Interest Income from Co-operative Banks to be considered for Deduction u/s 80P(2)(d) of Income Tax Act: ITAT allows Appeal [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal allowed the appeal filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), disallowing the deduction under Section 80P(2)(d) of the Income Tax Act, 1961.

The assessee GSSS Credit Co-operative Society Limited, claimed a deduction under the provisions of Section 80P(2)(d) of the Income Tax Act.

However, the Assessing Officer (AO) found that the provisions of sub section (4) of Section 80P of the Act are applicable to the assessee, which denies the benefit of deduction under Section 80P(2)(a)(i)/(d) of the Income Tax Act. Therefore, the AO disallowed the same and added to the total income of the assessee.

Aggrieved with the decision of Assessing Officer, the assessee preferred an appeal before the CIT(A). Citing the decision of Hon’ble Karnataka High Court in the case of Pr. CIT Vs. Totagars Co-operative Sale Society, the CIT(A) deleted the addition in part by observing that interest earned by assessee, a cooperative society, from surplus deposits kept with a co-operative bank, was not eligible for deduction under Section 80P(2)(d) of the Income Tax Act.

Therefore, the assessee filed an appeal with the Income Tax Appellate Tribunal.

Suman Lunkar, representing the assessee, raised the issue that the CIT(A) erred in confirming the disallowance made by the Assessing Officer under the provisions of Section 80P(2)(d) of the Income Tax Act.

After reviewing the facts and records, the bench of Beena Pillai (Judicial Member) and Waseem Ahmed (Accountant Member) observed that if the Co-operative Bank is not carrying out any banking business, the deduction on account of interest on the investment made in such Co-operative Bank cannot be denied for the reason that such Cooperative Bank is not a bank as per the judgment of Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Bank Ltd., Vs. ACIT, wherein it was observed that the assessee was a state-level agricultural and rural development bank and governed under the Kerala Co-operative Societies Act , 1969 as a co-operative society.

Accordingly, the bench allowed appeals for statistical purposes and issued directions to the Assessing Officer for fresh adjudication.

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