Tribunal allows deduction for interest from co-op banks under section 80P(2)(d)

The tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to allow the deduction of Rs. 1,67,21,794/- under section 80P(2)(d) for interest earned from investments with co-operative banks. The tribunal upheld that interest income from deposits with co-operative banks is eligible for deduction under section 80P(2)(d). The issue regarding the appellant's right to amend or alter any ground or submit additional grounds was deemed premature and not required to be adjudicated.

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Issues Involved:
1. Whether the CIT(A) erred in directing the Assessing Officer to delete the addition of Rs. 1,67,21,794/- claimed as a deduction under section 80P(2)(d) of the Income-tax Act, 1961.
2. Whether the interest earned from investments with co-operative banks qualifies for deduction under section 80P(2)(d).
3. The appellant's right to amend or alter any ground or submit additional grounds.

Detailed Analysis:

Issue Nos. 1 & 2:
The primary contention revolves around the allowance of the assessee's claim of Rs. 1,67,21,794/- under section 80P(2)(d) of the Income-tax Act, 1961. The revenue argued that the CIT(A) erroneously allowed the interest income deduction, asserting that interest earned from scheduled co-operative banks is not covered by the concept of mutuality and is thus not allowable under section 80P(2)(d).

The CIT(A) examined the relevant provisions of Section 80P, which allows deductions on income earned by a co-operative society from investments with other co-operative societies. The term "co-operative society" is defined under section 2(19) of the Act. The CIT(A) cited several judicial precedents to support the decision, including:

- Totgars Co-operative Sale Society Ltd. vs. ITO (2010): Held that interest income from surplus funds invested in short-term deposits is taxable under "income from other sources" and not eligible for deduction under section 80P(2)(a)(i).
- PCIT vs. Totagars Co-operative Sale Society (2017): Held that co-operative banks are a variety of co-operative societies, and interest earned from co-operative banks qualifies for deduction under section 80P(2)(d).
- State Bank of India vs. CIT (2016): Held that interest derived from deposits with SBI is not attributable to the business carried on by the assessee and cannot be deducted under section 80P(2)(a)(i).

The CIT(A) concluded that co-operative banks are a type of co-operative society, and the deduction under section 80P(2)(d) is allowable for interest earned from investments with co-operative banks. This view is supported by the tribunal's decision in the assessee's own case for the A.Y. 2013-14, where it was held that the interest income from deposits with co-operative banks is exempt under section 80P(2)(d).

The tribunal affirmed the CIT(A)'s finding, noting that the issue was covered by the assessee's case for the A.Y. 2013-14. The tribunal upheld the CIT(A)'s decision, stating that the interest income from deposits with co-operative banks is eligible for deduction under section 80P(2)(d).

Issue No. 3:
The issue regarding the appellant's right to amend or alter any ground or submit additional grounds was deemed premature and not required to be adjudicated. Hence, this issue was dismissed.

Conclusion:
The tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to allow the deduction of Rs. 1,67,21,794/- under section 80P(2)(d) for interest earned from investments with co-operative banks. The tribunal's order was pronounced in the open court on 08/04/2021.

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