TaxTMI 
TaxTMI 
2026 (7) TMI 937
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....assessment year 2023-24, the disallowance amounts to Rs. 45,31,200/-. The assessee is a co-operative residential housing society, which had invested its surplus funds, generated from contributions collected from its members, in fixed deposits with SVC Co-operative Bank, which is itself a co-operative society, and had earned interest income to the aforesaid amounts, which was claimed as deductible under section 80P(2)(d). The CPC disallowed the said claim, and the application filed by the assessee under section 154 was also rejected, which action has been affirmed by the ld. CIT(A) on the ground that, with effect from 01.04.2007, section 80P has been amended by insertion of sub-section (4), as per which the provisions of section 80P shall not apply to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, and that there exists a distinction between a co-operative society and a co-operative bank. According to the ld. CIT(A), since the interest has been earned from a co-operative bank, the deduction could not be allowed, further holding that such interest income is liable to be taxed under the head "Inc....
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....section 80P Clause (a) states that, "in the case of cooperative society engaged in cooperative business of banking and providing credit facilities to its members or ........., the whole of amount of profit and gains of the business attributable to anyone or more or such activity." Clause (d) of Sub-section 2 of Section 80P reads as under:- (d) 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; 6. Sub section 4 of section 80P carves out of exception that the provision of this section will not apply in relation to any cooperative bank. Further explanation provides that the definition of cooperative bank and primary cooperative bank. The said provision reads as under: - (4) The provisions of this section 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. Explanation. For the purposes of this sub-section- (a) co-operative bank" and "primary agricultural credit society" shall have the meanings respectiv....
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....erational income and not the other income which accrues to the society and as such interest earned on funds which are not required for business 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 deductable 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 lim....
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.... state cooperative bank, come within the ambit of section 80P (2)(d), therefore the income constitutes income from other sources and it is eligible for deduction covered u/s. 80P(2)(d). Otherwise section 80P(2)(d) specifies any income by way of interest or dividend which is otherwise taxable under the head income from other sources, deduction is allowable if the same is derived from investment made with any other cooperative societies. 9. In contravention, section 80P (2)(a) provides income from carrying out various activities which is in the nature of business. Irrespective whether the interest income derived from activities as provided in section 80P (2)(a) which is otherwise the business income for which deduction is allowable, if there is any interest income which is earned on deposits or investment made with cooperative societies, the same must fall in the category activity or the business, but still is eligible for deduction under the specific provision of section 80P(2)(d). Thus, the interest derived by the assessee from cooperative bank is eligible for deduction u/s. 80P(2)(d) because as noted above, cooperative are also cooperative societies for this purpose. This....
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....ation Act, 1949 or are subject to regulatory supervision of the Reserve Bank of India does not alter their fundamental character as co-operative societies. 5. The Tribunal in Premium Tower Co-operative Housing Society Ltd. has further harmonised the apparent conflict sought to be raised by the Revenue by clarifying, in a manner both nuanced and legally sound, that the judgment of the Hon'ble Supreme Court in Totgars Co-operative Sale Society Ltd. (322 ITR 283) operates in an entirely distinct field, namely section 80P(2)(a)(i), which concerns operational income arising from the business activities of a co-operative society, and therefore cannot be read as circumscribing or limiting the scope of section 80P(2)(d), which is a separate and self-contained provision dealing specifically with interest or dividend income derived from investments with other co-operative societies. The Tribunal, in its analytical exposition, further took into consideration the judgment of the Hon'ble Kerala High Court in Percoorkada Service Co-operative Bank Ltd. (supra), wherein it has been held that even where such interest income is assessed under the head "Income from Other Sources", the same would n....