2023 (6) TMI 1366 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest income derived by a co-operative society from its deposits with the co-operative banks - HELD THAT - Tribunal in the case of M/s Amore Commercial Premises Co-op Society Ltd 2023 (1) TMI 826 - ITAT MUMBAI has dealt on the taxability of interest earned on the deposits were the cooperative society receives/earns interest on deposits with the co-operative bank is eligible for claim of deduction u/s 80P(2)(d) of the Act. Accordingly, we direct the AO to allow the claim of deduction u/sec 80P(2)(d) on the interest income/dividend received /earned from the co-operative banks. Appeal filed by the assessee are allowed.

Summary

Issues Involved:
1. Denial of Deduction u/s 80P(2)(d) of the Act.
2. Setoff of Loss.

Summary:

Issue 1: Denial of Deduction u/s 80P(2)(d) of the Act

The appeal was filed by the assessee, a Housing Cooperative Society, against the order of the NFAC/CIT(A), Delhi, which denied the deduction u/s 80P(2)(d) of the Act amounting to Rs. 1,58,305. The AO/CPC denied the deduction on the grounds that the cooperative bank is an urban commercial bank and does not fall under the purview of a cooperative society as referred to in Sec. 80P(2)(d) of the Act. Consequently, the interest income from cooperative banks was taxed under income from other sources, resulting in a total assessed income of Rs. 2,79,060. The assessee's subsequent rectification petition u/s 154 of the Act was also rejected.

Aggrieved by this, the assessee appealed to the CIT(A), who sustained the disallowance u/s 80P(2)(d) but granted relief on other grounds. The assessee then appealed to the ITAT. During the hearing, the assessee's AR argued that the interest income from cooperative banks should be eligible for deduction u/s 80P(2)(d), supported by judicial decisions. The ITAT referenced the case of M/s Amore Commercial Premises Co-op Society Ltd vs. CPC Karnataka, which dealt with similar issues and concluded that interest income earned from cooperative banks is eligible for deduction u/s 80P(2)(d).

The ITAT cited multiple judicial precedents, including decisions from the Hon'ble Karnataka High Court and Hon'ble Gujarat High Court, which held that interest income earned by a cooperative society from investments with a cooperative bank is eligible for deduction u/s 80P(2)(d). The Tribunal emphasized that the cooperative bank continues to be a cooperative society registered under the Cooperative Societies Act.

Issue 2: Setoff of Loss

The AO/CPC denied the setoff of loss amounting to Rs. 1,20,750, which was included in the total assessed income of Rs. 2,79,060. However, this issue was not elaborated upon in the judgment, as the primary focus was on the denial of deduction u/s 80P(2)(d).

Conclusion:

The ITAT set aside the order of the CIT(A) on the disputed issue and directed the AO to allow the claim of deduction u/s 80P(2)(d) of the Act on the interest income/dividend received from the cooperative banks. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 13.06.2023.