Appeal Allowed for Deduction of Interest from Cooperative Banks under Section 80P(2)(d)

The Tribunal allowed the appeal, directing the Assessing Officer to permit the deduction under section 80P(2)(d) for interest earned from deposits with Cooperative Banks. The Tribunal relied on judicial precedents, including decisions by the Karnataka High Court and the High Court of Himachal Pradesh, to support the assessee's claim. It distinguished between sections 80P(2)(a)(i) and 80P(2)(d) of the Income-tax Act, emphasizing that the latter allows deduction for interest or dividends from investments with other Cooperative societies. The Tribunal disagreed with the CIT(A)'s decision and set it aside, ultimately ruling in favor of the assessee on 03.12.2018.

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Issues:
Whether the rejection of claim for deduction u/s 80P(2)(d) of the Income-tax Act in respect of interest received on deposits kept with Cooperative Banks was justified.

Analysis:
The appeal pertains to the rejection of the assessee's claim for deduction u/s 80P(2)(d) of the Income-tax Act concerning interest income earned on deposits with Cooperative Banks. The Assessing Officer and the CIT(A) denied the deduction, stating that Co-operative Banks do not fall under the definition of Co-operative Societies as per section 80P(2)(d) of the Act. The assessee contended that interest income from deposits with Cooperative Banks should be eligible for deduction u/s 80P(2)(d) based on judicial precedents. The Tribunal referred to various cases, including decisions by the Hon'ble Karnataka High Court and the High Court of Himachal Pradesh, to support the assessee's claim. Notably, the Tribunal relied on the Supreme Court's principles in the Vegetable Products Ltd. case to allow the deduction. The Tribunal also cited previous decisions, such as the Sea Grean Co-operative Housing Society Ltd. case, to support the assessee's position.

The Tribunal observed that the assessee's contentions were supported by precedents like the Citiscape Co-operative Housing Society Ltd. case and the Sea Grean Co-operative Housing Society Ltd. case. The Tribunal highlighted the distinction between section 80P(2)(a)(i) and 80P(2)(d) of the Act, emphasizing that the latter allows deduction for interest or dividends derived from investments with other Co-operative societies, irrespective of the nature of the income. The Tribunal disagreed with the CIT(A)'s reliance on the Ahmedabad Bench's decision related to the State Bank of India, as it was not a Co-operative society. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the deduction u/s 80P(2)(d) for interest earned from deposits with Co-operative Banks. Consequently, the appeal filed by the assessee was allowed, and the order was pronounced in court on 03.12.2018.

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