Deduction Allowed Under Section 80P(2)(d) for Interest Income from Co-operative Banks Confirmed

The ITAT Mumbai allowed the assessee's claim for deduction under section 80P(2)(d) in respect of interest income received from co-operative banks. The tribunal relied on its own precedents and decisions of the Karnataka and Gujarat HCs, confirming the entitlement to the deduction. Consequently, the deduction for interest income from Saraswat Cooperative Bank and Maharashtra Cooperative Bank was granted for the relevant assessment years.

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1. ISSUES PRESENTED and CONSIDERED

• Whether the interest income earned by a cooperative housing society from deposits with cooperative banks qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961.
• Whether the disallowance of deduction claimed under section 80P(2)(d) by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) was justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Eligibility of deduction under section 80P(2)(d) for interest income earned by a cooperative housing society from cooperative banks

Relevant legal framework and precedents:

• Section 80P(2)(d) of the Income-tax Act, 1961, provides deduction to cooperative societies in respect of income by way of interest on securities or deposits with other cooperative societies or cooperative banks.
• Judicial precedents from co-ordinate benches of the Tribunal and High Courts, including decisions in Amit Tata Employees Co-operative Housing Society Ltd., Poonam Chambers Premises Co-Op. Society Ltd., Merwanjee Cama Park Co-operative Housing Society Ltd., and Eternity Co-operative Housing Society Ltd., have held that interest income earned by cooperative housing societies from cooperative banks is eligible for deduction under section 80P(2)(d).
• The Hon'ble Karnataka High Court decision in PCIT v. Totalgars Cooperative Sales Society was distinguished by these co-ordinate benches on facts and legal interpretation.

Court's interpretation and reasoning:

• The Tribunal examined the scope of section 80P(2)(d) and the nature of the assessee as a cooperative housing society earning interest income from cooperative banks.
• The Tribunal noted that the cooperative banks from which the interest income was earned fall within the ambit of entities contemplated under section 80P(2)(d).
• The Tribunal relied on consistent precedents where similar claims were allowed, emphasizing that the legislative intent supports granting deduction to cooperative societies on such income.
• The Tribunal distinguished adverse decisions by carefully analyzing the facts and legal principles, concluding that those decisions did not apply to the present facts.

Key evidence and findings:

• The assessee's undisputed status as a cooperative housing society.
• Interest income earned from deposits with Saraswat Cooperative Bank and Maharashtra State Cooperative Bank.
• Prior orders and judicial pronouncements supporting the assessee's claim for deduction.

Application of law to facts:

• The Tribunal applied the legal provisions and judicial precedents to the facts, finding that the interest income earned qualifies for deduction under section 80P(2)(d).
• The amount of deduction claimed was specifically identified and allowed in respect of the interest income from cooperative banks.

Treatment of competing arguments:

• The Revenue relied on the Karnataka High Court decision in PCIT v. Totalgars Cooperative Sales Society to argue against the claim.
• The Tribunal distinguished this decision based on factual and legal differences, relying instead on more recent and consistent decisions favoring the assessee's position.
• The Tribunal gave greater weight to co-ordinate bench decisions and subsequent High Court rulings that supported the deduction claim.

Conclusions:

• The Tribunal held that the cooperative housing society is entitled to claim deduction under section 80P(2)(d) for interest income earned from cooperative banks.
• The disallowance of deduction by the Assessing Officer and confirmation by the Commissioner (Appeals) was set aside.
• The deduction amounts of Rs. 3,04,21,874/- for AY 2016-17 and Rs. 2,94,40,756/- for AY 2017-18 were allowed.
• The appeals filed by the assessee were allowed accordingly.

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