2022 (10) TMI 971 - AT - Income Tax

Cooperative Society Granted Deduction for Interest Income under Income Tax Act

The Tribunal held that the assessee, a cooperative society, is entitled to a deduction under Section 80P(2)(d) of the Income Tax Act for interest income ... Deduction ú/s. 80P - Disallowance of deduction claimed by holding the appellant as a co-operative bank - HELD THAT:- We observe that identical issue i.e. whether the assessee a cooperative society is entitled for deduction u/s. 80P(2)(d) of the Act on the interest income earned from other cooperative banks/societies has been decided by various Coordinate Benches in favour of the assessee. See Kshatriy Gadkari Maratha Cooperative Credit Society Ltd [2019 (4) TMI 1932 - ITAT MUMBAI] as held admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Cooperative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. Also see Kaliandas Udyog Bhavan Premises Co-op Hsg Society [2018 (4) TMI 1678 - ITAT MUMBAI] Thus we hold that the assessee a cooperative society is eligible for deduction u/s.80P(2)(d) of the Act in respect of the interest income earned by the assessee from either any other cooperative society or from a cooperative bank. Grounds raised by the assessee are allowed. Issues Involved:1. Whether the assessee, a cooperative society, is entitled to a deduction under Section 80P(2)(d) of the Income Tax Act on the interest income earned from investments in cooperative banks/societies.Detailed Analysis:Issue 1: Deduction under Section 80P(2)(d) for Interest Income from Cooperative Banks/SocietiesGrounds of Appeal:The assessee contested the order of the Learned Commissioner of Income-tax (Appeals) [Ld. CIT(A)], which confirmed the addition of Rs. 8,93,840 by disallowing the deduction under Section 80P of the Income Tax Act, asserting that the appellant is a cooperative credit society and not a cooperative bank.Proceedings:Despite the issuance of notice, no representative appeared for the assessee. The Departmental Representative (Ld. DR) supported the orders of the lower authorities.Tribunal's Observations:- The Tribunal noted that the issue of whether a cooperative society is entitled to a deduction under Section 80P(2)(d) on interest income from other cooperative banks/societies has been decided favorably for the assessee by various Coordinate Benches.- The Tribunal referenced the case of Kshatriy Gadkari Maratha Cooperative Credit Society Ltd., where it was held that the assessee, being a cooperative society, is entitled to such deductions.Relevant Legal Provisions:- Section 80P(2)(d) of the Income Tax Act provides for the deduction of any income by way of interest or dividends derived by a cooperative society from its investments with any other cooperative society.Key Judicial Pronouncements:- Totgar Cooperative Sales Society Limited v. ITO: The Supreme Court ruled that interest on surplus funds not attributable to the business of providing credit facilities to members is assessable as 'other income' and not as 'business profits.' However, this decision was deemed inapplicable to the present case.- Pr.CIT v. Totgar Cooperative Sales Society Limited (Karnataka High Court): It was held that a cooperative society includes a cooperative bank for the purpose of deduction under Section 80P(2)(d), thereby making interest received from a cooperative bank eligible for deduction.- Kaliandas Udyog Bhavan Premises Co-op Hsg Society v. ITO: The Tribunal reaffirmed that a cooperative society is entitled to a deduction under Section 80P(2)(d) for interest income derived from investments with any other cooperative society, including cooperative banks.Conclusion:- The Tribunal concluded that the assessee, being a cooperative society, is eligible for the deduction under Section 80P(2)(d) of the Income Tax Act in respect of the interest income earned from investments in other cooperative societies or cooperative banks.- The appeal filed by the assessee was allowed, and the grounds raised were accepted.Order Pronounced:The order was pronounced in the open court on 30.09.2022, allowing the appeal in favor of the assessee.