Interest on investment from co-operative banks eligible for deduction under Section 80P(2)(d), following established precedent

ITAT Bangalore allowed the assessee's appeal regarding deduction under Section 80P(2)(d). The tribunal held that interest on investment from co-operative banks is eligible for deduction under Section 80P(2)(d), following precedent in Totgars Cooperative Sale Society Ltd. The AO was directed to treat interest from commercial banks as income from other sources and grant relief under Section 57. The appeal was allowed in favor of the assessee.

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Issues involved:
Whether interest on investments derived by the appellant from cooperative banks is eligible for deduction u/s. 80P(2)(d) of the Income Tax Act, 1961.

Summary:

The appeal was against the disallowance of interest on investments by the National Faceless Appeal Centre, arising from the order passed by the ITO u/s. 143(3) of the Act for A.Y. 2017-18. The appellant, a cooperative society, claimed deduction u/s. 80P(2)(a)(i) which was rejected, resulting in the determination of income at a different figure.

The main issue was whether interest on investments from scheduled and cooperative banks is eligible for deduction u/s. 80P(2)(d) of the Act.

During the hearing, the Counsel for the assessee cited judgments in favor of cooperative societies regarding the eligibility of interest income for deduction u/s. 80P(2)(d) of the Act. The Coordinate Bench's order in a similar case was also presented, which favored the assessee and was not contested by the Revenue.

The Tribunal considered the submissions, materials on record, and the previous judgment by the Coordinate Bench. Referring to the Supreme Court's decision in a related case, it distinguished the facts and held that the interest income in question was attributable to the business of banking, making it eligible for deduction u/s. 80P(2)(d) of the Act.

Relying on the previous decisions and following the view taken by the Karnataka and Gujarat High Courts, the Tribunal allowed the appeal, directing the AO to grant relief to the assessee in accordance with the law u/s. 57 of the Act for interest earned from commercial banks.

In conclusion, the appeal filed by the assessee was allowed, and the order was pronounced on 14th December 2023.

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