2023 (11) TMI 1226 - AT - Income Tax

Deduction u/s 80P(2)(d) - appellant is Co- operative Housing Society and has received the interest from Co-operative Society - HELD THAT - As per catena of judicial decisions were the co-operative society receives/earns interest on deposits with the co-operative bank is eligible for claim of deduction under section 80(2)(d) of the Act. The recent decision of Kerala State Cooperative Agricultural Rural Development Bank Ltd Vs Assessing Officer ( 2023 (9) TMI 761 - SUPREME COURT ) has upheld the view of allowing deduction U/sec 80P(2)(d) of the Act to the Cooperative society. Accordingly, we set aside the order of the CIT(A) and direct the AO to allow the claim of deduction u/sec 80P(2)(d) on the interest income received /earned from the co-operative banks. And the grounds of appeal allowed in favour of the assessee.

Summary

Issues Involved:
1. Deduction u/s 80P(2)(d) for interest income from cooperative banks.
2. Applicability of judicial precedents regarding deduction u/s 80P(2)(d).

Summary:

Issue 1: Deduction u/s 80P(2)(d) for interest income from cooperative banks

The assessee, a cooperative housing society, filed returns for A.Y 2017-18 claiming a deduction u/s 80P(2)(d) amounting to Rs. 17,79,349 for interest income from cooperative banks. The Assessing Officer (AO) disallowed this deduction, interpreting that cooperative banks do not fall under the purview of "cooperative society" as referred to in Sec. 80P(2)(d) of the Act. Consequently, the interest income was taxed under "income from other sources," leading to an assessed total income of Rs. 17,79,350.

Issue 2: Applicability of judicial precedents regarding deduction u/s 80P(2)(d)

Aggrieved by the AO's decision, the assessee appealed to the CIT(A), who upheld the AO's order. The assessee then appealed to the ITAT. The ITAT considered various judicial precedents, including decisions from the Hon'ble Tribunal in similar cases and the recent judgment by the Hon'ble Supreme Court in Kerala State Cooperative Agricultural & Rural Development Bank Ltd Vs Assessing Officer (2023) 154 taxmann.com 305 (SC). The ITAT concluded that interest income derived by a cooperative society from its deposits with cooperative banks is eligible for deduction u/s 80P(2)(d). The Tribunal relied on multiple judicial decisions supporting this view, including those from the Hon'ble High Courts of Karnataka and Gujarat.

Conclusion:

The ITAT set aside the CIT(A)'s order and directed the AO to allow the deduction u/s 80P(2)(d) for the interest income received from cooperative banks. The grounds of appeal were allowed in favor of the assessee for all assessment years involved (A.Y 2017-18, 2018-19, 2019-20, and 2020-21).

Order Pronounced:

In the result, the four appeals filed by the assessee are allowed. Order pronounced in the open court on 06.11.2023.