Appeal allowed for deduction under section 80P(2)(d) for interest from cooperative banks/societies

The ITAT Mumbai allowed the appeal of a cooperative credit society, directing the AO to verify interest income details and allow deduction u/s. 80P(2)(d) for interest received from cooperative banks/societies. The ITAT did not address the validity of reopening the assessment, treating the appeal as allowed for statistical purposes due to the merit found in the deduction claim contentions. The decision set aside the CIT(A)'s order and remanded the issue for verification and allowance of the deduction.

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Issues:
1. Rejection of claim for deduction u/s. 80P of the Act
2. Validity of reopening of assessment

Analysis:

Issue 1: Rejection of claim for deduction u/s. 80P of the Act
The appellant, a cooperative credit society, contested the decision of the CIT(A) confirming the Assessing Officer's rejection of the deduction claim u/s. 80P of the Act. The Assessing Officer reopened the assessment and disallowed the deduction, assessing a sum as income. The appellant argued that the assessed income represented interest income from deposits with cooperative banks and claimed deduction u/s. 80P(2)(d) instead of u/s. 80P(2)(a)(i). The CIT(A) relied on precedents to deny the deduction. The appellant's representative highlighted that the income was nil due to setting off business loss and cited a Karnataka High Court ruling considering cooperative banks as cooperative societies. The ITAT Mumbai found merit in the appellant's contentions, noting the interest income from cooperative banks should be deductible u/s. 80P(2)(d) based on the Karnataka High Court's decision. The ITAT directed the AO to verify the interest income details and allow the deduction accordingly.

Issue 2: Validity of reopening of assessment
The appellant did not argue the validity of reopening the assessment before the ITAT. However, the ITAT found merit in the appellant's contentions regarding the deduction claim, rendering the discussion on the validity of reopening unnecessary. Consequently, the ITAT treated the appeal as allowed for statistical purposes without delving into the issue of the assessment's reopening. The ITAT's decision was pronounced on 21.8.2017, setting aside the CIT(A)'s order and remanding the issue to the AO for verification and allowance of the deduction u/s. 80P(2)(d) for interest received from cooperative banks/societies.

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