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2023 (2) TMI 1141 - AT - Income TaxDeduction u/s 80P(2)(d) - interest income earned by the Co-operative Society on its investment made with cooperative bank - HELD THAT - Now this issue is longer res integra having been decided in favour of the assessee in case of Palm Court M Premises Co-operative Society Ltd. i 2022 (9) TMI 650 - ITAT MUMBAI by the coordinate bench of Tribunal by distinguishing the judgement rendered of Totgars Co-operative Sale Society Ltd 2010 (2) TMI 3 - SUPREME COURT and by discussing the decision rendered by Hon ble Bombay High Court and Hon ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with cooperative bank would be eligible for claim of deduction under section 80P(2)(d) Hon ble High Court of Karnataka in case of Pr. CIT Anr. Vs. Totgar s Co-operative Sale Society Ltd. 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and Hon ble Gujarat High Court in case of State Bank of India 2016 (7) TMI 516 - GUJARAT HIGH COURT had also held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction u/s 80P(2)(d) - CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. 2. Eligibility of interest income earned from investments with cooperative banks for deduction under section 80P(2)(d) of the Act. Detailed Analysis: 1. Disallowance of Deduction under Section 80P(2)(a)(i): The assessee, a co-operative credit society, filed returns for the assessment years 2013-14 and 2018-19, claiming deductions under section 80P of the Income-tax Act, 1961. The returns were processed under section 143(1) of the Act, disallowing deductions of Rs. 16,76,460 and Rs. 87,93,570 for the respective years. The assessee appealed to the CIT(A), who upheld the disallowance, relying on the Supreme Court's decision in Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC). The Tribunal noted that this issue had been resolved in favor of the assessee by a coordinate Bench of the Tribunal, which distinguished the Totgars case and discussed decisions from the Bombay and Gujarat High Courts. 2. Eligibility of Interest Income from Investments with Cooperative Banks for Deduction under Section 80P(2)(d): The Tribunal reviewed the facts and found that the assessee had invested surplus funds with cooperative banks, earning interest income of Rs. 16,76,460 and Rs. 87,93,570 for the respective assessment years. The CIT(A) had denied the deduction under section 80P, relying on the Totgars decision. However, the Tribunal referred to multiple decisions from coordinate benches and High Courts, which held that interest income earned by a cooperative society from investments with cooperative banks is eligible for deduction under section 80P(2)(d). The Tribunal cited several cases, including: - M/s Solitaire CHS Ltd. Vs. Pr.CIT-26, Mumbai - Land and Cooperative Housing Society Ltd. Vs. ITO - M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai - Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range 20(2)(2), Mumbai - Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai The Tribunal emphasized that cooperative banks are still cooperative societies under the Cooperative Societies Act, 1912, and thus, interest income from such banks qualifies for deduction under section 80P(2)(d). The Tribunal also noted that the Karnataka High Court in Pr. CIT & Anr. Vs. Totgar's Co-operative Sale Society Ltd. and the Gujarat High Court in State Bank of India vs. CIT supported this view. Conclusion: The Tribunal concluded that the CIT(A) erred in denying the deduction under section 80P(2)(d). Consequently, the appeals filed by the assessee were allowed, and the AO was directed to allow the claimed deductions. The order was pronounced on 23/02/2023.
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