2021 (8) TMI 1086 - AT - Income Tax

Co-op Housing Society wins appeal for interest income deduction under Income Tax Act

The Tribunal allowed the appeal of the assessee, a Co-operative Housing Society, regarding the deduction claim under section 80P(2)(d) of the Income Tax ... Deduction u/s 80P(2)(d) - whether interest income derived from deposits with cooperative banks is eligible for deduction under section 80P(2)(d) of the Act or not has not crystallised so far? - HELD THAT:- The coordinate Bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. [2018 (4) TMI 1678 - ITAT MUMBAI] considering various decisions by Hon’ble High Courts and the Tribunal and the provisions of the Act, has held that interest income derived by a co-operative society from investments with co-operative bank, would be entitled for deduction under section 80P(2)(d). In the case of PCIT vs. Totagars, Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] has held that for the purpose of section 80P(2)(d) of the Act, co-operative bank should be considered as cooperative society. Similar view has been taken by the Hon'ble Gujarat High court in the case of Surat Vankar Sahakari Sangh Ltd. [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] Accordingly, following the decision in the earlier case of Totagars Co-operative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and in the case of Vankar Sahakari Sangh [2016 (7) TMI 1217 - GUJARAT HIGH COURT] the deduction claimed by the assessee under section 80P(2)(d) of the Act in respect interest derived from investments with the cooperative bank is allowed. - Decided in favour of assessee. Issues:1. Rejection of assessee's claim of deduction under section 80P(2)(d) of the Income Tax Act, 1961.Analysis:The appeal pertained to the rejection of the assessee's claim of deduction under section 80P(2)(d) of the Income Tax Act, 1961 for the Assessment Year 2015-16. The assessee, a Co-operative Housing Society, earned interest income from deposits with a Co-operative Bank. The Assessing Officer disallowed the deduction claim based on the insertion of section 80P(4) by the Finance Act, 2006. The Commissioner of Income Tax (Appeals) upheld the assessment order, leading to the present appeal. The primary contention was whether interest income from deposits with cooperative banks is eligible for deduction under section 80P(2)(d) of the Act.The Tribunal analyzed the provisions of section 80P(2)(d) and relevant case laws to determine the eligibility of the assessee for the deduction claimed. It noted that the issue of whether interest income from cooperative bank deposits qualifies for deduction under section 80P(2)(d) had not been conclusively settled. Referring to the decision in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd., the Tribunal held that interest income derived by a co-operative society from investments with a cooperative bank is entitled to deduction under section 80P(2)(d) of the Act.Additionally, the Tribunal cited the decision of the Pune Bench in the case of Majalgaon Sahakari Sakhar Karkhana Ltd., which supported the deduction claim under section 80P(2)(d) for interest and dividend income from cooperative bank investments. The Tribunal emphasized that the cooperative bank should be considered a cooperative society for the purpose of section 80P(2)(d). The judgments of the Karnataka High Court and Gujarat High Court were also referenced, highlighting differing views on the issue.Considering conflicting decisions, the Tribunal applied the principle that favors the assessee, as per the decision of the Bombay High Court in the case of K. Subramanian vs. Siemens India Ltd. The Tribunal concluded that the deduction claimed by the assessee under section 80P(2)(d) for interest derived from investments with the cooperative bank was permissible. As a result, the appeal of the assessee was allowed, and the order was pronounced on August 20, 2021.