2023 (11) TMI 779 - HC - Income Tax

Cooperative societies entitled to Section 80P(2)(d) deduction for interest from cooperative bank investments regardless of business type

HC allowed writ petitions challenging denial of deduction u/s 80P(2)(d) for interest received from cooperative bank investments. Court held that ... Deduction u/s 80P(2)(d) - petitioners made investments with the Cooperative Bank from which, they received interest - HELD THAT:- 'Co-operative Society' means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank. As decided in The Salem Agricultural Producers Co-operative Marketing Society Ltd [2016 (9) TMI 699 - MADRAS HIGH COURT] the respondent therein, which is a Co-operative society, is entitled to avail the benefit under 80P(2)(d) of the Act. Since the impugned orders are passed without considering all these aspects, this Court is of the view that the same are liable to be set aside. Accordingly, the Writ Petitions are allowed and all the impugned notices are set aside. Issues involved:The central issue in this case is whether the petitioners are entitled to deduction under Section 80P(2)(d) of the Income Tax Act, 1961 for interest received from a Cooperative Bank.Judgment Summary:Issue 1: Entitlement to deduction under Section 80P(2)(d)The petitioners challenged notices for reopening assessments under Section 148 of the Income Tax Act, claiming deduction under Section 80P(2)(d) for interest received from a Cooperative Bank. The respondent contended that such deduction is only available for income and interest received from a Cooperative Society, not a Cooperative Bank. The petitioner argued that any interest from a Cooperative Society, including a Cooperative Bank, is eligible for deduction. The court examined the definition of 'Cooperative Society' under the Act and concluded that a Cooperative Bank registered under the Cooperative Societies Act falls within this definition, making the petitioner eligible for the deduction.Issue 2: Interpretation of relevant provisionsThe court analyzed Section 80P(2)(d) which allows deduction for interest derived from investments in other Cooperative Societies. The petitioner's investments in a Cooperative Bank, registered under the Cooperative Societies Act, were found to meet the criteria for deduction. The court distinguished the judgment in 'The Totagars Cooperative Sale Society -Vs- Income Tax Officer, Karnataka' which dealt with a different provision (Section 80P(2)(a)(i)), emphasizing that the present case falls under Section 80P(2)(d) for which the Cooperative Bank investment qualifies for deduction.Issue 3: Precedents and legal interpretationsReference was made to a Division Bench judgment in 'Commissioner of Income Tax Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd' where a Cooperative Society was held entitled to deduction under Section 80P(2)(d) for interest income. The court highlighted that the law laid down by the Supreme Court in a previous case was not directly applicable to the current scenario, reinforcing the eligibility of the petitioner for the deduction under Section 80P(2)(d).Conclusion:The court found that the impugned orders were passed without considering crucial aspects, leading to their setting aside. Consequently, the Writ Petitions were allowed, and all related notices were annulled, with no costs imposed.