2021 (1) TMI 43 - AT - Income Tax

Deduction u/s 80P(2)(d) - interest income derived from deposits with cooperative bank - assessee is a Cooperative Housing Society - Diversified views - HELD THAT - No judgement from Hon'ble Jurisdictional High court on the issue of eligibility of deduction under section 80P(2)(d) of the Act on interest income derived by a Co-operative Society from a Cooperative Bank has been brought to our notice. The Hon'ble Bombay High Court in the case of K. Subramanian Vs. Siemens India Ltd. 1983 (4) TMI 3 - BOMBAY HIGH COURT has held that when two conflicting decisions of non-jurisdictional High Courts are available, the view that favours the assessee is to be preferred. Accordingly, following the decision of Totagars Co-operative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and the decision in the case of Hon'ble Gujarat High Court in the case of Vankar Sahakari Sangh . 2016 (7) TMI 1217 - GUJARAT HIGH COURT the deduction claimed by the assessee under section 80P(2)(d) of the Act in respect interest derived from investments with the cooperative banks is allowed. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Disallowance of the assessee's claim of deduction under section 80P(2)(d) of the Income-tax Act, 1961, in respect of interest income derived from deposits with cooperative banks.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80P(2)(d):

Background:
The assessee, a Cooperative Housing Society, received interest income from both cooperative and nationalized banks during the relevant assessment year. The assessee claimed a deduction under section 80P(2)(d) of the Income-tax Act, 1961, for the interest income earned from these banks. The Assessing Officer disallowed this claim, resulting in an addition of ?2,65,481/-. The CIT(A) upheld the Assessing Officer's decision, leading to the present appeal.

Department's Argument:
The Departmental Representative argued that section 80P(2)(d) clearly specifies that only interest or dividends derived from investments with any other cooperative society are eligible for deduction. Interest income from cooperative or nationalized banks does not qualify for this deduction.

Tribunal's Analysis:
The Tribunal examined the submissions and the orders of the lower authorities. It referred to the decision in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO, where it was held that interest income derived by a cooperative society from investments with a cooperative bank qualifies for deduction under section 80P(2)(d). The Tribunal emphasized that the provision allows for the deduction of interest income derived from investments with any other cooperative society, which includes cooperative banks.

Key Judicial Pronouncements:
- Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO: The Tribunal highlighted that the interest income derived by a cooperative society from investments with a cooperative bank is entitled to deduction under section 80P(2)(d).
- Majalgaon Sahakari Sakhar Karkhana Ltd. vs. ACIT: The Pune Bench of the Tribunal supported the view that interest and dividend income derived from investments with cooperative banks are deductible under section 80P(2)(d).
- PCIT vs. Totagars Co-operative Sale Society (Karnataka High Court): Conflicting judgments were noted. In one instance, the court held that cooperative banks should be considered cooperative societies for the purpose of section 80P(2)(d), while in another, it held that interest income from cooperative banks does not qualify for the deduction. The Tribunal noted that the latter judgment did not consider the earlier decision.

Conclusion:
The Tribunal found no judgment from the jurisdictional High Court on this issue. Following the principle laid down by the Bombay High Court in K. Subramanian Vs. Siemens India Ltd., which states that when two conflicting decisions of non-jurisdictional High Courts exist, the view favoring the assessee should be preferred. Therefore, the Tribunal allowed the deduction claimed by the assessee under section 80P(2)(d) for interest derived from investments with cooperative banks. The appeal of the assessee was allowed, and the impugned order was set aside.

Final Decision:
The Tribunal allowed the appeal of the assessee, granting the deduction under section 80P(2)(d) for the interest income derived from investments with cooperative banks. The order was pronounced in the open court on October 29, 2020.