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 under Section 80P(2)(d) - Interest income from investment in a co-operative bank - Definition of 'Co-operative society' under Section 2(19) - Distinction between Section 80P(2)(d) and Section 80P(2)(a)(i) Deduction under Section 80P(2)(d) - Interest income from investment in a co-operative bank - Definition of 'Co-operative society' under Section 2(19) - Co operative societies are entitled to deduction under Section 80P(2)(d) in respect of interest income derived from investments made with a co operative bank registered under the Co operative Societies Act. - HELD THAT: - Section 80P(2)(d) provides that income by way of interest derived by a co operative society from its investment with any other co operative society is deductible. The Income tax Act defines 'co operative society' under Section 2(19) as a society registered under the Co operative Societies Act or any corresponding State law. A co operative bank registered under the Co operative Societies Act therefore falls within the statutory definition of a 'co operative society' for the purposes of Section 80P(2)(d). The Supreme Court decision in Totagars Cooperative Sale Society related to the distinct head in Section 80P(2)(a)(i) and, accordingly, its ratio does not negate entitlement under Section 80P(2)(d) where interest is received from a co operative bank which is registered as a co operative society. A Division Bench of this Court has likewise treated analogous receipts as eligible under Section 80P(2)(d). The Assessing Officer's notices under Section 148A(b) were issued without considering these aspects and therefore were set aside. [Paras 9, 10, 11, 12, 13] Notices under Section 148A(b) challenging entitlement to deduction under Section 80P(2)(d) were quashed and set aside; the co operative society is entitled to the deduction for interest received from a co operative bank registered under the Co operative Societies Act. Final Conclusion: Writ petitions allowed; impugned notices issued under Section 148A(b) set aside for failure to consider that interest received by the petitioner co operative societies from a co operative bank registered under the Co operative Societies Act is eligible for deduction under Section 80P(2)(d). 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.