The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that interest income to a cooperative society from investments with any other cooperative society is deemed allowable under Section 80P, providing relief to Indian Oil employees’ welfare.
The issue to be decided was whether the assessee Indian oil employees welfare cooperative societies Ltd is eligible for deduction of bank interest earned from cooperative banks under Section 80 P (2) (d) or (a) of the Income Tax Act or not.
The claim of the assessee is that assessee is a cooperative society registered under the Maharashtra cooperative societies act, 1960 and interest received by the appellant from the cooperative banks which are registered under the cooperative society act was deductible under Section 80P(2)(D) of the Income Tax Act.
The assessing officer on the same grounds held that the assessee was not eligible for deduction under section 80 P (2) (d) of the Income Tax Act, for ₹ 8,148,348. The same was disallowed and assessment order was passed under section 143 (3) of the Income Tax Act on 7/12/2019. The assessee challenged the same before the CIT (A), who passed an order on 16/8/2023 on similar lines and dismissed the appeal of the assessee. Therefore, assessee was in appeal.
The assessee is a co-operative society primarily engaged in arranging for prompt payment to beneficiaries of deceased employees. In addition, arrangements have been made to refund the welfare Society dues to employees who ceases to the member of the society due to superannuation, voluntary retirement, termination, resignation etc. For these purpose contribution towards capital in monthly deduction from salary and subscription to the society is made by the members. Such surplus is kept by the assessee with the cooperative banks and interest thereon is earned.
According to the provisions of Section 80 P, wherein case of an assessee being a co-operative society the gross total income includes any income referred to in subsection (2) it shall be deducted in accordance with and subject to the provisions of the section in computing the total income of the assessee.
According to subsection (2) in case of a cooperative society engaged in carrying on the business of banking or providing credit facilities to its member is eligible for deduction of the whole of the amount of profits and gains of business attributable to anyone or more of such activities
The bench noted that the income earned by a co-operative society by way of interest derived from its investment with any other cooperative society, then the whole of such income is deductible. Further the amount of interest received by the assessee from the different cooperative banks; it is not the claim that those banks are also not cooperative societies. It is agreed that those are also cooperative banks in terms of The Banking Regulation Act, 1949.
This issue is also covered in favour of the assessee by the decision of the Supreme Court in case of Kerala State Co-Operative Agricultural & Rural Development Bank Ltd, where the deduction was allowable to the state level agricultural and rural development bank, was engaged in providing credit facility to its members. The case of the assessee was on far better footings that these are society of only the employees of Indian oil Corporation
The two member bench of the tribunal comprising Amit Shukla ( Judicial member ) and Prashanth Maharishi ( Accountant member ) directed the lower authorities to allow the deduction to the assessee on interest income earned from various cooperative banks under Section 80P(2)(d) of the Income Tax Act. Accordingly, the appeals of the assessee were allowed.
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