Co-op Credit Society Wins Appeal for Tax Deduction on Interest Income

The Tribunal allowed the appeal by the co-operative credit society, directing the Assessing Officer to grant the deduction under section 80P(2)(d) of the Income Tax Act for the interest income earned from the investment with the co-operative bank. The Tribunal clarified that section 80P(4) is applicable only to co-operative banks, not credit societies, and upheld that a credit society is entitled to exemption under section 80P(2).

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Issues involved:
The judgment involves a challenge to an order passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) related to the denial of deduction under section 80P claimed by the assessee for the assessment year 2017-18.

Summary of Judgment:

Issue 1: Denial of deduction under section 80P:
The assessee, a co-operative credit society, filed an appeal against the denial of deduction under section 80P of the Income Tax Act. The Assessing Officer (AO) denied the deduction claimed by the assessee under section 80P of the Act, citing section 80P(4) as applicable to co-operative societies providing credit facilities. The Commissioner of Income Tax (Appeals) upheld the denial, stating that the assessee deposited money with a bank covered under section 80P(4). However, the Tribunal held that section 80P(4) is relevant only for co-operative banks, not credit societies. The Tribunal cited a Supreme Court decision to support its view that a credit society is entitled to exemption under section 80P(2) and that section 80P(4) does not apply to the assessee.

Issue 2: Interpretation of section 80P(2)(d) of the Act:
The Tribunal analyzed the provisions of section 80P(2)(d) of the Act, which allows deduction for income derived by a co-operative society from investments with another co-operative society. The Tribunal noted that the assessee, being a co-operative society, invested funds in a District Central Co-operative Bank and earned interest, which was claimed as a deduction under section 80P. The Tribunal referred to previous decisions and held that interest earned from co-operative banks is allowable as a deduction under section 80P(2)(d) of the Act. The Tribunal directed the Assessing Officer to grant the deduction to the assessee for the interest income earned from the investment with the co-operative bank.

In conclusion, the Tribunal allowed the appeal by the assessee, directing the Assessing Officer to grant the deduction under section 80P(2)(d) of the Act for the interest income earned from the investment with the co-operative bank.

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