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2024 (12) TMI 703 - AT - Income TaxDeduction u/s. 80P(d) - interest earned from cooperative bank - HELD THAT - As can be seen from the aforesaid observations of the Coordinate Bench, though, the Bench was conscious of the contrary view expressed in case of PCIT Vs. Totgars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT relied upon by the First Appellate Authority, however, having taken note of the fact that the same Hon ble High Court in the case of the same assessee in an earlier decision 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and SBI 2016 (7) TMI 516 - GUJARAT HIGH COURT have allowed deduction u/s. 80P(2)(d) of the Act in respect of similar nature of income, accepted assessee s claim. The Coordinate Bench, while coming to such conclusion has further observed that, in view of conflicting decisions of different High Courts, the view favourable to the assessee is to be taken. Therefore, respectfully following we allow assessee s claim of deduction u/s. 80P(2)(d) of the Act in respect of interest income earned on investment made with other cooperative banks. Assessee appeal allowed.
Issues Involved:
1. Entitlement of the assessee to claim deduction under Section 80P(2)(d) of the Income Tax Act, 1961 for interest income earned from investments made in a cooperative bank. Detailed Analysis: Issue 1: Entitlement to Deduction under Section 80P(2)(d) for Interest Income from Cooperative Banks The primary issue in this appeal revolves around whether the assessee, a cooperative credit society, is entitled to claim a deduction under Section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from investments made in cooperative banks. The assessee had filed its return of income declaring Nil income after claiming a deduction of Rs. 80,53,524/- under Section 80P of the Act. The Assessing Officer disallowed the deduction, viewing the assessee as similar to a cooperative bank and thus not entitled to the deduction under either Section 80P(2)(a)(i) or 80P(2)(d). Upon appeal, the First Appellate Authority accepted the deduction under Section 80P(2)(a)(i) for profits and gains from the eligible activities of the cooperative society but disallowed the deduction under Section 80P(2)(d) concerning interest income from investments in cooperative banks. The decision relied on precedents from the Karnataka High Court in Totgars Cooperative Sale Society and the Gujarat High Court in Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. vs. ACIT. Before the Tribunal, the assessee's counsel argued that the interest earned from investments in cooperative banks qualifies for deduction under Section 80P(2)(d), asserting that a cooperative bank is a type of cooperative society. The counsel supported this argument with various judicial precedents. Conversely, the Departmental Representative upheld the views of the Departmental Authorities. The Tribunal, after considering the submissions and precedents, noted that the First Appellate Authority's adverse conclusion was based on certain High Court decisions. However, the Tribunal referenced a Coordinate Bench's decision in Palm Court M Premises Cooperative Society Ltd. vs. Principal Commissioner of Income-tax, which allowed the deduction under Section 80P(2)(d) for similar interest income. The Tribunal observed that the Coordinate Bench had considered the same Karnataka High Court decision and still allowed the deduction, emphasizing that where conflicting judicial views exist, the view favorable to the assessee should be adopted. The Tribunal referred to several decisions from various benches, which consistently held that interest income from investments in cooperative banks qualifies for deduction under Section 80P(2)(d). These included cases such as Petit Towers Co-op. Housing Society Ltd. vs. ITO and Solitaire CHS Ltd. vs. Pr. CIT, among others. The Tribunal highlighted that even though cooperative banks are not entitled to deductions under Section 80P due to subsection (4), they remain cooperative societies under the law, thus entitling the assessee to the deduction for interest income under Section 80P(2)(d). The Tribunal concluded by allowing the assessee's claim for deduction under Section 80P(2)(d) for the interest income earned on investments made with other cooperative banks, aligning with the favorable judicial pronouncements and the principle of adopting the view beneficial to the assessee in the presence of conflicting High Court decisions. Conclusion: The appeal was allowed, granting the assessee the deduction under Section 80P(2)(d) for interest income from investments in cooperative banks, based on the interpretation that cooperative banks qualify as cooperative societies for the purpose of this deduction.
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