Interest Income Earned by Credit Co-operative Society from Co-operative Bank is Eligible for Deduction u/s 80P(2)(d): ITAT [Read Order]
The Tribunal relied on the principle that a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act.
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) confirmed that interest and dividend income earned by a primary credit co-operative society from investments made with a co-operative bank is eligible for deduction under Section $80P(2)(d)$ of the Income Tax Act, 1961.
The Ammunition Factory Co-op. Credit Society Limited (assessee), a primary credit co-operative society engaged in providing credit facilities and accepting deposits from its members. The dispute concerned the Assessment Years (AY) 2018-19 and 2020-21.
For AY 2020-21, the assessee claimed a deduction under Section 80P(2)(d) for interest and dividend income amounting to ₹2,33,90,227. This income was earned from investments, specifically fixed deposits, made with the Pune District Central Co-operative Bank Ltd.
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The Assessing Officer (AO) disallowed the claim, treating the income as "Income from Other Sources" taxable under Section 56. The AO relied on the Hon'ble Supreme Court's decision in the case of Totgar's Co-operative Sale Society Limited vs. ITO.
Aggrieved by the AO’s order, the assessee appealed to the CIT(A), who deleted the addition and allowed the deduction. The CIT(A) held that a co-operative bank is a co-operative credit society, and the interest income is eligible for deduction under Section 80P(2)(d) of the Income Tax Act.
Aggrieved by the CIT(A)’s order, the Revenue then filed an appeal before the ITAT, challenging the allowance of the deduction.
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The two-member bench comprising Manish Borad (Accountant Member) and Vinay Bhamore (Judicial Member) noted that the assessee was a primary credit co-operative society whose core business was providing credit facilities to its members.
The tribunal observed that the investment of funds with other co-operative banks was mandatory as per the Maharashtra State Co-operative Societies Act.
The Tribunal relied on the principle that a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act.
The tribunal followed binding precedents from the Jurisdictional Mumbai Bench of the ITAT and the Hon'ble Bombay High Court in the case of Annasaheb Patil Mathadi Kamgar Sahkari Pathpedhi Ltd.
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The tribunal upheld the order of the CIT(A)/NFAC and confirmed that the interest and dividend income was entitled to the deduction under Section 80P(2)(d) of the Income Tax Act. The Revenue's appeals for both AY 2020-21 and AY 2018-19 were dismissed.
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