Interest Income from Cooperative Bank Deposits Allowed Deduction Under Section 80P(2)(d) of Income Tax Act

The ITAT Pune held that interest income earned from fixed deposits or investments with Cooperative Banks qualifies for deduction under section 80P(2)(d) of the Act. Relying on coordinate bench decisions, the Tribunal affirmed that Cooperative Banks, being essentially Cooperative Societies with banking licenses, are entitled to this deduction. The assessee's appeal was allowed accordingly.

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ISSUES:

Whether interest income earned by a Cooperative Credit Society from investments with Cooperative Banks qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961.Whether delay in filing appeal before the Tribunal can be condoned on grounds of reasonable cause.

RULINGS / HOLDINGS:

The delay of 180 days in filing the appeal before the Tribunal is condoned as there was a "reasonable cause" due to lack of awareness and failure of the tax consultant to verify notices, in the "larger interest of justice."Interest income earned from fixed deposits/investments with Cooperative Banks is eligible for deduction under section 80P(2)(d) of the Act, as Cooperative Banks are "basically Cooperative Societies only" despite having banking licenses; thus, the disallowance of such interest income was set aside and the deduction claim allowed.

RATIONALE:

The condonation of delay was guided by the principle established in Collector Land Acquisition Vs. MST Katiji (1987) 167 ITR 471 SC, recognizing "reasonable cause" as a valid ground for extension of limitation.Section 80P(2)(d) of the Income-tax Act provides deduction for income by way of interest or dividend derived by a Cooperative Society from investments with any other Cooperative Society.Precedents from Coordinate Benches of the Tribunal consistently hold that interest income from deposits with Cooperative Banks qualifies for deduction under section 80P(2)(d), as Cooperative Banks are considered Cooperative Societies notwithstanding their banking license, supported by recent decisions including Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. vs. ITO and The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO.The Tribunal applied these precedents and statutory interpretation to reverse the Assessing Officer's disallowance and the appellate order upholding it, thereby allowing the deduction claimed by the assessee.

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