Cooperative society's interest income from other cooperatives qualifies for section 80P(2)(d) deduction exemption

The ITAT Panaji held that interest income received by a cooperative society from other cooperative societies qualifies for deduction under section 80P(2)(d). The tribunal ruled that cooperative banks are also cooperative societies, rejecting lower authorities' denial of exemption on this ground. Citing Karnataka HC precedent in CIT vs. Totagars Cooperative Sale Society, the tribunal distinguished this case from Supreme Court decisions, noting section 80P(2)(d) specifically covers investment income from cooperative societies. However, due to unclear records regarding whether entire interest income originated from cooperative banks versus other banks, the matter was remitted to the Assessing Officer for verification and appropriate exemption allowance. The appeal was partly allowed for statistical purposes.

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Issues:
Allowability of deduction under section 80P(2)(d) of the Income Tax Act for interest income received by a cooperative society from other cooperative societies.

Analysis:
The case involved an appeal by a cooperative society against the denial of deduction under section 80P(2)(d) of the Income Tax Act for interest income earned on Reserve Funds and Shares for the assessment year 2012-13. The Assessing Officer had disallowed the deduction, stating that the provisions of section 80P(2)(d) were not applicable to the assessee. The ld. CIT(A) upheld this decision, relying on a Supreme Court judgment. The main contention was whether the interest income received from a cooperative bank qualified for the deduction under section 80P(2)(d) of the Act.

The Appellate Tribunal analyzed the provisions of section 80P(2)(d) and emphasized that income derived by a cooperative society from its investment held with other cooperative societies is exempt. The Tribunal noted that the denial of exemption based on the interest being received from a cooperative bank was unfounded, as a cooperative bank is also a cooperative society. It referred to a Karnataka High Court judgment which clarified that interest income on investments falls under section 80P(2)(d) and not under a different provision. Additionally, the Tribunal cited a Pune Bench decision which preferred the view of the Karnataka High Court over conflicting judgments.

The Tribunal dismissed the reliance on another Karnataka High Court judgment concerning interest income earned by a cooperative society engaged in various activities, as it was not directly relevant to the present case. It concluded that the Assessing Officer's reasoning for denying the deduction was not valid. However, due to ambiguity regarding whether the entire interest income was received from a cooperative bank, the matter was remitted to the Assessing Officer for verification. The Tribunal partially allowed the grounds raised by the assessee for statistical purposes, ultimately partly allowing the appeal.

In conclusion, the Tribunal's decision clarified the eligibility of a cooperative society to claim a deduction under section 80P(2)(d) of the Income Tax Act for interest income derived from investments made with other cooperative societies. The judgment highlighted the importance of correctly interpreting the provisions of the Act and considering relevant legal precedents to determine the applicability of deductions in such cases.

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