Co-operative society entitled to Section 80P(2)(d) deduction for interest income from co-operative bank investments

ITAT Pune held that a co-operative society remains entitled to deduction under Section 80P(2)(d) for interest income from investments in co-operative banks. Despite Section 80P(4) disqualifying co-operative banks from claiming deductions, co-operative banks continue to be registered co-operative societies under relevant Acts. Therefore, interest earned by a co-operative society from co-operative bank investments qualifies for deduction. The tribunal followed precedent from Rena Sahakari Sakhar Karkhana Ltd. and decided in favor of the assessee.

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Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of deduction claimed u/s 80P(2)(a)(i) of the Income Tax Act, 1961.

Summary:

1. Delay in Filing the Appeal:
The assessee's appeal for the assessment year 2020-21 involved a delay of 113 days. The delay was condoned based on the assessee's solemn averments and in light of the precedent set by the Supreme Court in Collector, Land Acquisition vs. MST Katiji [1987] 167 ITR 471 (SC), which emphasized that technical aspects should not impede substantial justice.

2. Disallowance of Deduction Claimed u/s 80P(2)(a)(i):
The primary grievance was the disallowance of a deduction of Rs. 29,60,215/- claimed u/s 80P(2)(a)(i) of the Act, representing interest derived from various co-operative societies/banks. The Tribunal referenced its recent decision in ITA.No.1249/PUN./2018 dated 07.01.2022, which rejected similar arguments by the Revenue.

The Tribunal examined the provisions of Sec. 80P(2)(d), which allows for the deduction of interest income derived by a co-operative society from investments with any other co-operative society. The Tribunal noted that the insertion of sub-section (4) to Sec. 80P by the Finance Act, 2006, effective from 01.04.2007, excluded co-operative banks from the purview of Sec. 80P. However, it maintained that co-operative banks, being co-operative societies, still qualify for deductions under Sec. 80P(2)(d).

The Tribunal cited several judicial pronouncements supporting the view that interest income earned by a co-operative society from investments with a co-operative bank is eligible for deduction u/s 80P(2)(d). These included decisions from the High Courts of Karnataka and Gujarat and various ITAT benches.

Ultimately, the Tribunal found that the Assessing Officer (A.O.) had taken a plausible view in allowing the deduction, and the Principal Commissioner of Income Tax (Pr. CIT) had erred in exercising his revisional jurisdiction u/s 263 of the Act to dislodge the A.O.'s decision. Consequently, the Tribunal set aside the Pr. CIT's order and restored the A.O.'s assessment order.

Order:
The assessee's appeal was allowed, and the order was pronounced in the open Court on 20.03.2024.

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