Cooperative society's interest from cooperative bank qualifies for section 80P(2)(d) deduction without adjustment

ITAT Surat held that revision under section 263 was not warranted regarding deduction under section 80P(2)(d) for interest received from cooperative bank. The tribunal found that cooperative banks are primarily cooperative societies, and interest earned on deposits with such banks qualifies for exemption under section 80P(2)(d). Following Gujarat HC precedent in cooperative society case, the tribunal ruled that gross interest from cooperative bank is deductible without adjusting interest paid. Since the assessment aligned with established jurisprudence, twin conditions for invoking section 263 were not satisfied. Appeal decided in favor of assessee.

---

---

The appeal before the Appellate Tribunal involved the issue of whether the order of the Principal Commissioner of Income Tax, Surat-1, setting aside the assessment order passed by the Assessing Officer under Section 143(3) of the Income Tax Act for the Assessment Year 2018-19 was erroneous and prejudicial to the interest of revenue. The key issues considered were the disallowance of interest income from a cooperative bank under Section 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act and the delay in filing the appeal before the Tribunal.The Appellate Tribunal first addressed the issue of condonation of delay in filing the appeal. The assessee claimed that the delay was due to a misunderstanding by their consultant regarding the appealability of the order under Section 263 of the Act. The Tribunal, considering the lack of intentional delay and following precedent, condoned the delay of 166 days in filing the appeal.On the substantive issue of the disallowance of interest income from a cooperative bank, the Tribunal noted that the Principal Commissioner had set aside the assessment order based on the interest income not being eligible for deduction under Section 80P(2)(d) of the Act. The Tribunal observed that the cooperative banks are considered cooperative societies and interest earned on deposits with such banks is exempt under Section 80P(2)(d). Citing decisions by various Tribunals and the High Court, the Tribunal found that the assessment order was not erroneous as it was in line with the legal position established by precedent. Therefore, the Tribunal allowed the appeal, quashing the order passed by the Principal Commissioner under Section 263 of the Act.In conclusion, the Appellate Tribunal held that the interest income earned by the assessee from a cooperative bank was eligible for deduction under Section 80P(2)(d) of the Income Tax Act, and the order of the Principal Commissioner setting aside the assessment order was not justified. The Tribunal allowed the appeal of the assessee, emphasizing the legal position established by previous decisions in similar cases.

---