Interest Income earned from Deposits made on other Cooperatives Banks are eligible for deduction u/s 80P(2)(d) of Income Tax Act: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Bangalore Bench held that Interest income earned from deposits made on other cooperative banks are eligible for deduction under section 80(2)(d) of Income Tax Act, 1961.

Assessee,  BEE Co-op Credit Society Ltd.is a society filed its return of income nil after claiming exemption under Section  80P of the Income Tax Act .Thereafter assessee case was selected for scrutiny .

During the assessment proceedings  AO observed that the assessee earned interest from surplus deposits and securities in cooperative banks/banks.Thus the AO denied the claim.

Aggrieved by the order, the assessee filed an appeal  before the Commissioner of Income Tax (Appeal){ CIT(A)} . who dismissed the appeal of assessee.Thereafter the assessee filed a second appeal before the tribunal.

Madhukar G Hegde, Counsel for assessee submitted that the assessee did not carry on business of the bank.  It carried on the business of providing credit facilities to its members .Thus  assessee is a co-operative society and carrying on the business of providing credit facility to members only .

Further major portion of the investment was in cooperative banks i.e eligible for deduction under Section 80P(2)(d) of the Income Tax  Act.

 Moreover , The Income tax  Act does not provide for any distinction between the investment and any income received by the assessee being cooperative society from another cooperative society would be eligible for deduction under Section 80P(2)(d) of the Income Tax  Act.

Supriya Rao O.N, Counsel for the revenue supported the decision of lower authorities.

It was observed by the tribunal that  co-operative society is a broad and larger umbrella under which the co-operative banks do perform. Section 80P(2)(d) of the Income Tax  Act, allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society.

The tribunal after reviewing the facts and submissions of the both parties,the two member bench of Chandra Poojari,(Accountant Member ) and Beena Pillai,(Judicial Member) observed that assessee is eligible for deduction under section 80P(2)(d) in respect of interest earned from deposits made on other Cooperative banks,

Therefore the bench allowed the appeal of the assessee.

To Read the full text of the Order CLICK HERE

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