2024 (9) TMI 342 - AT - Income Tax

Deduction u/s 80P(2)(a)(i)/80P(2)(d) - interest income earned on investments made out of surplus funds made with Cooperative banks Cooperative Societies and Nationalised banks - HELD THAT - We find this issue is no more res integra by virtue of catena of decisions passed by the Coordinate Benches of this Tribunal. In the present case we find that admittedly the interest income was earned from the investments out of surplus funds made with cooperative banks/socieites the cooperative bank is also a specie of cooperative society therefore the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s.80(P)(2)(d). Such interest also qualifies for exemption u/s.80P(2)(a)(i) as held in the case of Nashik Road Nagari Sahkari Patsanstha Limited 2021 (12) TMI 1259 - ITAT PUNE Therefore we affirm the impugned order directing the AO to allow the claim of exemption u/s.80P(2)(a)(i)/80P(2)(d) on the interest income earned on investments made out of surplus funds made with Cooperative banks Cooperative Societies and Nationalised banks. Appeal filed by the Revenue is dismissed.

Summary

Issues:
Interpretation of provisions under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act for exemption of interest income earned by a Co-operative Credit Society from investments made with various banks and societies.

Analysis:
The case involved a Co-operative Credit Society that filed a return of income for the assessment year 2014-15, declaring total income at Nil, with interest income earned from deposits made with commercial banks, cooperative banks, and societies. The Assessing Officer (AO) denied the claim of exemption under sections 80P(2)(a)(i) and 80P(2)(d) for interest and dividend income earned from these deposits. The CIT(A) allowed the deduction based on Tribunal decisions and a CBDT Circular.

The Tribunal noted that the interest income earned by the Co-operative Society from investments with cooperative banks qualifies for deduction under section 80P(2)(d) and exemption under section 80P(2)(a)(i). Referring to a similar case, the Tribunal highlighted that interest income earned on surplus funds deposited with banks is eligible for exemption under section 80P(2)(a)(i), despite a divergence in judicial opinions from various High Courts.

The Tribunal upheld the CIT(A)'s decision, affirming the exemption under sections 80P(2)(a)(i) and 80P(2)(d) for the interest income earned on investments made with Cooperative banks, Cooperative Societies, and Nationalised banks. The appeal filed by the Revenue was dismissed, and the order pronounced on June 27, 2024, in favor of the Co-operative Credit Society.