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<h1>Tribunal affirms deduction for interest income from co-op banks under Sec. 80P(2)(d)</h1> <h3>Income Tax Officer, 24 (1) (4), Mumbai Versus M/s. Citiscape Co-op. Housing Society Ltd.</h3> Income Tax Officer, 24 (1) (4), Mumbai Versus M/s. Citiscape Co-op. Housing Society Ltd. - TMI Issues:- Interpretation of Sec. 80P(2)(d) of the Income Tax Act regarding the deductibility of interest income from co-operative banks.- Divergent views by different High Courts on whether co-operative banks qualify as co-operative societies for the purpose of deduction under Sec. 80P(2)(d).- Application of the principle favoring the assessee in case of two reasonable constructions of a taxing provision.Analysis:- The case involved a co-operative housing society claiming deduction u/s 80P(2)(d) of the Income Tax Act for interest income earned from deposits with co-operative banks. The Assessing Officer (AO) denied the deduction citing Sec. 80P(4) of the Act, leading to an appeal by the assessee against the AO's decision.- The Ld CIT(A) allowed the claim based on a decision by the Hon'ble Karnataka High Court, which held that co-operative banks are cooperative societies, making interest income from them eligible for deduction u/s 80P(2)(d) of the Act. This decision was challenged by the revenue in the appeals.- The revenue contended that a subsequent decision by the same High Court contradicted the earlier ruling, stating that interest income from co-operative banks is not distinct from that of scheduled banks and thus not eligible for deduction under Sec. 80P(2)(d).- The assessee argued that co-operative banks are indeed co-operative societies, supported by decisions from other High Courts like the Himachal Pradesh High Court. They emphasized the principle favoring the assessee in case of two reasonable interpretations of a tax provision.- The Tribunal noted the conflicting views of different High Courts on the matter but relied on the principle from the Supreme Court's ruling in Vegetable Products Ltd case to adopt the interpretation favoring the assessee. Consequently, the Tribunal upheld the Ld CIT(A)'s decision to allow the deduction for interest income from co-operative banks, dismissing the revenue's appeals.This detailed analysis highlights the key legal arguments, conflicting interpretations by different High Courts, and the application of the principle favoring the assessee in resolving the issue of deductibility of interest income from co-operative banks under Sec. 80P(2)(d) of the Income Tax Act.