Interest Received By Cooperative Banks From Fixed Deposit Receipts Are Deductible u/s 80P of Income Tax Act: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, held that interest income earned by a cooperative society from investments in fixed deposits with cooperative banks is eligible for deduction under section 80P of the Income Tax Act, 1961.

The appellant, Deoband Cooperative Cane Development Union Ltd, is a cooperative society and has claimed deduction under Section 80P on interest income earned from fixed deposit receipts (FDRs).

The Revenue Department denied the claim, holding that such interest income does not arise from eligible business activities. The appellant aggrieved by the order passed by lower authority filed an appeal

J.N. Shukla, the counsel for the appellant, contended that the interest income was earned from investments of surplus funds with cooperative banks and thus qualifies for deduction under sections 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act.

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Rajesh Kumar Dhanesta, representing the Revenue Department, supported the orders of the lower authorities and contended that such an interest income could not be eligible business under section 80P(2) of the Income Tax Act.

Sudhir Kumar, Judicial Member and Rifaur Rahman, Accountant Member observed that the issue is no longer res integra and is covered by a series of decisions of coordinate benches.

The Tribunal noted that cooperative banks are a species of cooperative societies and therefore, interest income earned from such investments is eligible for deduction under section 80P of Income Tax Act.

The Tribunal relied on the decision of the Co-ordinate bench of Pune Tribunal in case of ITO v. Shri Bhairavnath Multistate Cooperative Credit Society Ltd. and held that interest earned on surplus funds deposited with cooperative banks qualifies for deduction under section 80P(2)(a)(i) and section 80P(2)(d) of Income Tax Act.

In light of facts and circumstances the appeal of the appellant was allowed.

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