Interest income from Cooperative Bank not deductible under section 80P(2)(d)

The Tribunal dismissed the appeals, affirming that interest income from Alappuzha District Co-operative Bank Limited was not eligible for deduction under section 80P(2)(d) of the I.T.Act. The decision was based on the distinction between a Co-operative Society and a Cooperative Bank, emphasizing that the deduction is only applicable for income received from investments with another Co-operative Society, not a Cooperative Bank. The Tribunal upheld the CIT(A)'s ruling that interest income from the bank does not qualify for the deduction.

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Issues involved:
Whether the assessee is entitled to deduction u/s 80P(2)(d) of the I.T.Act on interest received on investments made with Alapuzha District Cooperative Bank LimitedRs.

Analysis:

Issue 1: Entitlement to deduction u/s 80P(2)(d) of the I.T.Act
The case involved the question of whether the assessee, a Co-operative Society engaged in the business of manufacturing and sale of homeopathic medicines, was entitled to deduction u/s 80P(2)(d) of the I.T.Act on interest received on investments made with Alapuzha District Cooperative Bank Limited. The Assessing Officer had denied the deduction, stating that only interest/dividend paid by a cooperative society is eligible for exemption under this provision. The CIT(A) upheld this view, emphasizing that a Cooperative Bank like Alappuzha District Co-operative Bank Limited is not a Cooperative Society and, therefore, interest income from it is not eligible for deduction under section 80P(2)(d) of the Act.

Issue 2: Judicial precedents and interpretation of the law
The Tribunal considered the conflicting decisions of the Hon'ble Karnataka High Court regarding whether a Co-operative Bank can be considered a Co-operative Society for the purpose of claiming deduction u/s 80P(2)(d) of the I.T.Act. The Tribunal noted that the Hon'ble Karnataka High Court had previously held that a Co-operative Society includes a Co-operative Bank, while in a subsequent case, it was held that the deduction under this provision is only for income received on investments with a Co-operative Society and not a Cooperative Bank. The Tribunal emphasized that the provisions of section 80P(2)(d) are clear and only allow deduction for interest/dividend received from investments made with another Co-operative Society.

Issue 3: Distinction between Co-operative Society and Co-operative Bank
The Tribunal analyzed the distinction between a Co-operative Society and a Cooperative Bank, highlighting that the benefit of deduction u/s 80P(2)(d) is available only for interest/dividend received by a Co-operative Society for investments made with another Co-operative Society. In this case, the payer, Alappuzha District Co-operative Bank Limited, was also registered under the Banking Regulations Act, 1949 for banking business. The CIT(A) had concluded that the bank is a Cooperative Bank and not a Cooperative Society, a finding that was not challenged before the Tribunal. Therefore, the Tribunal upheld the CIT(A)'s decision, stating that when interest income is received from a cooperative bank, the recipient co-operative society is not entitled to deduction u/s 80P(2)(d) of the I.T.Act.

In conclusion, the Tribunal dismissed the appeals filed by the assessee, affirming that the interest income received from Alappuzha District Co-operative Bank Limited was not eligible for deduction under section 80P(2)(d) of the I.T.Act.

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