Cooperative society gets Section 80P(2)(d) deduction on interest income from bank deposits and investments

ITAT Pune allowed the assessee's claim for deduction under Section 80P(2)(d) on interest income earned from investments/deposits with cooperative banks. The tribunal relied on its coordinate bench decision in Rena Sahakari Sakhar Karkhana Ltd and AP HC ruling in Vaveru Cooperative Rural Bank Ltd, which established that interest income from nationalized and other banks qualifies for Section 80P deduction. The Revenue's contrary position was rejected, and the deduction claims under Section 80P(2)(a)(i) and 80P(2)(d) were accepted in favor of the assessee.

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Issues Involved:
1. Deduction u/s 80P(2)(a)(i) for interest income from cooperative institutions and other banks.
2. Pr. CIT's exercise of revisional jurisdiction u/s 263.

Summary:

Issue 1: Deduction u/s 80P(2)(a)(i) for interest income from cooperative institutions and other banks

The assessee claimed a deduction u/s 80P(2)(a)(i) amounting to Rs. 21,42,515/-, representing interest from cooperative institutions and other banks. The tribunal referenced its recent decision in ITA.No.1249/PUN./2018, which rejected the Revenue's arguments against such deductions. The tribunal reiterated that interest income derived from investments with cooperative societies qualifies for deduction u/s 80P(2)(d). The tribunal emphasized that the term "co-operative society" includes cooperative banks registered under the Co-operative Societies Act, thus making interest income from these banks eligible for deduction.

Issue 2: Pr. CIT's exercise of revisional jurisdiction u/s 263

The Pr. CIT had set aside the A.O's order, which allowed the deduction, on the grounds that cooperative banks are not cooperative societies and thus not eligible for deduction u/s 80P(2)(d). The tribunal disagreed, stating that cooperative banks, being registered cooperative societies, qualify for the deduction. The tribunal referenced several judicial pronouncements, including those from the High Courts of Karnataka and Gujarat, which supported the eligibility of interest income from cooperative banks for deduction u/s 80P(2)(d). The tribunal concluded that the A.O had taken a plausible view in allowing the deduction, and the Pr. CIT erred in exercising revisional jurisdiction u/s 263 to dislodge it.

Conclusion:

The tribunal allowed the assessee's appeal, restoring the A.O's order and granting the deduction u/s 80P(2)(a)(i)/80P(2)(d) for the interest income from cooperative institutions and other banks. The order was pronounced in open court on 16.04.2024.

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