ITAT Panaji Allows Section 80P(2)(d) Deduction on Interest from Goa State Co-operative Bank

Background of the Dispute

The case of ACGL BBD Employees Co-op. Credit Society Ltd. Vs ITO came up before the ITAT Panaji Bench in relation to Assessment Year 2017-18. The assessee, a co-operative credit society formed for employees and registered under the relevant State Co-operative Societies Act, challenged the order passed by the National Faceless Appeal Centre under Section 250 which had affirmed the assessment framed under Section 143(3).

The lis revolved around the assessee’s eligibility to claim deduction under Section 80P(2)(d) in respect of interest income earned on deposits maintained with Goa State Co-op. Bank Ltd. (GSCBL), and the alleged bar created by Section 80P(4).

Condonation of Delay

One-Day Delay in Filing Appeal

The Registry reported a marginal delay of one day in the filing of the appeal. The assessee submitted an affidavit dated 02/09/2024 explaining the circumstances of the delay, asserting that it was neither deliberate nor due to negligence.

The Tribunal, guided by the liberal principles laid down by the Hon’ble Bombay High Court in Vijay V Meghani Vs. DCIT & Anr. [2017, 398 ITR 250 (Bom)] and by the Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag and Anr. Vs Ms Katiji and Others [1987, 167 ITR 5 (SC)], held that the explanation was satisfactory. In the interest of substantial justice, the delay was condoned and the matter was taken up on merits.

Facts of the Case

Nature of Assessee and Income Earned

  • The assessee is an employee co-operative credit society registered under the State Co-operative Societies Act.
  • For AY 2017-18, the assessee had placed funds in Fixed Deposit Receipts / Term Deposit Receipts (FDR/TDR) with Goa State Co-op. Bank Ltd. (GSCBL).
  • On these deposits, the assessee earned interest income aggregating to ₹21,18,607.

Return of Income and Claim under Section 80P

  1. The assessee filed its return of income on 29/11/2017.
  2. It declared nil taxable income, after claiming deduction under Chapter VI-A in the nature of deduction under Section 80P(2)(d) for the entire interest amount of ₹21,18,607.
  3. The return was initially processed under Section 143(1) without any adjustment.

Subsequently, the case was selected for scrutiny and notice under Section 143(2) was issued. During scrutiny proceedings, the assessee defended its claim for deduction under Section 80P(2)(d) on the interest income from GSCBL deposits.

Assessment and First Appeal

Stand of the Assessing Officer

The Assessing Officer (Ld. AO) was not convinced with the assessee’s submissions. The AO concluded that:

  • The interest was received from a co-operative bank, i.e. GSCBL.
  • According to the AO, in view of Section 80P(4), interest from deposits with a co-operative bank would not qualify for deduction under Section 80P(2)(d).

On this basis, the AO disallowed the claim for deduction under Section 80P(2)(d) and assessed the interest income as taxable in the hands of the assessee.

Decision of NFAC / CIT(A)

The assessee preferred an appeal before the National Faceless Appeal Centre (Ld. CIT(A)/NFAC). However, the first appellate authority endorsed the view of the AO and upheld the disallowance of deduction, primarily relying on:

  • **Mavilayi Service Co-operative Bank Ltd.