Appeal Victory: Interest from Cooperative Bank Deposits Eligible for Deduction u/s 80P(2)(d.

The Tribunal allowed the appeal filed by the appellant, a Cooperative Society, overturning the decisions of the AO and CIT(A)/NFAC. It held that interest income earned from deposits with cooperative banks qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961, based on the Karnataka High Court's interpretation.

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Issues:
Allowability of deduction u/s. 80P(2)(a)(i)/80P(2)(d) for interest income earned by a Cooperative Society from various cooperative banks.

Analysis:
The appellant, a Cooperative Society, filed an appeal against the order of the National Faceless Appeal Centre for the assessment year 2017-18. The appellant claimed a deduction of Rs. 28,10,447/- u/s. 80P of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed the deduction on the grounds that interest income of Rs. 87,74,075/- earned from cooperative banks did not qualify for deduction u/s. 80P(2)(d) as it was not attributable to the society's core activities. The CIT(A)/NFAC upheld the AO's decision. The Tribunal noted that the issue of deduction u/s. 80P(2)(d) for interest income from cooperative banks had been extensively discussed in previous judgments. The Tribunal referred to the Karnataka High Court's decision in a similar case and held that interest income earned by a cooperative society on deposits with cooperative banks qualifies for deduction under section 80P(2)(d) of the Act. Therefore, the Tribunal allowed the appellant's appeal.

The Tribunal observed that the interest income in question was derived from various cooperative banks. It emphasized that for claiming deduction u/s 80P(2)(d), the income should have been derived from investments made with other cooperative societies. Citing the Karnataka High Court's decision, the Tribunal clarified that interest income on investments falls under section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. Relying on this interpretation, the Tribunal concluded that the interest income earned by the cooperative society on deposits with cooperative banks qualifies for deduction under section 80P(2)(d) of the Act. Consequently, the Tribunal allowed the appellant's appeal, overturning the decisions of the AO and CIT(A)/NFAC.

In conclusion, the Tribunal allowed the appeal filed by the appellant, a Cooperative Society, against the disallowance of deduction u/s. 80P(2)(d) for interest income earned from cooperative banks. The Tribunal's decision was based on the interpretation that such interest income qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961. The appellant's claim for deduction was upheld, and the appeal was allowed by the Tribunal.

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