Interest Income from Deposits with Nationalized Bank is allowable for Deduction u/s. 80P(2)(a)(i) of I-T Act : ITAT [Read Order]

The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently held that interest income earned from deposits kept with nationalized banks is allowable  as deduction under Section 80p(2)(a)(i) of Income Tax Act 1961.

The Section 80p(2)(a)(i) of Income Tax Act deals with deduction  provided to cooperative societies upon certain specified income engaged in specific activities such income including the gross total income of society.

The Assessee Subordinate Engineers Association MSEB Co.op. Credit Society Ltd is a credit cooperative society engaged in the business of providing banking or credit facilities to its members. The assessee filed a return claiming deduction under Section 80P(2)(a)(i) of the Income Tax Act in relation to interest income earned from a nationalized bank The Assessing Officer (AO) denied the benefit of deduction  under Section 80P Income Tax Act. 

Aggrieved by the order, the assesee filed an appeal before the Commissioner of Income Tax (Appeals),who confirmed the decision of the AO. Thereafter assessee filed a second appeal before the tribunal.

During the course of  hearing no one appeared for the assessee. Neha Deshpande appeared and argued for the revenue .

The tribunal after hearing both sides observed the question of availability of deduction under Section 80P Income Tax Act on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO has allowed similar deductions.

In the said case, the Tribunal discussed the contrary views expressed by the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO allows deduction under Section 80P of Income Tax Act  on interest income. After considering the precedents laid down in the Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit case, the single  member bench of  R.S. Syal, (Vice President) allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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