2025 (7) TMI 1120 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - AO/CIT(A) has disallowed the entire deduction claimed by the assessee u/s 80P which was bifurcated by the assessee u/s 80P(2)(a) 80P(2)(c) 80P(2)(d) - HELD THAT - Deduction claimed by the assessee u/s 80P(2)(a)(i)/ 80P(2)(d) of the Act in respect of profits from provisions of credit facility to the members of the assessee society and the interest earned from deposits from Co-operative banks/scheduled banks are concerned we find some force in the submission of assessee find that this issue is no more res-integra and has been decided in favour of the assessee by various decision(s) of the Co-ordinate Bench(es) of the Tribunal including the Pune Tribunal wherein it has been consistently held that the assessee society is eligible for deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act as the same is attributable to the business of the assessee society. Assessee has claimed maximum of Rs. 50, 000/- and on the balance amount of Rs. 24, 672 the applicable taxes have already been paid by the assesseeassessee has submitted that the said deduction of Rs. 50, 000/- has been claimed in respect of profits from resale of gas cylinders to the employees of Reliance Industries Ltd. at its Nagothane township who are the members of the assessee society and hall rent xerox and lamination charges and hence it is eligible for deduction u/s 80P(2)(c)(ii) of the Act. Ld. CIT(A) completely brushed off the above submissions of the assessee and confirmed the addition made by the Ld. AO. In our considered view the said claim of the assessee finds due support from the decision of Banganga Nagri Sah. Patsanstha Ltd. 2016 (3) TMI 1434 - ITAT PUNE wherein the Tribunal under the similar set of facts as that of the assessee in the present case has allowed the deduction claimed u/s 80P(2)(c)(ii) of the Act in respect of incomes earned from certain allied activities viz. locker rent ambulance rent commission on collection of MSEB bills and health club carried out by the co-operative society. Addition treating the same as a kind of donation. It has been brought to our notice by the Ld. AR that the said amount of Rs. 90, 000/- pertains to Sanugraha Anudan which means bonus in Marathi and therefore it is in the nature of expense debited to profit and loss account forming part of the business income of the assessee which is further eligible for deduction u/s 80P(2)(a)(i) of the Act as enhanced eligibility. In this view of the factual finding in our opinion CIT(A) has erred in confirming the addition of Rs. 90, 000/- to the income of the assessee. The claim of the assessee also finds support from the decision of the Bangalore Tribunal in the case of Sharavathi Pathina Sahakara Sangha Niyamitha 2022 (8) TMI 292 - ITAT BANGALORE wherein it has been held that where disallowance for non-deduction of TDS liability would increase business income of assessee-society which was eligible for deduction under section 80P(2)(a)(i) deduction under section 80P(2)(a)(i) to be allowed on profit as enhanced by sum disallowed under section 40(a)(ia) of the Act.

Summary

ISSUES:

Whether the deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961, in respect of profits from providing credit facilities to members by a cooperative society is allowable.Whether interest income earned from balances in savings bank accounts maintained with cooperative banks and scheduled banks is eligible for deduction under section 80P(2)(d) of the Act.Whether deduction under section 80P(2)(c)(ii) of the Act is allowable on profits from other activities such as resale of refilled gas cylinders, hall rent, xerox, and lamination charges.Whether the provision for expense labeled as "Sanugraha Anudan" (bonus) debited to the profit and loss account is disallowable as a donation or allowable as a business expense eligible for deduction under section 80P(2)(a)(i).

RULINGS / HOLDINGS:

The deduction claimed under section 80P(2)(a)(i) for profits from providing credit facilities to members is allowable as the income is "attributable to the business of the assessee society."Interest income earned from balances in savings bank accounts with cooperative banks and scheduled banks qualifies for deduction under section 80P(2)(d) as it is connected to the business operations of the cooperative society.Deduction under section 80P(2)(c)(ii) is allowable on profits from other activities such as resale of gas cylinders, hall rent, xerox, and lamination charges, subject to a maximum of Rs. 50,000, as these activities form part of the cooperative society's business operations.The provision of Rs. 90,000 labeled "Sanugraha Anudan" is not a donation but a "bonus" expense and forms part of the business income; hence, it is eligible for deduction under section 80P(2)(a)(i). The addition disallowing this amount was erroneous.

RATIONALE:

The Court applied the statutory provisions of sections 80P(2)(a)(i), 80P(2)(c)(ii), and 80P(2)(d) of the Income Tax Act, 1961, which provide deductions to cooperative societies on income derived from specified business activities.The Court relied on a consistent line of precedents from coordinate Benches of the Tribunal, including recent decisions from the Pune Tribunal, which held that income earned from credit facilities and related business operations by cooperative societies is eligible for deduction under section 80P.The Court rejected the lower authorities' approach of disallowing deductions without adequately considering the nature of income and business activities, emphasizing that interest income from deposits related to business operations qualifies for deduction.The Court recognized the "Sanugraha Anudan" as a bonus expense, supported by judicial precedent from the Bangalore Tribunal, which held that disallowance of business expenses that increase business income eligible for deduction under section 80P(2)(a)(i) is incorrect.The decision represents adherence to established jurisprudence without any doctrinal shift or dissenting opinion.