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2020 (12) TMI 972 - AT - Income TaxDisallowance of deduction u/s 80P(2)(d) - interest received on deposit kept with co-operative bank - AO disallowed the claim of deduction by stating that the co-operative bank is different than a co-operative society, as per provisions of section 80P(2) - HELD THAT - The assessee had made the claim before the authorities below duly supported by several jurisdictional ITAT order in this regard. AO refused to follow the same on the ground that Department has not accepted the same and the same is in appeal before the honourable Bombay High Court. This in our considered opinion is a violation of discipline of judicial hierarchy, as no case is made out that Hon'ble Bombay High Court has reversed any of the decisions. CIT(A) also has refused to follow the discipline of precedence by referring to decision of honourable Karnataka High Court. In this regard as evident from the above said decision of the ITAT 2019 (4) TMI 1933 - ITAT MUMBAI wherein it has been brought out that there is a decision of honourable Karnataka High Court itself in favour of the assessee and there is another decision of honourable Gujarat High Court in favour of assessee on the same issue. In this view of the matter in our considered opinion learned CIT(A) has also committed violation of the judicial discipline by refusing to follow the precedence cited before him on not very cogent ground. Be as it may we find that the issue involved is covered in favour of the assessee by several decisions of ITAT Mumbai as above. Moreover it is also supported by the decisions of honourable Karnataka High Court in the case of Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT .
Issues:
Assessee's claim of interest income from cooperative banks for deduction under section 80P(2)(d) of the I.T. Act. Analysis: 1. The dispute revolves around whether the interest income earned by the assessee from deposits in cooperative banks qualifies for deduction under section 80P(2)(d) of the Income Tax Act. 2. The assessing officer rejected the claim despite ITAT Mumbai's consistent decisions in favor of such deductions, citing that the Department has not accepted those decisions. However, there is no evidence of the Bombay High Court reversing any of these decisions. 3. The CIT(A) also disregarded the ITAT Mumbai decisions and relied on a judgment from the Karnataka High Court in a different case. This led to the CIT(A) upholding the assessing officer's decision. 4. The ITAT reviewed the case, considering the arguments presented by both sides. They emphasized that interest income derived by a cooperative society from investments with a cooperative bank is eligible for deduction under section 80P(2)(d). This interpretation aligns with the legal provisions and definitions of cooperative societies under the Income Tax Act. 5. The ITAT highlighted various cases supporting the assessee's claim, including decisions from the ITAT Mumbai, the Karnataka High Court, and the Gujarat High Court. They also noted the CBDT Circular No. 14 of 2006, clarifying the eligibility of such deductions. 6. The ITAT found that the Karnataka High Court had a differing view from its own coordinate bench decision, which favored the assessee. Additionally, the Gujarat High Court ruled in favor of cooperative societies claiming deductions on interest income from cooperative banks. 7. The ITAT criticized the assessing officer and the CIT(A) for not following the judicial hierarchy and precedence set by relevant decisions. They emphasized that when two views are possible, the one favoring the assessee should be adopted. 8. Ultimately, the ITAT ruled in favor of the assessee, setting aside the decisions of the lower authorities. They concluded that the issue was covered in favor of the assessee by multiple decisions from the ITAT Mumbai, the Karnataka High Court, and the Gujarat High Court. 9. The ITAT allowed the appeal, emphasizing the importance of following legal precedents and upholding the rights of cooperative societies to claim deductions under section 80P(2)(d) for interest income earned from cooperative banks.
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