The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) ruled that interest income earned from deposits with cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act,1961.
Charkop Lands End Co-operative Housing Society Ltd.,the appellant-assessee,had filed its return of income for AY 2020-21, declaring a total income of ₹2,80,303. The return was processed under Section 143(1), after which the Assessing Officer (AO) disallowed the assessee’s claim of ₹3,94,856 under Section 80P(2)(d) in relation to interest income earned from deposits with cooperative banks. The disallowance led to an increase in the total taxable income to ₹6,75,160.
The dispute arose when the assessee’s claim for deduction under Section 80P(2)(d) was disallowed by the AO. The assessee maintained that the interest income earned from cooperative banks, namely New India Co-operative Bank and NKGSB, was eligible for deduction as these banks were also cooperative societies, and therefore, their income should be deductible under this section of the Act.
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The matter was taken to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the disallowance made by the AO. The assessee, dissatisfied with the order, then appealed to the tribunal. The crux of the appeal was whether interest income earned from cooperative banks could be considered eligible for deduction under Section 80P(2)(d), which allows deductions for interest and dividends earned by cooperative societies from other cooperative societies.
The assessee argued that cooperative banks, though they perform banking activities, are registered as cooperative societies and should fall within the scope of Section 80P(2)(d). The Tribunal reviewed this contention, considering similar cases and prior judicial precedents that supported the interpretation that cooperative banks qualify as cooperative societies for the purposes of Section 80P(2)(d).
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After a thorough examination, the bench concluded that the interest income earned from cooperative banks was indeed eligible for deduction under Section 80P(2)(d).
The two member bench comprising Sunil Kumar Singh (Judicial Member) and Om Prakash Kant (Accountant Member)rejected the disallowance made by the AO and confirmed by the CIT(A). Consequently, the bench allowed the appeal in favor of the assessee, restoring the deduction for interest income and ordering the deletion of the addition made to the taxable income.
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