2022 (12) TMI 1531 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest income received from a cooperative bank by a cooperative housing society - HELD THAT - From a bare reading of Sec. 80P(2)(d), it can be discerned that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. What is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. So if the interest income is derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under Sec. 80P(2)(d) of the Act is a valid claim. Though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) - Decided in favour of assessee.

Summary

Issues:
Claim of deduction under Section 80P(2)(d) of the Income Tax Act for interest income received from a cooperative bank by a cooperative housing society.

Analysis:
The case involved an appeal by a cooperative housing society, UTI Employees Sai Samrudhi Co-operative Housing Society Ltd., against the decision of the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of the claim of deduction on interest income under Section 80P(2)(d) of the Income Tax Act. The society, formed by employees and nominees of Unit Trust of India, had received interest income from Mumbai District Central Cooperative Bank. The claim was rejected by the Assessing Officer and confirmed by the Ld. CIT(A) based on a Karnataka High Court decision. The issue revolved around the interpretation of Section 80P(2)(d) concerning the deduction of interest income by a cooperative society from its investments with another cooperative society.

The Tribunal analyzed the relevant provisions of Section 80P(2)(d) and the definition of a cooperative society under the Income Tax Act. It noted that interest income derived by a cooperative society from its investments with a cooperative bank would still be eligible for deduction under Section 80P(2)(d) despite the insertion of sub-section (4) to Section 80P. The Tribunal referred to various judicial pronouncements and precedents, including decisions by the High Courts of Karnataka and Gujarat, supporting the eligibility of cooperative societies to claim deduction on interest income from investments in cooperative banks. The Tribunal also highlighted a CBDT Circular clarifying the purpose behind the enactment of sub-section (4) of Section 80P.

Based on the conflicting judicial pronouncements and the principle of favoring the view in favor of the assessee in case of conflicting decisions by non-jurisdictional High Courts, the Tribunal concluded that the cooperative society's claim for deduction of interest income from the cooperative bank was valid under Section 80P(2)(d) of the Act. Consequently, the appeal of the assessee was allowed, and the Assessing Officer was directed to allow the claim of deduction.

In conclusion, the Tribunal's decision clarified the eligibility of cooperative societies to claim deductions on interest income from investments in cooperative banks under Section 80P(2)(d) of the Income Tax Act, emphasizing the interpretation of relevant provisions and judicial precedents supporting the assessee's position.