2024 (6) TMI 1390 - AT - Income Tax

Deduction claimed u/s 80P - deduction as claimed towards interest received from deposits with Co-operative Bank - HELD THAT - We notice that the Co-ordinate Bench has been consistently holding that the income derived by way of interest from Co-operative Banks is also eligible for deduction u/s 80P(2)(d). Assessee has placed the surplus funds in deposits with various Co-operative Banks and has received interest income on the same. The assessee while filing the return of income has claimed such interest as a deduction u/s 80P(2)(d). We notice that the lower authorities have denied the benefit of deduction for all the AYs under consideration for the reason that the interest received from Co-operative Bank is not eligible for deduction u/s 80P(2)(d). We hold that the assessee is entitled for deduction under section 80P(2)(d) towards income derived from deposits with Co-operative Bank - Assessee appeal allowed.

Summary

Issues:
Disallowance of deduction under section 80P(2)(d) of the Income Tax Act, 1961.

Analysis:
The appellant, a Co-operative Society, appealed against the disallowance of deduction under section 80P(2)(d) for AYs 2017-18, 2018-19, and 2020-21. The AO disallowed the deduction as the interest income claimed was from Co-operative Banks. The CIT(A) upheld the disallowance citing a Karnataka High Court decision. The appellant argued that a Co-operative Society includes a Cooperative Bank and relied on previous tribunal decisions supporting deduction for interest from Co-operative Banks. The DR cited a Gujarat High Court case to oppose the deduction.

The Tribunal noted that income from interest from Co-operative Banks is eligible for deduction under section 80P(2)(d). It highlighted the conditions for the deduction, emphasizing that the term "cooperative society" includes Co-operative Banks. The Tribunal referred to a Supreme Court judgment to support its interpretation of the Act. It rejected the CIT(A)'s reasoning and allowed the deduction for the appellant.

In a separate judgment, the Tribunal cited a Madras High Court decision to reaffirm that interest income from Co-operative Banks is eligible for deduction under section 80P(2)(d). It clarified that a Co-operative Bank falls within the definition of a Co-operative Society under the Act. The Tribunal concluded that the appellant is entitled to the deduction for the interest income from deposits with Co-operative Banks for the relevant assessment years.

Therefore, the Tribunal allowed the appeals for AYs 2017-18, 2018-19, and 2020-21, directing the AO to permit the deduction claimed by the appellant.