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

The Tribunal allowed the appeals of the assessee for the assessment years 2017-18 and 2018-19 by condoning the delay in filing appeals and granting the deduction under section 80P(2)(d) for interest income earned from investments in Co-operative Banks. The Tribunal emphasized substantial justice over technicalities, interpreting that Co-operative Banks are not excluded under section 80P(4) and that interest income from such banks qualifies for deduction under section 80P(2)(d).

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Issues Involved:
1. Condonation of delay in filing appeals.
2. Eligibility of deduction under section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from investments in Co-operative Banks.

Summary:

Condonation of Delay in Filing Appeals:
The assessee's appeals for the assessment years 2017-18 and 2018-19 were time-barred by 32 and 40 days, respectively. The assessee filed affidavits explaining the delay due to a misunderstanding of the law and lack of full-time accounting staff. The learned Departmental Representative did not object to the condonation of delay. The Tribunal, referencing the Supreme Court's decision in Collector Land Acquisition, Anantnag Vs. MST Katiji and others, condoned the delay, emphasizing that substantial justice should be preferred over technical considerations.

Eligibility of Deduction under Section 80P(2)(d):
The core issue was the disallowance of the deduction under section 80P(2)(d) of the Act for interest income earned from Co-operative Banks. The assessee, a registered Co-operative Housing Society, claimed this deduction for interest income from investments in Co-operative Banks. The Assessing Officer (AO) and the learned Commissioner of Income Tax (Appeals) [CIT(A)] denied the deduction, arguing that Co-operative Banks are excluded under section 80P(4) and do not qualify as "Co-operative Societies" for this purpose.

The Tribunal analyzed the provisions of section 80P(2)(d) and section 80P(4) of the Act. It noted that section 80P(2)(d) allows deductions for interest income derived from investments with any other Co-operative Society. The Tribunal referenced the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. vs CIT, which clarified that section 80P(4) excludes only Co-operative Banks functioning as commercial banks from claiming deductions under section 80P, but does not affect other Co-operative Societies investing in Co-operative Banks.

The Tribunal also considered the consistent view of coordinate benches that interest earned from Co-operative Banks qualifies for deduction under section 80P(2)(d). It addressed divergent views from the Karnataka High Court on this issue, opting to follow the interpretation favoring the assessee, as guided by the Supreme Court in CIT v. Vegetable Products Ltd.

Conclusion:
The Tribunal directed the AO to grant the deduction under section 80P(2)(d) for interest income earned from investments with Co-operative Banks for both assessment years 2017-18 and 2018-19. Consequently, the appeals filed by the assessee were allowed.

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