2021 (10) TMI 778 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest income received from co-operative bank - HELD THAT - This issue is covered by the decision of ITAT, Mumbai in the case Sea Grean Co-operative Housing Society Ltd. 2017 (3) TMI 1728 - ITAT MUMBAI , thus we direct the AO to allow the claim of deduction under section 80P(2)(d) of the Act with respect to interest income earned on deposits made with co-operative Bank. - Decided in favour of assessee.

Summary

Issues:
Appeal against disallowance of deduction under section 80P(2)(d) for interest income received from a co-operative bank.

Analysis:
The appeal concerns the disallowance of a deduction under section 80P(2)(d) of the Income-tax Act for interest income received from co-operative banks. The assessee claimed the interest income as exempt, but the Assessing Officer disallowed the claim based on a decision of the Hon'ble Apex court. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the current appeal before the Tribunal. The key issue revolves around whether interest income earned from investment of surplus funds with Co-operative Banks qualifies for deduction under section 80P(2)(d) or the principle of mutuality. The CIT(A) confirmed the disallowance of the claimed amount, stating that such interest income is not eligible for deduction under section 80P(2)(d) or the principle of mutuality.

The Tribunal reviewed a similar case, Sea Grean Co-operative Housing Society Ltd. Vs. ITO, where it was held that a co-operative society can avail deduction under section 80P(2)(d) for income derived from investments with other co-operative societies, irrespective of whether the society is engaged in banking activities. The Tribunal differentiated between deductions under section 80P(2)(a)(i) and 80P(2)(d), emphasizing that the latter applies to interest and dividend income from investments with other co-operative societies. Based on this precedent, the Tribunal allowed the assessee's claim for deduction under section 80P(2)(d) for interest income earned on deposits made with a co-operative bank.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to grant the deduction under section 80P(2)(d) for the interest income earned on deposits with the co-operative bank. The decision was based on the precedent set by the Sea Grean Co-operative Housing Society Ltd. case, which clarified the eligibility for such deductions under the Income-tax Act.

This detailed analysis of the judgment highlights the legal interpretation and application of section 80P(2)(d) in the context of interest income from co-operative banks, providing a comprehensive understanding of the issues involved and the Tribunal's decision in favor of the assessee.