Interest earned by Co-operative Society on its Investments in Co-operative Bank eligible for Deduction: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai held that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Income Tax Act.

The assessee which is a co-operative society had filed its return of income for A.Y. 2015-16 on 28.09.2015, declaring its total income at Rs. 57,39,670/-. Subsequently, the income of the assessee was assessed by the A.O under Sec. 143(3) of the Act, dated 23.12.2017 at a total income of Rs. 57,39,670/- (after allowing the assesses claim for deduction under Sec. 80P of Rs. 56,16,242/-).

The assesses claim for deduction under Sec. 80P (2)(d) on the interest income of Rs. 56,16,242/- that was earned from the investments made with the co-operative banks; and that, the A.O had erroneously worked out the tax liability of the assessee under the normal provisions at Rs. 19,47,515/- as against the alternative minimum tax (ALT) of Rs. 23,80,257/-.

On the basis of his aforesaid observations the Pr.CIT called upon the assessee to explain as to why the assessment framed in its case may not be revised under Sec. 263 of the Act. In reply, the assessee assailed the validity of the jurisdiction assumed by the Pr. CIT under Sec. 263 of the Act.

It was claimed by the assessee that as the A.O after necessary deliberations had framed the assessment, therefore, the exercise of the revisional jurisdiction under Sec. 263 by the Pr. CIT was clearly ousted.

Also, the assessee tried to impress upon the Pr.CIT that no error did emerge from the assessment framed by the A.O vide his order passed under Sec. 143(3), dated 23.12.2017. It was averred by the assessee that its claim for deduction under Sec. 80P(2)(d) in respect of the interest income on its investments with co-operative banks as well in order.

The order was given by the Tribunal comprising of Judicial Member Ravish Sood and Accountant Member Rajesh Kumar based on an appeal given by Technopolis Premises Co-operative Society Limited.

Section 80P(2)(d) elaborates as Deduction in respect of the income of co-operative societies. Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section, here shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section, in computing the total income of the assessee 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.

Section 143 (3) deals with Scrutiny Assessment under the Income Tax Act which is a detailed assessment. The notice under this section is received by the assessee where the income tax department is doubtful about the authentication of the income or has information regarding income concealment. The scrutiny is made to confirm the genuineness and correctness of various claims, deductions, etc. made by the taxpayer in the return of income.

Relying upon many judgments in the  High Court of Karnataka in the case of Pr. Commissioner of IncomeTax and Anr. Vs. Totagars Cooperative Sale Society and High Court of Gujarat in the case of State Bank Of India Vs. also observed that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act.

The Tribunal further observed that it has been the claim of the assessee that the A.O was in error in working out the “adjusted total income‟ of the assessee.