Deduction u/s 80P(2)(d) is available on entire interest income earned by co-operative societies

Co-op societies are eligible for a deduction under Section 80P(2)(d) for interest income from investments in co-op banks. section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies.

Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d) of the Act.

A co-operative society is clearly entitled to deduction under section 80P(2)(d) of the Act, in respect of its income, by way of interest or dividends received from any other co-operative society. Even a co-operative bank, other than a State co-operative bank, a Central co-operative bank and a Primary co-operative bank, is entitled to deduction in respect of its income, under section 80P(2)(a)(i) of the Act

Cases: Oberoi Spring Co–operative Housing Society Limited Vs ITO (ITAT Mumbai)
TAT Mumbai held that deduction under section 80P(2)(d) is allowable on the entire interest income received by the assessee from the Co-operative bank which includes the amount credited to the balance sheet.

Facts- The assessee is a co-operative housing society, a non-profit making entity, formed with the objective of maintaining and protecting building occupied by its members. The return of income filed by the assessee was selected for scrutiny and statutory notices u/s. 143(2) and section 142(1) along with the questionnaire were issued and served on the assessee. AO vide order dated 30/12/2018 passed u/s. 143(3) of the Act disallowed the deduction claimed by the assessee u/s. 80P(2)(d) of the Act in respect of interest income of Rs.54,74,228 received from Co-operative Bank and disclosed in the return of income. AO also disallowed the interest income of Rs.1,45,16,552 directly credited by the assessee to the Reserves and Surplus in the balance sheet as per the Co-operative Societies Act. CIT(A) vide impugned order granted the relief in respect of interest income of Rs.54,74,228 claimed as deduction under section 80P(2)(d) of the Act.

Being aggrieved, assessee preferred the present appeal. Conclusion- The learned CIT(A) granted the relief to the assessee allowing deduction under section 80P(2)(d) of the Act on the entire interest income received by the assessee from the Co-operative Bank, including the amount credited to the balance sheet. There is no material available on record to show that the aforesaid findings of the learned CIT(A) have been overruled. Therefore, in view of the above, we are of the considered opinion that the assessee is entitiled to deduction under section 80P(2)(d) of the Act on the entire amount of interest income of Rs.1,99,90,770 received from the Co-operative Bank. As a result, grounds raised by the assessee are allowed.