Co-op credit society eligible for tax deduction on interest income from cooperative bank investments

The Tribunal allowed the appeals for both assessment years, directing the Assessing Officer to grant the deduction under section 80P for interest income earned from Maharashtra Gramin Bank. The Tribunal held that a cooperative credit society could claim the deduction on interest income from investments/deposits with a cooperative bank, which is a registered cooperative society. The order was pronounced on 21st April 2023.

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Issues:
The judgment deals with the denial of deduction u/s.80P of the Income-tax Act, 1961 on interest income earned from Maharashtra Gramin Bank for the assessment years 2017-18 and 2018-19.

Assessment Year 2017-18:
The assessee, a cooperative credit society, declared total income at Nil and claimed deduction u/s 80P on interest income earned from Maharashtra Gramin Bank. The Assessing Officer held that the deduction was allowable only if interest income was earned from a cooperative society. The ld. CIT(A) upheld this decision. The Tribunal referred to previous decisions and held that a cooperative society can claim deduction on interest income from investments/deposits parked with a cooperative bank, which is a registered cooperative society. Following this, the Tribunal directed to grant deduction u/s.80P(2)(d) on the interest income.

Assessment Year 2018-19:
Similar to the previous year, the AO denied deduction u/s.80P on interest income received from Maharashtra Gramin Bank. The Tribunal, after considering the facts and circumstances, reversed the impugned order and directed the AO to grant the deduction on the interest income.

In conclusion, both appeals were allowed, and the Tribunal pronounced the order on 21st April 2023.

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