verify large deduction under chapter VI-A & low income in comparison to high loans/advances. The AO issued notice u/s 143(2) on 11-08-2018 & thereafter notice u/s 142(1) was also issued on 30-09-2019 along- with questionnaire. During the course of assessment proceedings, the AO required the assessee to justify the deduction of Rs.38,79,392/- claimed u/s 80P of the IT Act in respect of interest received on bank deposits earned from other cooperative banks. According to the AO, the society is eligible to claim of deduction u/s 80P2(a)(i) in respect of the income derived from providing credit facilities to its members but is not entitled to claim of 3 ITA No.592/PUN/2024 deduction in respect of interest income earned on bank deposits made with other cooperative banks. The Ld. AR of the assessee claimed that even if the deduction u/s 80P(2)(a)(i) is not eligible, the society is eligible for deduction u/s 80P(2)(d) of the IT Act. But the AO said that as per section 80P2(d) the income by way of interest or dividend derived by the cooperative society from its investment with any other cooperative society is only deductible, and the cooperative banks are not cooperative societies therefore interest earned from cooperative banks does not qualify for deduction u/s 80P2(d) of the IT Act. Consequently the AO vide order dated 07-12-2019 passed the assessment order & denied the deduction of Rs.38,79,392/- claimed u/s 80P of the Act.

4. Being aggrieved the assessee preferred first appeal before LD CIT(A)/NFAC, who vide order dated 06-03-2024, confirmed the findings of the AO & dismissed the appeal of the assessee. It is this order against which the assessee is in appeal before this Tribunal.

5. The LD AR submitted before us that it has already been held by coordinate benches of this Tribunal that the cooperative banks are also cooperative societies duly registered under the respective Cooperative Societies Act of that state & the interest income earned by cooperative society from the deposit/investment with other 4 cooperative banks qualifies for deduction u/s 80P2(d) of the IT Act. The counsel of the assessee further clarified that in the instant case also the assessee cooperative society has deposited amount with other cooperative society who are doing banking business & earned interest of Rs.38,79,392/- from those cooperative banks. The counsel of the assessee in support of its contention further relied on various decisions of coordinate benches of this Tribunal. It was therefore requested before the bench to set-a-side the orders passed by the AO as well as by LD CIT(A)/NFAC & delete the addition of Rs.38,79,392/- under the head “income from other sources”, made by the AO & confirmed by LD CIT(A)/NFAC.

6. The LD DR supported the orders passed by the AO as well as by LD CIT(A)/NFAC.