Cooperative society's interest income from bank deposits qualifies for Section 80P(2)(d) exemption deduction allowed

ITAT Mumbai allowed the assessee's appeal regarding exemption under Section 80P(2)(d) for interest income from deposits with cooperative banks. The tribunal held that interest earned from deposits with cooperative banks qualifies for deduction under Section 80P(2)(d), following a coordinate bench decision with similar facts. The AO was directed to allow the claimed deduction for assessment years 2015-16 and 2018-19.

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Issues Involved:
1. Disallowance of benefits under Section 80P(2)(d) of the Income Tax Act.
2. Non-admission of appeal by CIT(A) due to non-representation by the assessee.
3. Interpretation of Section 80P(2)(d) vis-`a-vis Section 80P(4) of the Income Tax Act.

Detailed Analysis:

1. Disallowance of Benefits under Section 80P(2)(d):

The primary issue in both appeals was the disallowance of benefits under Section 80P(2)(d) of the Income Tax Act by the Assessing Officer (AO). The assessee, a co-operative society, had claimed deductions on interest/dividend income earned from fixed deposits placed with various co-operative banks. The AO disallowed these claims on the grounds that the interest income was not earned from investments in another co-operative society, thus assessing the total income at Rs. 1,07,78,140/- for A.Y. 2018-19, including the disallowed deduction of Rs. 1,06,09,280/-.

2. Non-admission of Appeal by CIT(A):

Aggrieved by the AO's order, the assessee filed an appeal before the CIT(A), who dismissed the appeal in limine without discussing the merits. The CIT(A) issued seven notices to the assessee for attending the hearing, but the assessee failed to respond. Consequently, the CIT(A) concluded that the assessee was not interested in representing his case and dismissed the appeal.

3. Interpretation of Section 80P(2)(d) vis-`a-vis Section 80P(4):

The assessee argued that the AO misinterpreted the provisions of Section 80P(2)(d) and Section 80P(4) of the Income Tax Act. The assessee contended that interest income from co-operative banks should qualify for deductions under Section 80P(2)(d) as co-operative banks fall within the broader definition of a co-operative society. The AO, however, denied this interpretation, relying on case laws that were argued to be not applicable to the assessee's case.

Judgment Analysis:

The Tribunal considered the submissions made by both parties and reviewed the material on record. The Tribunal noted that various judicial pronouncements, including decisions by coordinate benches and the Hon'ble High Court, consistently held that interest income earned from deposits with co-operative banks is eligible for deduction under Section 80P(2)(d).

The Tribunal referred to the case of Shah and Nahar Industrial Premises A2 Co-op. Soc. Ltd. vs. National e-Assessment Centre, where it was held that the term "co-operative society" includes co-operative banks, and thus, interest income from such banks qualifies for deductions under Section 80P(2)(d). The Tribunal also cited other relevant cases, including Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO and Kona Seema Co-operative Housing Society Ltd., which supported the assessee's claim.

The Tribunal concluded that the AO's disallowance was contrary to settled law and that the assessee was entitled to deductions under Section 80P(2)(d) for the interest income earned from deposits with co-operative banks. The Tribunal directed the AO to allow the deductions claimed by the assessee for A.Y. 2015-16 and 2018-19.

Conclusion:

The Tribunal allowed both appeals filed by the assessee, holding that the assessee is entitled to deductions under Section 80P(2)(d) for the interest income earned from deposits with co-operative banks. The Tribunal directed the AO to allow the deductions claimed for the relevant assessment years. The judgment was pronounced in the open court on 23.08.2024.

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