Interest Income from Cooperative Banks Eligible for Deduction u/s 80P(2)(d): ITAT allows deduction of Rs. 35 lakhs [Read Order]

The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) held that the interest income that is derived from the cooperative banks is eligible for deduction under Section 80P(2) of the Income Tax Act, 1961, and allowed the assessee to claim a deduction of around Rs. 35 lakhs.

The assessee, Jankalyan Gramin Bigarsheti, is a cooperative society registered under the Maharashtra Cooperative Societies Act, 1960. The Assessing Officer (AO) disallowed the deduction under Section 80P(2)(d) of the Income Tax Act on the interest income earned from investments, noting that the assessee failed to segregate investments made with cooperative societies and cooperative banks. The AO noted that the society had earned interest from entities like RDCC, VKGB, Dapoli Urban Bank, and DNS Investment but could not substantiate that these were purely cooperative societies and not cooperative banks.

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Although the assessee appealed to the National Faceless Appeal Centre ( NFAC ), there were no favourable results.

The assessee then approached the ITAT for relief, contending that the interest income from deposits with cooperative banks should be eligible for deduction under Section 80P(2)(d) of the Income Tax Act. The case was heard ex parte as no representative appeared on behalf of the society despite due notice.

The ITAT noted that Section 80P(2)(d) allows deductions for income received as interest or dividends from investments with other cooperative societies. The Tribunal referred to previous decisions, including those in the cases of Kolhapur District Central Co-op. Bank and Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society, where it was held that interest income from deposits with cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act.

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The ITAT concluded its judgment stating that the interest income earned from deposits with cooperative banks is also eligible for deduction under Section 80P(2) of the Income Tax Act, as cooperative banks are basically cooperative societies that have turned into banks on getting the necessary banking license.

The ITAT, presided over by Manish Borad (Accountant Member), allowed the assessee’s appeal.

To Read the full text of the Order CLICK HERE

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