2023 (9) TMI 1487 - AT - Income Tax

Disallowance of claim u/s 80P(2)(a)(i) / 80P(2)(d) - interest income earned on investments with South Canara District Central Co-operative Bank Ltd. - HELD THAT - Admittedly the amount has been received by the assessee from South Canara District Central Co-operative Bank Ltd. It is the claim of the assessee that the amounts are invested in compliance with the relevant Acts and Rules. On identical facts in the case of Bharat Co-operative Credit Society 2022 (12) TMI 30 - ITAT BANGALORE by following the case of Vasavamba Co-operative Society Ltd. 2021 (8) TMI 706 - ITAT BANGALORE had stated that if the investments made with the Central Cooperative Bank is out of compulsions under Karnataka State Co-operative Societies Act 1959 and Rules the income received from such investments would be entitled to the benefit of deduction u/s 80P(2)(a)(i) of the Act. Restore the issue to the files of the AO to examine whether interest income received from South Canara District Central Co-operative Bank Ltd. is out of compulsions and in compliance with the Karnataka State Co-operative Societies Act 1959 and the relevant Rules. If it is so the same interest income is to be assessed as income from business which would entail the benefit of deduction u/s 80P(2)(a)(i) of the Act. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved: Delay in filing appeal, Disallowance of claim u/s 80P(2)(a)(i) / 80P(2)(d) of the Income Tax Act.

Delay in Filing Appeal: The appeal was filed 135 days late, attributed to the tax practitioner's fault. The delay was condoned as the assessee had a reasonable cause for the delay, and the appeal was proceeded with on merits.

Disallowance of Claim u/s 80P(2)(a)(i) / 80P(2)(d): The issue raised was the confirmation of disallowance of the claim under section 80P(2)(a)(i) / 80P(2)(d) of the Act concerning interest income earned on investments with South Canara District Central Co-operative Bank Ltd.

Facts of the Case: The assessee, a co-operative society, filed a return declaring 'Nil' income after claiming deduction u/s 80P of the Act. The AO denied the deduction u/s 80P, including disallowing interest income earned on fixed deposits with cooperative banks due to a perceived violation of the principle of mutuality.

First Appellate Authority (CIT (A)): Partly allowed the appeal by granting deduction u/s 80P(2)(a)(i) but rejected the claim for interest income from South Canara District Central Co-operative Bank Ltd. based on Supreme Court interpretation and section 80P(4) exclusion of co-operative banks.

Tribunal Decision: The Tribunal considered precedents and ordered the issue to be examined by the AO to determine if the interest income from the cooperative bank was in compliance with relevant Acts and Rules. If so, the income should be assessed as business income eligible for deduction u/s 80P(2)(a)(i) of the Act.

Conclusion: The appeal by the assessee was allowed for statistical purposes, and the matter was restored to the AO for further examination in light of relevant provisions.