Interest income from cooperative bank deposits held deductible for cooperative societies; directs AO to grant deduction on appeal.

Interest income earned on deposits with cooperative banks was held eligible for deduction under the law for a registered cooperative housing society, following prior ITAT Mumbai precedent. The tribunal applied that precedent to direct the assessing officer to allow a deduction for interest from such deposits, resulting in allowance of the appeals. The reasoning rests on treating interest from cooperative bank deposits as qualifying income for deduction available to cooperative societies, and the AO is directed to grant relief accordingly.

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Issues: (i) Whether the delay in filing the appeals should be condoned; (ii) Whether interest income earned by a co-operative housing society from deposits with co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Issue (i): Condonation of delay in filing appeals before the Tribunal.

Analysis: The application for condonation set out reasons including absence of regular professional assistance, advanced age of office-bearers, and lack of awareness of appeal procedures; the Tribunal applied established principles that procedural rules yield to substantial justice and referred to the test in Collector Land Acquisition, Anantnag v. MST Katiji for sufficiency of cause.

Conclusion: Delay in filing the appeals is condoned.

Issue (ii): Entitlement to deduction under section 80P(2)(d) for interest earned on deposits with co-operative banks.

Analysis: Section 80P(2)(d) allows deduction for income by way of interest or dividends derived by a co-operative society from investments with any other co-operative society; section 2(19) defines "co-operative society"; the Tribunal followed coordinate-bench precedent holding that deposits with co-operative banks (being co-operative societies) qualify under section 80P(2)(d), examined the effect of section 80P(4) which excludes certain co-operative banks only in specific contexts, and applied the principle that where two reasonable constructions exist, the one favourable to the assessee should be adopted.

Conclusion: Interest income earned by the co-operative housing society from deposits with co-operative banks is deductible under section 80P(2)(d); the impugned orders denying that deduction are set aside and the matter is remitted to the Assessing Officer for consequential compliance.

Final Conclusion: The Tribunal condoned the delay and, following binding coordinate-bench precedent and applicable principles of statutory interpretation, directed grant of deduction under section 80P(2)(d) in respect of interest from co-operative banks, with consequential adjustments to be carried out by the Assessing Officer.

Ratio Decidendi: Where a co-operative society earns interest from investments placed with a co-operative bank that is a co-operative society within the meaning of section 2(19), such interest falls within the scope of deduction under section 80P(2)(d); ambiguities in taxing provisions are to be resolved in favour of the assessee.

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