2023 (2) TMI 1018 - AT - Income Tax

Cooperative housing society wins tax deduction case for interest income from cooperative banks

M/s. Ganga Heritage Cooperative Housing Society Ltd. Versus CIT (A) NFAC, Delhi.

The Tribunal allowed the appellant, a cooperative housing society, deductions under section 80P(2)(d) of the Income Tax Act for interest income from ... Deduction u/s 80P(2(d)) - interest income from co-operative bank - HELD THAT:- Hon’ble High Court of Karnataka in case of Pr. CIT & Anr. Vs. Totgar’s Co-operative Sale Society Ltd. [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank of India [2016 (7) TMI 516 - GUJARAT HIGH COURT] had held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. Thus we are of the considered view that assessee society who has earned an amount from its investment of surplus fund with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. Appeal filed by the assessee is allowed. Issues Involved:1. Deduction under section 80P(2)(d) of the Income Tax Act, 1961 on interest income from cooperative banks.2. The application of the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. vs. ITO.3. The relevance of the Karnataka and Gujarat High Courts' rulings on similar issues.Issue-wise Detailed Analysis:1. Deduction under section 80P(2)(d) of the Income Tax Act, 1961 on interest income from cooperative banks:The appellant, a cooperative housing society, claimed deductions under section 80P(2)(d) for interest income earned from investments in cooperative banks for the assessment years 2014-15 and 2015-16. The amounts in question were Rs. 4,13,957 and Rs. 5,37,862 respectively. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] denied these deductions, prompting the appellant to seek rectification under section 154, which was also dismissed. The Tribunal reviewed the facts and legal precedents, particularly the decisions of coordinate benches and high courts, which supported the appellant's claim that interest income from cooperative banks qualifies for deduction under section 80P(2)(d).2. The application of the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. vs. ITO:The lower authorities relied on the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. vs. ITO to deny the deduction. However, the Tribunal distinguished this case, noting that the Supreme Court's judgment pertained to section 80P(2)(a)(i) and not section 80P(2)(d). The Tribunal emphasized that the issue at hand was whether interest income from cooperative banks qualifies for deduction under section 80P(2)(d), which was not directly addressed in the Totgars case.3. The relevance of the Karnataka and Gujarat High Courts' rulings on similar issues:The Tribunal referred to the Karnataka High Court's decision in Pr. CIT & Anr. vs. Totgar's Co-operative Sale Society Ltd. and the Gujarat High Court's decision in State Bank of India vs. CIT, both of which held that interest income earned by a cooperative society from investments in cooperative banks is eligible for deduction under section 80P(2)(d). The Tribunal found these rulings persuasive and applicable, reinforcing the appellant's entitlement to the deduction.Conclusion:The Tribunal concluded that the appellant cooperative housing society is entitled to deductions under section 80P(2)(d) for the interest income earned from cooperative banks. The Tribunal directed the AO to allow the deductions for both assessment years, resulting in the appeals being allowed in favor of the appellant. The Tribunal's decision was pronounced in the open court on 23.02.2023.