Co-operative society's interest from co-operative bank investment qualifies for Section 80P(2)(d) deduction despite revenue's commercial bank argument

ITAT Mumbai allowed the appeal, holding that interest received from investment in a co-operative bank qualifies for deduction under Section 80P(2)(d). The tribunal followed its own precedent in Blue Rose Co-operative Society Limited, ruling that interest earned from investments in co-operative banks is allowable as deduction. The revenue failed to demonstrate that the investee co-operative bank held RBI license or functioned as commercial bank. CIT(A)'s order was overturned in favor of the assessee.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility of deduction under Section 80P(2)(d) of the Income-tax Act, 1961, for interest income received from investments in co-operative banks.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The appellant filed an appeal with a delay of 201 days, attributing the delay to the failure of the society's manager to inform the managing committee/chartered accountant about the impugned order. The Tribunal condoned the delay in the interest of justice and fair play, noting that the appellant had provided a reasonable explanation supported by an affidavit from the Honorary Secretary of the society.

2. Eligibility of Deduction Under Section 80P(2)(d) of the Income-tax Act, 1961:

The primary issue for determination was whether the appellant, Blue Rose Industrial Premises Co-operative Society Ltd., was entitled to a deduction of Rs. 37,45,701/- under Section 80P(2)(d) of the Act for interest received from investments in co-operative banks.

Arguments by the Appellant:
- The appellant argued that the issue was covered by a previous order in their own case for A.Y. 2020-21, where the Tribunal had allowed the deduction under Section 80P(2)(d).
- The appellant contended that the interest income from investments in co-operative banks should be eligible for deduction as per Section 80P(2)(d) of the Act.

Arguments by the Revenue:
- The Revenue opposed the condonation of delay and supported the impugned order on merits, arguing that the deduction was not applicable.

Tribunal's Findings:
- The Tribunal noted that Section 80P(2)(d) allows a deduction for any income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society.
- The Tribunal referred to the definitions under the Income Tax Act, 1961, and the Maharashtra Co-operative Society Act, 1960, which include co-operative banks within the ambit of co-operative societies.
- Citing the Supreme Court's judgment in Mavilayi Service Co-operative Bank Limited v. Commissioner of Income Tax, Calicut, and other relevant case laws, the Tribunal emphasized that Section 80P is a beneficial provision intended to promote the growth of the co-operative sector and should be interpreted liberally in favor of the assessee.
- The Tribunal also referred to previous decisions of the coordinate benches, which consistently held that interest income from co-operative banks is eligible for deduction under Section 80P(2)(d).

Conclusion:
- The Tribunal concluded that the appellant was entitled to the deduction under Section 80P(2)(d) for interest income received from investments in co-operative banks.
- The Tribunal directed the Assessing Officer to allow the deduction after verification, thereby setting aside the impugned order passed by the CIT(A).

Outcome:
- The appeals (ITA Nos. 2330/MUM/2024 and 2329/MUM/2024) were allowed.
- The impugned orders dated 14.08.2023 and 02.08.2023 were set aside.
- The Tribunal directed the Assessing Officer to allow the benefit of deduction under Section 80P(2)(d) as discussed in the judgment.

Order Pronounced:
- The order was pronounced on 30.08.2024.

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