Assessee wins section 80P(2)(d) exemption for interest earned from cooperative bank after tribunal distinguishes precedents

ITAT Mumbai allowed the assessee's claim for exemption under section 80P(2)(d) regarding interest earned from a cooperative bank. The CIT(A) had denied the claim, relying on precedents that were distinguished by the tribunal. The tribunal found the CIT(A)'s reliance on State Bank of India Employees Co-op Credit Supply Society Ltd case untenable, as it involved interest from State Bank of India, which is not a cooperative society. The tribunal followed the precedent in Lands End Co-operative Housing Society Ltd, which upheld similar exemption claims for interest from cooperative banks. The CIT(A)'s order was set aside, and the Assessing Officer was directed to allow the deduction under section 80P(2)(d) for interest income from cooperative banks.

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Issues:
Claim of deduction u/s. SOP(2)(d) of the I.T.Act,1961 for interest income earned from a Co-operative bank.

Analysis:
The appeal pertains to the denial of a deduction under section 80P(2)(d) of the Income Tax Act, 1961 for interest income earned by a Co-operative housing society from deposits with a Co-operative bank. The Assessing Officer and CIT(A) rejected the exemption, stating that section 80P(2)(d) restricts the exemption to interest earned from "any other Co-operative society," not a Co-operative bank. The appellant argued that even interest from a Co-operative bank is covered under section 80P(2)(d) as a Co-operative bank is essentially a Co-operative society. The appellant relied on a Mumbai Tribunal decision where interest earned by a Co-operative housing society from a Co-operative bank was held eligible for exemption under section 80P(2)(d) and cited the Supreme Court judgment in a related case.

The Departmental Representative argued that a Mumbai Tribunal decision contradicted the appellant's claim, justifying the denial of the exemption by the CIT(A). The Tribunal noted that the appellant, a Co-operative society, earned interest from a Co-operative bank, leading to the denial of the exemption under section 80P(2)(d) due to the specific wording of the provision. The Tribunal referred to a Mumbai Tribunal decision involving a similar situation where the claim for exemption under section 80P(2)(d) was upheld, contrasting it with the decisions cited by the CIT(A) which were deemed irrelevant as they involved different circumstances.

The Tribunal analyzed the provisions of section 80P(2)(a)(i) and 80P(2)(d) of the Act, emphasizing the distinction between deductions for business income and income from investments with other Co-operative societies. It highlighted that a Co-operative society can claim deduction under section 80P(2)(d) for interest or dividend income from investments with other Co-operative societies, irrespective of the source of the income. The Tribunal found the appellant entitled to the deduction for interest earned from a Co-operative bank, aligning with the precedent set in a similar case.

Accordingly, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the deduction under section 80P(2)(d) for the interest income earned from the Co-operative bank, ultimately allowing the appeal of the assessee.

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