2025 (8) TMI 358 - AT - Income Tax

Deduction Allowed Under Section 80P for Interest Income from Cooperative Banks per Gujarat HC Ruling

The ITAT Ahmedabad allowed the deduction under section 80P for interest income received from a Cooperative Bank registered under the Cooperative Societies ... Deduction u/s 80P - assessee received interest income from Cooperative Bank which is registered under the Cooperative Societies Act, Gujarat - HELD THAT:- The Hon’ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd. [2016 (7) TMI 1217 - GUJARAT HIGH COURT] has categorically held that the interest income received from Cooperative Bank is derived from the investment with other Cooperative Societies / Cooperative Bank and the same should be allowed. Thus, Ground No. 2 is allowed. ISSUES: Whether interest income received from Cooperative Banks and Nationalized Banks qualifies for deduction under Section 80P(2)(d) of the Income Tax Act.Whether interest income received from Cooperative and Nationalized Banks should be taxed fully under Section 56 without allowing pro-rata expenditure under Section 57.Whether the order of the Commissioner of Income Tax (Appeals) is legally sustainable and consistent with the facts and law. RULINGS / HOLDINGS: The Court held that interest income received from Cooperative Banks is eligible for deduction under Section 80P(2)(d) as it represents income derived from investments with other Cooperative Societies / Cooperative Banks, relying on the precedent that such interest income 'should be allowed'.The ground relating to taxation of interest income under Section 56 without allowing pro-rata expenditure under Section 57 was not pressed by the appellant and hence dismissed.The appeal was partly allowed on the issue of deduction under Section 80P(2)(d) with respect to interest from Cooperative Banks, confirming that the CIT(A) erred in disallowing the same. RATIONALE: The Court applied the statutory framework of the Income Tax Act, specifically Sections 80P(2)(d), 56, and 57, and relied on judicial precedent from the Gujarat High Court which held that interest income received from Cooperative Banks is 'derived from the investment with other Cooperative Societies / Cooperative Bank' and thus qualifies for deduction under Section 80P(2)(d).No unique interpretation or doctrinal shift was noted; the Court followed established legal principles and precedent.The dismissal of the ground regarding Section 56 and Section 57 was based on the appellant's failure to press that ground, indicating procedural adherence to issues actively contested.