2021 (5) TMI 238 - AT - Income Tax

Disallowance u/s 80P(2)(d) on interest income earned from investment in co-operative banks - HELD THAT - As relying on LANDS END CO-OPERATIVE HOUSING SOCIETY LTD VERSUS I.T.O. WARD-16 (1) (3) , MUMBAI 2016 (2) TMI 620 - ITAT MUMBAI and TOTAGARS CO-OPERATIVE SALE SOCIETY, 2017 (1) TMI 1100 - KARNATAKA HIGH COURT assessee is entitled for the deduction u/s 80P(2)(d) in respect of the interest income earned from investment in co-operative banks. - Decided in favour of assessee.

Summary

Issues Involved:
1. Assessment of income by AO
2. Disallowance of claim u/s 80P(2)(d) on interest earned from co-operative banks

Analysis:

Issue No. 1:
The assessee filed an appeal against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2015-16. The assessee's income was assessed at a higher amount than declared in the return. The case involved scrutiny of the assessee, a co-operative housing society, earning income from various sources, including interest from investments in co-operative banks. The AO disallowed the claim u/s 80P(2)(d) for exemption on interest income, leading to the appeal.

Issue No. 2:
The main contention under this issue was the disallowance of the claim u/s 80P(2)(d) on interest income earned from investments in co-operative banks. The assessee argued that similar issues had been decided in their favor in previous judgments by ITAT Mumbai Bench and the Karnataka High Court. The ITAT Mumbai Bench had previously ruled that a co-operative society can claim deduction u/s 80P(2)(d) for interest income from investments with other co-operative societies, regardless of the nature of income. The High Court of Karnataka also supported this view, stating that interest earned from a co-operative bank is deductible under Section 80P(2)(d) of the Income Tax Act. Considering these precedents, the ITAT Mumbai allowed the appeal, reversing the decision of the CIT(A) and directing the AO to allow the deduction for interest income earned from co-operative banks.

In conclusion, the ITAT Mumbai ruled in favor of the assessee, allowing the appeal and granting the deduction u/s 80P(2)(d) for interest income from investments in co-operative banks. The judgment highlighted the importance of legal precedents and interpretations of relevant sections of the Income Tax Act in determining tax liabilities for co-operative societies.