Interest received by Cooperative Societies from Cooperative Banks Eligible for Deduction under Section 80P of Income Tax: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the interest received by the cooperative societies from cooperative banks is eligible for deduction under Section 80P of the Income Tax Act 1961.

Navrang Basant Co-operative Housing Society Limited was a cooperative housing society. It filed its return of income for A.Y. 2017-18 on 28th August, 2017, declaring total income at nil, wherein it claimed deduction under Section 80P of the Income Tax Act. This return of income was picked up for scrutiny. During the course of assessment proceedings, the Assessing Officer noted that the assessee had received interest from cooperative bank and deduction under Section 80P (2) (d) of the Income Tax Act of the same amount was claimed against the said income.

The Assessing Officer took the explanation of the assessee on record and it was rejected. The claim of the Assessing Officer was that as per sub-Section 4 of Section 80P of the Income Tax Act such deduction was not allowable. It was noted that assessee had deposited funds in various cooperative banks as fixed deposits and had earned interest income thereon.

In nutshell, the claim of the Assessing Officer was that interest received by the assessee from cooperative banks were not eligible for deduction under Section 80P of the Income Tax Act as they were not the cooperative societies. Accordingly, the assessment order under section 143 (3) of the Income Tax Act was passed by the Assessing Officer on 6 th December, 2019 wherein the total income of the assessee was assessed at ₹ 1,589,385/– denying deduction.

Siddhant Khopkar, appeared on behalf of the assessee and Adhok Kumar Ambastha, appeared on behalf of the revenue.

The two-member Bench of Prashant Maharishi, (Accountant Member) and Narender Kumar Choudhry, (Judicial Member) observed that assessee was a cooperative society more precisely a housing society and not a cooperative bank therefore the provision Section 80P (4) of the Income Tax Act would not apply to assessee and therefore assessee was held to be eligible for deduction under Section 80 P (2) of the Income Tax Act.

Here the assessee had invested in saraswat Cooperative bank, shamrao Vithal cooperative bank and Maharashtra District cooperative bank limited. There was no doubt that the assessee was not a cooperative bank. Section 80P (4) of the Income Tax Act denies deduction to cooperative banks only. This view was upheld by the supreme court in the case of Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. V Assessing Officer. The Bench allowed the appeal filed by the assessee.

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