Cooperative society entitled to tax deduction for interest income from deposits

The Tribunal allowed the appeal, directing the grant of deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest earned by a cooperative society from deposits with Cooperative Banks. The decision clarified that cooperative societies are eligible for this deduction, emphasizing the distinction between cooperative banks and cooperative societies for tax purposes. This ruling sets a precedent based on previous decisions and underscores the significance of the definition of a cooperative society under the Co-operative Societies Act in determining eligibility for tax deductions.

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Issues:
Deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest earned from deposits kept with Cooperative Banks.

Analysis:

Issue: Deduction under section 80P(2)(d) of the Income-tax Act, 1961

The appeal was filed against the denial of deduction of Rs.8,01,674/- under section 80P(2)(d) of the Income-tax Act, 1961 in relation to interest earned from deposits kept with Cooperative Banks. The Assessing Officer disallowed the deduction on interest income claimed under section 80P(2)(d) as the banks were scheduled banks. The First Appellate Authority upheld this decision. However, the Tribunal noted that the assessee, a cooperative society, earned interest from deposits kept with Cooperative Banks and was engaged in the business of accepting and lending money to its members. The Tribunal referred to a decision by the Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT, where it was held that a cooperative society is eligible for deduction under section 80P(2)(d) for interest income from investments/deposits with a cooperative bank registered under the Co-operative Societies Act. As the assessee was a registered cooperative society, the Tribunal allowed the appeal and directed the grant of deduction under section 80P(2)(d) for the interest earned from Cooperative Banks.

This judgment clarifies the eligibility of cooperative societies for deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest income earned from deposits kept with Cooperative Banks. The decision emphasizes that even though co-operative banks other than specific types are not eligible for deduction under section 80P(4), a cooperative society can claim deduction under section 80P(2)(d) for interest income from investments/deposits with a registered cooperative bank. The judgment provides a clear interpretation of the law and sets a precedent based on previous decisions by the Pune Benches. It highlights the importance of the definition of a cooperative society as per the Co-operative Societies Act in determining eligibility for deductions under section 80P(2)(d).

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