2023 (12) TMI 1313 - AT - Income Tax

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 ... Deduction u/s. 80P(2)(d) - interest on investment derived by the appellant from scheduled bank and co-operative bank - HELD THAT:- As relying on The Totgars’ Cooperative Sale Society Ltd [2023 (9) TMI 150 - ITAT BANGALORE] we hold that the investment held with the co-operative bank would be eligible for claim of deduction u/s. 80P(2)(d) of the Act and we direct the Ld.AO to pass orders in respect of the interest earned by the assessee from commercial banks considering under the head “Income from other sources” and to grant relief to the assessee in accordance with law u/s. 57 of the Act. Assessee appeal allowed. 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.