2022 (10) TMI 401 - AT - Income Tax

Tribunal grants deduction under section 80P(2)(d) for interest income from Co-operative banks

Avanti Niketan Cooperative Housing Society Limited Versus The CIT (A), National Faceless Appeal Centre, Delhi

The Tribunal allowed the appeal, holding that the assessee is entitled to claim a deduction under section 80P(2)(d) of the Income Tax Act for interest ... Deduction u/s 80P(2)(d) in respect of interest income earned from deposits kept with Co-operative banks - HELD THAT:- As relying on Kaliandas Udyog Bhavan Premises Co-op Society [2018 (4) TMI 1678 - ITAT MUMBAI] and Rena Sahakri Sakhai Karkhana Ltd [2022 (1) TMI 419 - ITAT PUNE] assessee is entitled for deduction under section 80P(2)(d) of the Act in respect of interest income earned from the cooperative banks. Accordingly, set aside the order passed by learned CIT(A) and direct the Assessing Officer to allow deduction under section 80P(2)(d) of the Act in respect of interest income earned from the cooperative banks. Appeal filed by the assessee is allowed. Issues Involved:1. Eligibility of the assessee to claim deduction under section 80P(2)(d) of the Income Tax Act in respect of interest income earned from deposits kept with Co-operative banks.Issue-wise Detailed Analysis:1. Eligibility of the assessee to claim deduction under section 80P(2)(d) of the Income Tax Act in respect of interest income earned from deposits kept with Co-operative banks:The assessee challenged the order dated 24.05.2022 by the CIT(A), National Faceless Appeal Centre, Delhi, for the assessment year 2020-21. The core issue was whether the assessee could claim a deduction under section 80P(2)(d) of the Act for interest income from deposits with Co-operative banks.The Tribunal rejected the adjournment request and proceeded to hear the case, noting that similar issues had been decided in favor of the assessee in previous cases. The Tribunal cited several decisions, including:A. Kaliandas Udyog Bhavan Premises Co-op Society Ltd vs. ITO:The Tribunal examined whether the interest income earned from investments made with co-operative banks qualifies for deduction under section 80P(2)(d). The lower authorities had denied the deduction, arguing that post the insertion of sub-section (4) of section 80P by the Finance Act 2006, the assessee was not entitled to the deduction since the co-operative banks were not Primary Agricultural Credit Societies or Primary Cooperative Agricultural and Rural Development Banks.However, the Tribunal disagreed, emphasizing that section 80P(2)(d) allows deduction for interest income derived from investments made by a co-operative society with any other co-operative society. The Tribunal clarified that the term 'co-operative society' includes co-operative banks, as defined under section 2(19) of the Act. Therefore, the interest income from investments in co-operative banks qualifies for the deduction under section 80P(2)(d).The Tribunal supported its decision by citing other cases and judicial pronouncements, including:- Land and Cooperative Housing Society Ltd. vs. ITO- M/s C. Green Cooperative Housing and Society Ltd. vs. ITO- Marvwanjee Cama Park Cooperative Housing Society Ltd. vs. ITO- Pr. Commissioner of Income Tax and Anr. vs. Totagars Cooperative Sale Society (Karnataka High Court)- State Bank Of India vs. CIT (Gujarat High Court)The Tribunal also referred to CBDT Circular No. 14, dated 28.12.2006, which clarified that the purpose of sub-section (4) of section 80P was to exclude co-operative banks from the deduction, but not to affect the deduction under section 80P(2)(d) for co-operative societies investing in co-operative banks.B. Rena Sahakri Sakhai Karkhana Ltd vs. PCIT:The Tribunal reiterated that the interest income earned from investments/deposits with co-operative banks is eligible for deduction under section 80P(2)(d). The Tribunal emphasized that the term 'co-operative society' includes co-operative banks, and thus, the interest income derived from such investments qualifies for the deduction.The Tribunal also considered conflicting judicial pronouncements and chose the view favoring the assessee, citing the principle that in cases of conflicting decisions of non-jurisdictional High Courts, the view favorable to the assessee should be preferred.Conclusion:Following the cited decisions, the Tribunal held that the assessee is entitled to the deduction under section 80P(2)(d) for the interest income earned from co-operative banks. The order of the CIT(A) was set aside, and the Assessing Officer was directed to allow the deduction.Result:The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 06.10.2022.