2022 (10) TMI 1036 - AT - Income Tax

Deduction u/s. 80P(2)(d) - interest income earned from other cooperative banks/societies - HELD THAT - As relying on Kshatriy Gadkari Maratha Cooperative Credit Society Ltd. 2019 (4) TMI 1932 - ITAT MUMBAI and Kaliandas Udyog Bhavan Premises Co-op Hsg Society 2018 (4) TMI 1678 - ITAT MUMBAI we hold that the assessee a cooperative society is eligible for deduction u/s.80P(2)(d) of the Act in respect of the interest income earned by the assessee either from any other cooperative society or from a cooperative bank. Grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Disallowance of deduction under section 80P(2)(d) of the Income Tax Act.
2. Applicability of case laws relied upon by the Commissioner of Income Tax.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80P(2)(d):
The primary issue in the appeal was whether the assessee, a cooperative society, was entitled to a deduction under section 80P(2)(d) of the Income Tax Act on the interest income earned from other cooperative banks/societies. The assessee contended that cooperative banks are registered under the Cooperative Societies Act, 1912, and thus, they should be eligible for the deduction.

The tribunal observed that various Coordinate Benches had previously decided similar issues in favor of the assessee. Specifically, it referenced the case of Kshatriy Gadkari Maratha Cooperative Credit Society Ltd. v. ITO, where it was held that the interest income earned by a cooperative society from investments in cooperative banks is eligible for deduction under section 80P(2)(d).

The tribunal further clarified that the provisions of section 80P(2)(d) explicitly state that any income by way of interest or dividends derived by a cooperative society from its investments with any other cooperative society is eligible for deduction. The tribunal noted that the decision of the Hon'ble Supreme Court in The Totgar Cooperative Sales Society Limited v. ITO was not applicable to the present case, as it dealt with the issue of interest on surplus funds and not the specific deduction under section 80P(2)(d).

Additionally, the tribunal referenced the decision of the Hon'ble Karnataka High Court in Pr.CIT v. Totgar Cooperative Sales Society Limited, which held that a cooperative bank is considered a cooperative society for the purpose of section 80P(2)(d). Therefore, the interest received by a cooperative society from a cooperative bank is eligible for deduction under this section.

2. Applicability of Case Laws Relied Upon by the Commissioner of Income Tax:
The assessee argued that the case laws relied upon by the Commissioner of Income Tax were not applicable to its case. The tribunal agreed with this contention, emphasizing that the decision in The Totgar Cooperative Sales Society Limited v. ITO was related to section 80P(2)(a)(i) and not section 80P(2)(d). The tribunal also cited several other cases, including the decisions of the Coordinate Bench in ITO v. Abhylaxhmi Co-op Credit Society Ltd. and Kalindas Udyog Bhavan Premises Co-op Society Ltd. v. ITO, which supported the assessee's eligibility for deduction under section 80P(2)(d).

The tribunal concluded that the assessee, being a cooperative society, is entitled to the deduction under section 80P(2)(d) for the interest income earned from investments in cooperative banks. Consequently, the grounds raised by the assessee were allowed, and the appeal was decided in favor of the assessee.

Conclusion:
The tribunal allowed the appeal filed by the assessee, holding that the assessee is eligible for deduction under section 80P(2)(d) of the Income Tax Act in respect of the interest income earned from other cooperative societies or cooperative banks. The decision was pronounced in the open court on 30.09.2022.