2017 (1) TMI 1100 - HC - Income Tax

Entitlement to claim deduction u/s 80P(2)(d) - amount of income was earned by the assessee in the form of interest from deposits in the Co- operative Banks - Held that - Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co - operative Bank which is a species of the genus would necessarily be covered by the word Co-operative Society . Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Bank would be included in the words Co-operative Society . Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction under Section 80P(2)(d) of the Income Tax Act.
2. Interpretation of whether a Co-operative Bank should be considered a Co-operative Society for deduction purposes.

Issue 1: Disallowance of deduction under Section 80P(2)(d) of the Income Tax Act:
The case involved a Co-operative Credit Society providing credit facilities to members and marketing agricultural produce, running various businesses, including a medical shop and lodging services. The Assessing Officer disallowed a deduction claimed under Section 80P(2)(d) of the Act, related to interest income from Co-operative Banks, treating it as income from "other sources." The Commissioner of Income Tax (Appeals) allowed the deduction, which was further challenged by the Revenue before the ITAT. The ITAT dismissed the Revenue's appeal, leading to the current challenge in the High Court.

Issue 2: Interpretation of whether a Co-operative Bank should be considered a Co-operative Society for deduction purposes:
The primary contention raised in the High Court was whether a Co-operative Bank should be considered a Co-operative Society for the purpose of claiming deductions under Section 80P(2)(d) of the Act. The Court highlighted that the issue had been previously decided by the ITAT in different cases. It was emphasized that the term "Co-operative Society" is of broad scope, encompassing various types of activities, while a Co-operative Bank is a specific type falling under this umbrella term. The Court noted that as per the Banking Regulations Act, a primary Co-operative Society bank is considered a Co-operative Society. Therefore, interest earned from a Co-operative Society Bank should be eligible for deduction under Section 80P(2)(d) of the Act.

In conclusion, the High Court dismissed the Revenue's appeal, stating that the questions of law raised were not applicable to the case at hand. The Court found that the interest earned by the assessee from a Co-operative Society Bank was indeed deductible under Section 80P(2)(d) of the Income Tax Act. The judgment reaffirmed that a Co-operative Bank falls within the definition of a Co-operative Society for the purpose of claiming deductions, as clarified by both legislative provisions and previous judicial interpretations.