In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Pune Bench granted relief to Shri Saikrupa Nagari Sahakari Patsanstha Maryadit Kolhapur, a cooperative credit society, by allowing a deduction under Section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from investments with cooperative banks.
The assessee, engaged in accepting deposits and providing credit facilities to its members, had declared a nil income for the Assessment Year 2018-19 after claiming deductions under Chapter VIA amounting to Rs.26,32,236.
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During the assessment, the Assessing Officer (AO) observed that the assessee earned Rs.19,33,878 as interest income from investments with cooperative banks. The AO disallowed the deduction claimed under Section 80P(2)(d), treating the interest income as taxable under the head “Income from Other Sources.” This decision was subsequently upheld by the Commissioner of Income Tax (Appeals).
Upon further appeal, the ITAT examined the provisions of Section 80P(2)(d), which allows a deduction to cooperative societies in respect of any income by way of interest or dividends derived from investments with other cooperative societies. The Tribunal noted that cooperative banks are essentially cooperative societies that have obtained banking licenses.
Citing previous decisions, including the case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. vs. ITO, the ITAT reiterated that interest income earned from deposits with cooperative banks qualifies for deduction under Section 80P(2)(d).
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The bench, comprising Dr. Manish Borad, Accountant Member, concluded that the assessee is entitled to the claimed deduction. Consequently, the ITAT set aside the findings of the lower authorities and directed the AO to allow the deduction of Rs.19,33,878 under Section 80P(2)(d).
This ruling reinforces the eligibility of cooperative societies to claim deductions on interest income earned from investments with cooperative banks, thereby providing clarity on the interpretation of Section 80P(2)(d) concerning such income.
In Conclusion, the appeal was allowed.
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