Cooperative society entitled to Section 80P(2)(d) deduction for interest income from other cooperative banks under established precedents

The ITAT Mumbai held that a cooperative society was entitled to deduction under Section 80P(2)(d) for interest income earned from other cooperative banks/societies, following established precedents. Regarding club house income and expenditure, the tribunal applied the principle of mutuality, recognizing that as a housing cooperative society providing services exclusively to members, related expenses should be allowed against such income. The AO was directed to permit expenses against club house income under the mutuality concept, and the assessee's grounds were allowed.

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Issues Involved:
1. Assessment of total income.
2. Taxability of club house income.
3. Disallowance of expenses u/s 57.
4. Deduction u/s 80P(2)(d).
5. Application of interest u/s 234A, 234B, 234D and notice u/s 271(1)(c).

Summary:

1. Assessment of Total Income:
The learned Assessing Officer (AO) assessed the total income at Rs. 32,58,230/- against the returned income of Nil, thereby making an addition of Rs. 32,58,230/-.

2. Taxability of Club House Income:
The AO considered the club house income received from members as taxable, although the same is covered by the concept of mutuality. The Tribunal observed that the society is a housing society and the club house services are offered only to the members. The AO recognized only the receipt from the members as income and did not allow any related expenses. The Tribunal directed the AO to allow the expenses against the income under the mutuality concept.

3. Disallowance of Expenses u/s 57:
The AO disallowed the expenses incurred on the maintenance of the club house u/s 57 against the income from the club house assessed as taxable. The Tribunal directed the AO to allow the expenses under the mutuality concept.

4. Deduction u/s 80P(2)(d):
The AO disallowed the deduction u/s 80P(2)(d) on the interest income from cooperative banks. The Tribunal observed that the issue of whether a cooperative society is entitled to deduction u/s 80P(2)(d) on the interest income earned from other cooperative banks/societies has been decided by various Coordinate Benches in favor of the assessee. The Tribunal held that the provisions of section 80P(2)(d) are clear and the assessee is entitled to deduction u/s 80P(2)(d) in respect of interest or dividends received from investments made with any other cooperative societies.

5. Application of Interest u/s 234A, 234B, 234D and Notice u/s 271(1)(c):
The AO applied interest u/s 234A, 234B, 234D and issued a notice u/s 271(1)(c). The Tribunal did not provide specific details on this issue in the judgment.

Conclusion:
The appeal filed by the assessee was allowed, and the Tribunal directed the AO to allow the expenses against the income under the mutuality concept and to grant the deduction u/s 80P(2)(d) on the interest income earned from cooperative banks. The order was pronounced in the open court on 05th April, 2024.

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