Co-operative society wins appeal: Interest income from co-operative banks qualifies for tax deduction u/s 80P(2)(d.

The ITAT ruled in favor of the assessee, a co-operative society, allowing the appeal related to the deduction claim under section 80P(2)(d) of the Income Tax Act for AY 2018-19. The Tribunal determined that interest income earned from a registered co-operative bank, which is a member of the co-operative society, qualifies for the deduction. The ITAT rejected the Revenue's interpretation, affirming that co-operative banks associated with co-operative societies are eligible for this deduction. The appeal was allowed, and the order was pronounced on January 19, 2024.

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Issues:
The appeal challenges the order of the Commissioner of Income-tax (Appeals) regarding the deduction claim under section 80P(2)(d) of the Income Tax Act for the Assessment Year 2018-19.

Details:
The assessee, a co-operative society, filed its return of income for AY 2018-19 claiming a deduction under section 80P of the Act. The Assessing Officer disallowed the interest income earned from a co-operative bank, treating it as income from other sources under section 56 of the Act.

The CIT(A) partly allowed the appeal, leading to the matter being brought before the ITAT.

The assessee cited the decision of the Gujarat High Court in CIT Vs. Sabarkantha District Co-operative Milk Producers Union Ltd., emphasizing that fixed deposits with banks and interest earned fall under section 80P(2)(d) of the Act.

In contrast, the Revenue argued that co-operative banks are excluded from section 80P based on the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. vs. CIT and other relevant cases. They contended that exemption statutes must be interpreted strictly in favor of the Revenue.

After considering the arguments, the ITAT ruled in favor of the assessee. It held that interest income earned from a registered co-operative bank, which is a member of a co-operative society, qualifies for deduction under section 80P(2)(d) of the Act. The Tribunal found the Revenue's interpretation to be incorrect, emphasizing that co-operative banks associated with co-operative societies are eligible for the deduction.

Therefore, the ITAT allowed the appeal of the assessee, emphasizing the eligibility for deduction under section 80P(2)(d) in the case of interest income from co-operative banks.

Order pronounced on January 19, 2024.

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