2022 (11) TMI 537 - AT - Income Tax

Denial of deduction u/s.80P(2)(d) on the interest income and dividend - assessee is a cooperative society which earned interest and dividend from Pune Central District Co-operative Bank - HELD THAT - As seen that the Pune Benches of the Tribunal in Rena Sahakari Sakhar Karkhana Ltd . 2022 (1) TMI 419 - ITAT PUNE has held that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. Pune District Central Co-operative Bank is also a co-operative society, being, registered as such. Thus overturn the impugned order and direct to grant deduction u/s.80P(2)(d) of the Act on the amount of interest and dividend income earned from Pune District Central Co-operative Bank, a co-operative society - Assessee appeal is allowed.

Summary

Issues:
Denial of deduction u/s.80P(2)(d) on interest income and dividend income.

Analysis:
The appeal pertains to the denial of deduction u/s.80P(2)(d) on the interest income and dividend income earned by a credit cooperative society from Pune District Cooperative Bank. The Assessing Officer (AO) disallowed the deduction, a decision upheld by the CIT(A), leading to the appeal before the Tribunal. The key contention revolved around the interpretation of section 80P of the Income Tax Act, specifically whether the cooperative society was eligible for the deduction on interest and dividend income.

Upon review, the Tribunal noted that the cooperative society earned interest and dividend from Pune Central District Co-operative Bank. Referring to a previous decision by the Pune Benches in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT, the Tribunal highlighted that while certain co-operative banks were excluded from deduction eligibility under section 80P(4) from April 1, 2007, this exclusion did not impact the eligibility of a cooperative society under section 80P(2)(d). The Tribunal emphasized that a cooperative society registered under the Co-operative Societies Act, 1912, or any applicable law, remained eligible for the deduction on interest income from investments/deposits in a cooperative bank meeting the defined criteria.

Relying on the precedent set by the Division Bench, the Tribunal overturned the previous order and directed the grant of deduction u/s.80P(2)(d) on the interest and dividend income earned from Pune District Central Co-operative Bank. Consequently, the appeal was allowed, and the decision was pronounced in the Open Court on 9th November 2022.