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 Co-operative Banks is eligible for deduction under section 80P(2)(d). Lower authorities had denied the deduction claiming such interest was not eligible under the provision. The tribunal relied on consistent coordinate bench decisions supporting deductibility of interest from Co-operative Bank deposits. The assessee had placed surplus funds in various Co-operative Bank deposits and claimed the resulting interest income as deduction while filing returns.

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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.

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