Co-op Society Wins Deduction Battle for Bank Interest Income

The ITAT Surat upheld the allowance of a deduction under Section 80P(2)(d) of the Income Tax Act for interest earned from Co-operative Banks by a co-operative society. The tribunal relied on the precedent set by the High Court of Gujarat, distinguishing between deductions under Sections 80P(2)(a) and 80P(2)(d) and emphasizing the eligibility of cooperative societies to claim deductions for interest received from cooperative banks. The tribunal dismissed the Revenue's appeal and affirmed the decision of the Commissioner of Income Tax (Appeals) to delete the addition made by the Assessing Officer.

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Issues:
1. Deduction under Section 80P(2)(d) of the Income Tax Act for interest earned from Co-operative Banks.

Analysis:
The appellate tribunal ITAT Surat heard an appeal by the Revenue against an order from the Commissioner of Income Tax (Appeals) related to the assessment year 2015-16. The primary issue was the deletion of an addition made by the Assessing Officer on interest earned from Co-operative Banks on Fixed Deposit Receipts (FDRs) other than co-operative societies, claimed as a deduction under Section 80P(2)(d) of the Income Tax Act, 1961. The Assessing Officer disallowed the interest income earned by the assessee-society from entities other than co-operative societies and added it back to the total income under "income from other sources." The Assessing Officer relied on a decision of the Hon'ble High Court of Karnataka. The Commissioner of Income Tax (Appeals) deleted the addition, emphasizing the distinction between deductions under Section 80P(2)(a) and 80P(2)(d) of the Act, allowing the deduction of interest received by a cooperative society from any other cooperative society, including cooperative banks, without restrictions. The Commissioner referred to various legal decisions supporting the deduction of interest income from District Co-Operative Banks under Section 80P(2)(d). The tribunal, following the precedent of the Hon'ble jurisdictional High Court of Gujarat, upheld the allowance of the deduction and dismissed the Revenue's appeal.

The tribunal concluded that the appellant, being a co-operative society, was entitled to claim a deduction for interest received from another co-operative bank under Section 80(P)(2)(d) of the Act based on the binding precedent of the Hon'ble jurisdictional High Court of Gujarat. The tribunal confirmed the order passed by the Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal.

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