Pathare Prabhu Co–operative Housing Society Ltd. Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai recently ruled in favor of Pathare Prabhu Co-operative Housing Society Ltd., allowing deductions under Section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from deposits in co-operative banks. The appeal was filed against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] for assessment years 2017-18 and 2018-19. The tribunal also condoned the delay in filing appeals, accepting the society’s justification that it lacked full-time accounting staff and was under the bona fide belief that the disputed issue was rectifiable without appeal.
The primary contention in the case revolved around whether interest income earned from co-operative banks qualifies for deduction under Section 80P(2)(d). The Assessing Officer (AO) had disallowed the deduction, arguing that co-operative banks do not fall under the category of “co-operative societies” as per the Act. The CIT(A) upheld this decision, relying on the Supreme Court’s ruling in Totgar’s Co-operative Sales Society Ltd., which distinguished between interest from surplus funds and business income. However, the ITAT held that Totgar’s case was based on Section 80P(2)(a)(i) and did not apply to claims under Section 80P(2)(d), which does not restrict deductions to business income alone.
