TaxTMI 
TaxTMI 
2026 (5) TMI 1412
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....ction under Chapter VI-A. The return was subsequently revised on 13.06.2019 declaring total income of Rs. 33,49,266/- after claiming deduction under section 80P(2)(d) of the Act. The case was selected for complete scrutiny under the E-assessment Scheme, 2019 on the issue of "Deduction from total income under Chapter VI-A" and statutory notices under sections 143(2) and 142(1) were issued from time to time through the faceless assessment mechanism. 3. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had earned interest income aggregating to Rs. 39,09,454/- from deposits placed with co-operative banks and other financial institutions. The details of such interest income comprised savings bank interest of Rs. 3,14,701/-, interest on bank FDRs of Rs. 35,76,269/- and interest on security deposits of Rs. 18,488/-. Against such income, the assessee claimed deduction under section 80P(2)(d) amounting to Rs. 33,49,266/-. The assessee, in response to the show cause notice issued by the Assessing Officer, submitted that it is a co-operative housing society engaged in maintenance of buildings and collection of contributions from members....
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.... income earned by the assessee from deposits with co-operative banks and commercial banks is not attributable to the operational activities of the assessee and is assessable as income from other sources. The learned CIT(A) further held that co-operative banks are distinct from co-operative societies and that, in view of the insertion of section 80P(4), the benefit of deduction under section 80P is not available in respect of interest income earned from such banks. The reliance placed by the assessee on judicial precedents was held to be distinguishable. Accordingly, the disallowance of Rs. 33,49,266/- made by the Assessing Officer was confirmed and the appeal of the assessee was dismissed. 7. The assessee is in further appeal before us and has raised the following grounds of appeal: 1 (a) The learned Commissioner of Income Tax (Appeals) erred in considering the decision of the learned Assessing officer of disallowing the claim of the appellant for deduction of Rs. 32,99,266/- u/s. 80P(2)(d) of the I.T. Act, 1961 being Rs. 50,000 u/s 80P(2)(c)(ii) and Rs. 33,49,266/- u/s. 80P(2)(d), as justified without appreciating the fact that the said first amount is statutory deduct....
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....entative (AR) reiterated the facts and submitted that the issue involved is squarely covered in favour of the assessee by judicial precedents and placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Principal Commissioner of Income-tax vs. Totagars Co-operative Sale Society(2017) 392 ITR 74 (Karnataka).Referring to the aforesaid judgment, the learned AR submitted that the Hon'ble High Court has categorically held that for the purpose of section 80P(2)(d), a co-operative bank is to be considered as a co-operative society and consequently, any interest earned by a co-operative society from deposits with a co-operative bank would be eligible for deduction under the said provision. 9. The learned AR further placed reliance on the order of the co-ordinate bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs. ITO (ITA No. 6547/Mum/2017), wherein, on identical facts, it has been held that interest income earned by a co-operative housing society from investments made with co-operative banks is eligible for deduction under section 80P(2)(d) of the Act. 10. The learned AR further submitted that the issue under consider....
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....ion 80P(2)(d) provides that in respect of "any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income" shall be deducted in computing the total income. Thus, the essential requirement for claiming deduction is that the income must be (i) by way of interest or dividend, and (ii) derived from investments with "any other co-operative society". 16. The expression "co-operative society" has been defined in section 2(19) of the Act to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State. There is no dispute that a co-operative bank is also registered as a co-operative society under the relevant State Co-operative Societies Act. The controversy, however, arises on account of insertion of section 80P(4) by the Finance Act, 2006, which provides that the provisions of section 80P shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. 17. A plain reading of section 80P(4) shows that....
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....s purposes falls under the category of" other income" taxable under the Income Tax Act?' 6. According to the learned counsel, the present appeal should be admitted on these two substantial questions of law. 7. However, the contention being taken by the learned counsel is untenable. For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Co-operative Bank would necessarily be deductible under Section 80P(1) of the Act. 8. The issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover, the word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co-Operative Society can be o....