2019 (7) TMI 1729 - AT - Income Tax

Deduction u/s 80P - interest income earned - HELD THAT - Assessee a cooperative society is eligible for deduction u/s.80P(2)(d) of the Act in respect of the interest income earned by the assessee from either any other cooperative society or from a cooperative bank. Grounds raised by the assessee are allowed. See KSHATRIY GADKARI MARATHA COOPERATIVE CREDIT SOCIETY LTD. 2019 (4) TMI 1932 - ITAT MUMBAI and KALIANDAS UDYOG BHAVAN PREMISES CO-OP SOCIETY LTD. 2018 (4) TMI 1678 - ITAT MUMBAI - Appeals of the assessee are allowed.

Summary

Issues Involved:

1. Disallowance of deduction under section 80P(2)(d) of the Income Tax Act, 1961.
2. Classification of cooperative banks under section 80P(2)(d).
3. Application of judicial precedents and decisions in similar cases.
4. Interpretation of section 80P(4) in relation to cooperative societies and cooperative banks.

Detailed Analysis:

1. Disallowance of Deduction under Section 80P(2)(d):

The primary issue was whether the assessee, a cooperative society, was entitled to a deduction under section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from deposits placed with cooperative banks. The assessee contended that the interest income from cooperative banks should be deductible under section 80P(2)(d). The Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] had confirmed the disallowance of this deduction, relying on section 80P(4) and judicial precedents that were argued to be distinguishable from the assessee's case.

2. Classification of Cooperative Banks under Section 80P(2)(d):

The tribunal examined whether cooperative banks could be considered cooperative societies for the purposes of section 80P(2)(d). It was noted that section 80P(2)(d) allows a deduction for interest income derived by a cooperative society from its investments with any other cooperative society. The tribunal referred to various judicial pronouncements, including the Karnataka High Court's decision in Pr.CIT v. Totgar Cooperative Sales Society Limited [392 ITR 74], which held that cooperative banks are indeed cooperative societies for the purposes of section 80P(2)(d).

3. Application of Judicial Precedents and Decisions in Similar Cases:

The tribunal cited several decisions from Coordinate Benches that had ruled in favor of the assessee on similar issues. For instance, in the case of Kshatriy Gadkari Maratha Cooperative Credit Society Ltd. v. ITO, it was held that interest income from cooperative banks qualifies for deduction under section 80P(2)(d). The tribunal also referenced the case of Kaliandas Udyog Bhavan Premises Co-op Hsg Society v. ITO, which supported the assessee's claim for deduction under section 80P(2)(d) for interest income from cooperative banks.

4. Interpretation of Section 80P(4) in Relation to Cooperative Societies and Cooperative Banks:

The tribunal clarified that section 80P(4) excludes cooperative banks from the benefits of section 80P, but this exclusion does not extend to cooperative societies earning interest from cooperative banks. The tribunal emphasized that the interest income derived by a cooperative society from investments in cooperative banks remains eligible for deduction under section 80P(2)(d). This interpretation was supported by the Karnataka High Court and the Gujarat High Court in relevant cases.

Conclusion:

The tribunal concluded that the assessee, being a cooperative society, was entitled to the deduction under section 80P(2)(d) for interest income earned from cooperative banks. The decisions of the lower authorities were overturned, and the appeals of the assessee were allowed. The tribunal's order emphasized that the provisions of section 80P(2)(d) are clear and that cooperative banks qualify as cooperative societies for the purposes of this section. The tribunal's decision was pronounced in the open court on July 26, 2019.