Interest from Cooperative Banks Eligible for 80P Deduction: ITAT Allows ₹12.53 Lakh Claim Treating Banks as Societies [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) held that interest earned from deposits/investments with cooperative banks qualifies for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, as cooperative banks are essentially cooperative societies.

Kallapanna Awade Ich Janata Sah Bank Sevakanchi Sah Patsanstha Maryadit (assessee), a cooperative society, claimed deduction under Section 80P(2)(d) on interest income of Rs. 12,53,362.

The Income was earned from deposits/investments with K.A. Ich Janata Multistate Coop. Bank Ltd. and Kolhapur District Central Coop. Bank Ltd. during Assessment Year 2020-21. The Assessing Officer (AO) disallowed the deduction.

The AO treated the interest as income from other sources. Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the disallowance. Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT.

The single-member bench comprising Dr. Manish Borad (Accountant Member) observed that the issue was settled by coordinate benches of the Tribunal.

The Bench also observed that the Benches have consistently held that interest from cooperative banks is allowable under Section 80P(2)(d), as such banks retain their character as cooperative societies despite obtaining banking licenses.

The bench relied on precedents, including Annapurna Nagari Sahkari Pathsanstha Maryadit vs. ITO and Kolhapur District Central Co-op. Bank Kantsista Sevakanchi Sahukar Pat Sanstha Ltd. vs. ITO, where similar deductions were allowed.

The bench noted that cooperative banks are registered under the Cooperative Societies Act and qualify as "cooperative societies" for the purposes of Section 80P(2)(d) of the Income Tax Act.

The Tribunal set aside the CIT(A)’s findings and directed the AO to allow the deduction of Rs. 12,53,362 under Section 80P(2)(d) of the Income Tax Act. The appeal of the assessee was allowed.

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