Cooperative society entitled to full Section 80P(2)(d) deduction on interest from other cooperatives without adjustment

ITAT Surat ruled in favor of the assessee on three issues. The tribunal held that Section 80P(2)(d) allows full deduction of interest/dividends received by cooperative societies from investments in other cooperative societies, without requiring adjustment for interest paid or considering source of investment funds. Regarding rental income and cracker sales, the tribunal found no disallowance was warranted since the assessee never claimed Section 80P deductions for these income streams, having separately declared and paid taxes on them.

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Issues Involved:
1. Disallowance of deduction under section 80P(2)(d) of the Income Tax Act.
2. Disallowance of rental income.
3. Disallowance of income from the sale of crackers.
4. General grounds related to eligible deductions under various subsections of section 80P.

Summary of Judgment:

Issue 1: Disallowance of Deduction under Section 80P(2)(d)
The assessee challenged the disallowance of deduction under section 80P(2)(d) amounting to Rs.6,49,886/-. The Tribunal referenced the Gujarat High Court's decision in Surat Vankar Sahakari Sangh Ltd. vs. ACIT, which supported the assessee's claim. The High Court had held that interest income from investments in cooperative banks is eligible for deduction under section 80P(2)(d). The Tribunal found no reason to deviate from this precedent and deleted the addition, allowing the assessee's ground.

Issue 2: Disallowance of Rental Income
The assessee contested the addition of Rs.3,94,590/- as rental income, arguing that it had not claimed any deduction under section 80P for this income. The Tribunal noted that the rental income was separately shown and taxed, and no deduction under section 80P was claimed for it. Therefore, the disallowance was deemed unwarranted, and the addition was deleted, allowing the assessee's ground.

Issue 3: Disallowance of Income from Sale of Crackers
The assessee disputed the disallowance of Rs.78,02,133/- related to income from the sale of crackers, asserting that no deduction under section 80P was claimed for this income. The Tribunal observed that the assessee maintained separate books for the sale of crackers and had not included this income in the section 80P deduction computation. Consequently, the disallowance was found to be unjustified, and the addition was deleted, allowing the assessee's ground.

Issue 4: General Grounds
The Tribunal noted that the general grounds related to eligible deductions under various subsections of section 80P did not require specific adjudication.

Conclusion:
The appeal filed by the assessee was allowed in its entirety, with all contested disallowances being deleted. The order was pronounced on 21/12/2023 in the open court.

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