2024 (6) TMI 1390 - AT - Income Tax

Interest income from Co-operative Bank deposits eligible for section 80P deduction, tribunal rules

ITAT Mumbai allowed assessee's appeal regarding deduction under section 80P. The tribunal held that interest income received from deposits with ... Deduction claimed u/s 80P - deduction as claimed towards interest received from deposits with Co-operative Bank - HELD THAT:- We notice that the Co-ordinate Bench has been consistently holding that the income derived by way of interest from Co-operative Banks is also eligible for deduction u/s 80P(2)(d). Assessee has placed the surplus funds in deposits with various Co-operative Banks and has received interest income on the same. The assessee while filing the return of income has claimed such interest as a deduction u/s 80P(2)(d). We notice that the lower authorities have denied the benefit of deduction for all the AYs under consideration for the reason that the interest received from Co-operative Bank is not eligible for deduction u/s 80P(2)(d). We hold that the assessee is entitled for deduction under section 80P(2)(d) towards income derived from deposits with Co-operative Bank - Assessee appeal allowed. Issues:Disallowance of deduction under section 80P(2)(d) of the Income Tax Act, 1961.Analysis:The appellant, a Co-operative Society, appealed against the disallowance of deduction under section 80P(2)(d) for AYs 2017-18, 2018-19, and 2020-21. The AO disallowed the deduction as the interest income claimed was from Co-operative Banks. The CIT(A) upheld the disallowance citing a Karnataka High Court decision. The appellant argued that a Co-operative Society includes a Cooperative Bank and relied on previous tribunal decisions supporting deduction for interest from Co-operative Banks. The DR cited a Gujarat High Court case to oppose the deduction.The Tribunal noted that income from interest from Co-operative Banks is eligible for deduction under section 80P(2)(d). It highlighted the conditions for the deduction, emphasizing that the term 'cooperative society' includes Co-operative Banks. The Tribunal referred to a Supreme Court judgment to support its interpretation of the Act. It rejected the CIT(A)'s reasoning and allowed the deduction for the appellant.In a separate judgment, the Tribunal cited a Madras High Court decision to reaffirm that interest income from Co-operative Banks is eligible for deduction under section 80P(2)(d). It clarified that a Co-operative Bank falls within the definition of a Co-operative Society under the Act. The Tribunal concluded that the appellant is entitled to the deduction for the interest income from deposits with Co-operative Banks for the relevant assessment years.Therefore, the Tribunal allowed the appeals for AYs 2017-18, 2018-19, and 2020-21, directing the AO to permit the deduction claimed by the appellant.