2023 (4) TMI 1350 - AT - Income Tax

Deduction claimed u/s 80P(2)(d) - interest income earned from deposits kept with Co-operative banks - HELD THAT - We notice that this issue has been decided in favour of the assessee in the many cases, wherein it was held that the interest received from co-operative banks by a co-operative society is eligible for deduction u/s 80P(2)(d) of the Act. See KALIANDAS UDYOG BHAVAN PREMISES CO-OP SOCIETY LTD. 2018 (4) TMI 1678 - ITAT MUMBAI . RENA SAHAKARI SAKHAR KARKHANA LTD. 2022 (1) TMI 419 - ITAT PUNE Thus assessee is entitled for deduction under section 80P(2)(d) of the Act in respect of interest income earned from the cooperative banks. Assessee appeal allowed.

Summary

Issues Involved:
1. Deduction under Section 80P(2)(d) of the Income Tax Act for interest income earned from deposits with cooperative banks.

Issue-wise Detailed Analysis:

1. Deduction under Section 80P(2)(d) of the Income Tax Act for interest income earned from deposits with cooperative banks:

The primary issue in this appeal is whether the assessee, a housing cooperative society, is entitled to a deduction under Section 80P(2)(d) of the Income Tax Act for interest income earned from deposits made with cooperative banks.

Background:
The assessee earned interest income of Rs. 25,64,420/- from deposits kept with cooperative banks during the assessment year 2018-19. The assessee claimed this amount as a deduction under Section 80P(2)(d) of the Act. However, the Assessing Officer (AO) rejected the claim, and this rejection was subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

Tribunal's Observations:
The Tribunal noted that this issue has been previously decided in favor of the assessee in several cases. Specifically, the Tribunal referenced the case of "Kaliandas Udyog Bhavan Premises Co-op Society Ltd vs. ITO," where it was held that interest received from cooperative banks by a cooperative society is eligible for deduction under Section 80P(2)(d).

Legal Interpretation:
Section 80P(2)(d) states:
> "In respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income shall be deducted."

The Tribunal emphasized that what is crucial for the claim of deduction under this section is that the interest income should be derived from investments made by the assessee cooperative society with any other cooperative society. Despite the insertion of Sub-section (4) of Section 80P, which excludes cooperative banks from the purview of this section, the Tribunal held that a cooperative bank continues to be a cooperative society. Therefore, interest income derived from investments held with a cooperative bank should be eligible for deduction under Section 80P(2)(d).

Supporting Judicial Pronouncements:
The Tribunal cited several cases supporting this view, including:
- "Land and Cooperative Housing Society Ltd. vs. ITO"
- "M/s C. Green Cooperative Housing and Society Ltd. vs. ITO"
- "Marvwanjee Cama Park Cooperative Housing Society Ltd. vs. ITO"
- The High Court of Karnataka in "Pr. Commissioner of Income Tax and Anr. vs. Totagars Cooperative Sale Society"
- The High Court of Gujarat in "State Bank Of India vs. CIT"

These cases consistently held that interest income earned by a cooperative society from investments held with a cooperative bank is eligible for deduction under Section 80P(2)(d).

Conclusion:
Based on the above observations and judicial precedents, the Tribunal concluded that the assessee is entitled to the deduction under Section 80P(2)(d) for the interest income earned from deposits with cooperative banks. The order of the lower authorities was set aside, and the AO was directed to allow the deduction.

Final Order:
The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 21.04.2023.