2017 (3) TMI 1728 - AT - Income Tax

Eligibility of deduction u/s 80P - claim denied on interest earned on deposits with a Co-operative bank - claim denied primarily on account of the fact that section 80P(2)(d) of the Act relates to the income earned from a Co-operative society - Held that - The reliance placed by the CIT(A) on the judgment of STATE BANK OF INDIA EMPLOYEES CO-OP. CREDIT & SUPPLY SOCIETY LTD VERSUS THE CIT 2015 (4) TMI 94 - ITAT AHMEDABAD is quite untenable, inasmuch as, in the said case the interest income in question was earned from deposits kept with State Bank of India. Obviously, State Bank of India is not a Co-operative society so as to justify the claim that such interest earnings fall within the scope of section 80P(2)(d) of the Act. Further, the reliance placed by the CIT(A) on the decision of the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. 2016 (1) TMI 1262 - ITAT MUMBAI is also of no avail, inasmuch as, the Bench merely set-aside the matter to the file of the Assessing Officer for examination afresh, whereas in the case of Lands End Co-operative Housing Society Ltd(supra), the claim of exemption under section 80P(2)(d) of the Act with respect to the interest earned from a Co-operative bank has been upheld. Therefore, in view of the said precedent, the claim of the assessee deserves to be allowed. Cae of LANDS END CO-OPERATIVE HOUSING SOCIETY LTD VERSUS I.T.O. WARD-16 (1) (3) , MUMBAI 2016 (2) TMI 620 - ITAT MUMBAI to be followed. Order of the CIT(A) is set-aside and the Assessing Officer is directed to allow deduction under section 80P(2)(d) of the Act with respect to the interest income earned from a Co-operative bank. - Decided in favour of assessee.

Summary

Issues:
Claim of deduction u/s. SOP(2)(d) of the I.T.Act,1961 for interest income earned from a Co-operative bank.

Analysis:
The appeal pertains to the denial of a deduction under section 80P(2)(d) of the Income Tax Act, 1961 for interest income earned by a Co-operative housing society from deposits with a Co-operative bank. The Assessing Officer and CIT(A) rejected the exemption, stating that section 80P(2)(d) restricts the exemption to interest earned from "any other Co-operative society," not a Co-operative bank. The appellant argued that even interest from a Co-operative bank is covered under section 80P(2)(d) as a Co-operative bank is essentially a Co-operative society. The appellant relied on a Mumbai Tribunal decision where interest earned by a Co-operative housing society from a Co-operative bank was held eligible for exemption under section 80P(2)(d) and cited the Supreme Court judgment in a related case.

The Departmental Representative argued that a Mumbai Tribunal decision contradicted the appellant's claim, justifying the denial of the exemption by the CIT(A). The Tribunal noted that the appellant, a Co-operative society, earned interest from a Co-operative bank, leading to the denial of the exemption under section 80P(2)(d) due to the specific wording of the provision. The Tribunal referred to a Mumbai Tribunal decision involving a similar situation where the claim for exemption under section 80P(2)(d) was upheld, contrasting it with the decisions cited by the CIT(A) which were deemed irrelevant as they involved different circumstances.

The Tribunal analyzed the provisions of section 80P(2)(a)(i) and 80P(2)(d) of the Act, emphasizing the distinction between deductions for business income and income from investments with other Co-operative societies. It highlighted that a Co-operative society can claim deduction under section 80P(2)(d) for interest or dividend income from investments with other Co-operative societies, irrespective of the source of the income. The Tribunal found the appellant entitled to the deduction for interest earned from a Co-operative bank, aligning with the precedent set in a similar case.

Accordingly, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the deduction under section 80P(2)(d) for the interest income earned from the Co-operative bank, ultimately allowing the appeal of the assessee.