2015 (2) TMI 1094 - AT - Income Tax

Revision u/s 263 - assessee had claimed deduction under section 80P(2)(d) on interest received by it on its deposits with Cooperative Banks - CIT held that Section 80P(2)(d) could not be so liberally interpreted so as to construe a Co-operative bank also as a Cooperative Society - Held that - A reading of the computation part of the assessment do show that AO had considered the claim of deduction made by the assessee u/s 80P(2)(d) of the Act. Out of the total claim of Rs. 9, 77, 821/- AO had disallowed Rs. 4, 770/- being interest of TDS for the assessment year 2009-10. Therefore it is not a case where AO failed to apply his mind at all. Now coming to the question as to whether the interest on deposits earned by a Co-operative Society where such deposits were with a Co-operative Bank we are of the opinion that restrictive interpretation given by the learned CIT(A) to section 80P(2)(d) was not warranted by it wordings. This Tribunal in the case of Bagalkot District Central Co-operative Bank 2015 (1) TMI 1005 - ITAT BANGALORE had held that a Co-operative bank which is also a Co-operative Society cannot be excluded from the purview of benefits available to a Cooperative Society unless the provisions of the Act so stipulate. No doubt in the said decision the Tribunal was considering the application of Section 194A(3)(v) of the Act wherein it was mandated that a Cooperative Society was not required to deduct tax at source if the interest credit were paid to any Co-operative Society. It had unequivocally held that the said provision applied to all Co-operative Society including a Cooperative Society engaged in the business of the bank or in other words a Co-operative Bank. Therefore the view taken by the AO that income by way of interest or dividends earned by the assessee society from the Cooperative bank namely Kanara Dist.Central Co-operative bank which was also a Co-operative Society was eligible for deduction cannot be faulted. We cannot say that the order of the AO was erroneous and prejudicial to the interest of the revenue - Decided in favour of assessee.

Summary

Issues:
1. Validity of CIT's orders under section 263 of the Income-tax Act, 1961.
2. Interpretation of section 80P(2)(d) regarding deduction on interest received from deposits with Cooperative Banks.

Issue 1:
The Assessee challenged the CIT's orders under section 263 of the Income-tax Act, claiming the assessments done under section 143(3) were not erroneous or prejudicial to the interest of revenue. The CIT invoked his revisionary powers based on the Assessee's claim of deduction under section 80P(2)(d) on interest from deposits with Cooperative Banks. The CIT held that the claim should not have been accepted, as he believed that a Co-operative bank should not be considered a Cooperative Society under section 80P(2)(d). The Assessee argued that the Co-operative bank where it placed its deposits was registered as a Co-operative Society, but the CIT disagreed, deeming the assessments erroneous.

Issue 2:
During the appeal, the Assessee cited a Tribunal decision and a High Court judgment to support their claim that a Co-operative bank should be considered a Cooperative Society for the purpose of section 80P(2)(d). The Departmental Representative (DR) supported the CIT's order, arguing that the Assessing Officer (AO) did not apply section 80P(2)(d) correctly. The Tribunal analyzed the assessment and found that the AO did consider the deduction claim under section 80P(2)(d) and disallowed a portion of it. The Tribunal disagreed with the CIT's restrictive interpretation of section 80P(2)(d) and referred to a previous decision involving a Co-operative bank, where it was held that a Co-operative bank could not be excluded from the benefits available to a Cooperative Society. Therefore, the Tribunal concluded that the AO's order was not erroneous, quashed the CIT's order, and allowed the Assessee's appeals.