2022 (6) TMI 816 - AT - Income Tax

Deduction u/s 80P - interest earned from co-operative banks - HELD THAT - This issue is squarely covered in favour of the assessee by the decision of Hon ble Gujarat High Court in the case of State Bank of India 2016 (7) TMI 516 - GUJARAT HIGH COURT wherein it was held that Section 80P(2)(d) specifically exempts interest earned from funds invested in co-operative societies and therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d). Interest earned from investments made in any bank, not being a co-operative society, is not deductible under Section 80P(2)(d) of the Act. In the present case, the amount of interest in question was earned by the assessee from co-operative banks and this being the undisputed position, said interest income is eligible for deduction under Section 80P(2)(d) of the Act. The impugned order passed by the learned CIT(A) on this issue is, therefore, set aside and the Assessing Officer is directed to allow the claim of the assessee for deduction under Section 80P(2)(d) - Decided in favour of assessee.

Summary

Issues Involved:
- Appeal against the Tribunal's order regarding deduction under Section 80P(2) of the Income-tax Act, 1961 for interest earned from co-operative banks.

Analysis:

Issue 1: Tribunal's Decision and Miscellaneous Application
The appeal filed by the assessee was earlier disposed of by the Tribunal, where the issue raised in Ground Nos. 3-5 regarding the deduction under Section 80P(2) for interest earned from co-operative banks was decided against the assessee. The assessee filed a Miscellaneous Application pointing out that the Tribunal's decision did not consider the judgment of the Hon'ble Gujarat High Court in a relevant case. The Tribunal accepted the mistake and allowed the Miscellaneous Application for fresh adjudication of Ground Nos. 3 to 5.

Issue 2: Adjudication of Claim for Deduction
Upon hearing both sides, it was noted that the issue of deduction under Section 80P(2) for interest income earned from Co-operative Banks was covered in favor of the assessee by the decision of the Hon'ble Gujarat High Court in the State Bank of India case. The Court held that interest earned from funds invested in co-operative societies is exempt under Section 80P(2)(d) of the Act. As the interest in question was earned from co-operative banks, the Tribunal, following the decision of the Hon'ble jurisdictional High Court, allowed the claim for deduction under Section 80P(2)(d) of the Act. Consequently, the impugned order by the CIT(A) was set aside, and the Assessing Officer was directed to allow the deduction.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the CIT(A)'s order and directing the Assessing Officer to allow the deduction under Section 80P(2)(d) for the interest income earned from co-operative banks. The judgment was pronounced in open court on 17th June 2022 at Ahmedabad.