2024 (4) TMI 1169 - AT - Income Tax

Disallowance u/s 80P(2)(d) - interest income earned from deposits kept with co-operative banks - HELD THAT - As decided in THORAPADI URBAN CO-OP CREDIT SOCIETY LIMITED 2023 (11) TMI 779 - MADRAS HIGH COURT ' Co-operative Society' means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a cooperative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank - Assessee appeal allowed.

Summary

Issues:
Challenge to disallowance under Section 80P(2)(d) of the Income Tax Act, 1961 for interest income earned from deposits with co-operative banks.

Analysis:
The appellant, a credit co-operative society, challenged the disallowance of deduction under Section 80P(2)(d) of the Act related to interest income earned from deposits with co-operative banks. The AO disallowed the deduction claimed by the appellant, leading to an appeal before the CIT(A), who upheld the disallowance. The main issue revolved around the interpretation of Section 80P(2)(d) and whether it allows deduction for interest income from deposits with co-operative banks. The CIT(A) found that the legislative intent was to exclude cooperative banks to ensure credit facilities for co-operative societies for agricultural and agro-based activities.

The appellant relied on the decision of the Madras High Court and previous Tribunal decisions to support their claim for deduction. However, the CIT-DR supported the impugned order, arguing that Section 80P(2)(d) does not cover interest income from deposits with co-operative/commercial banks. The Tribunal noted that the issue was settled by previous decisions and cited the Madras High Court's interpretation of Section 80P(2)(d) to clarify that a co-operative society includes co-operative banks registered under the Co-operative Societies Act, 1912. Consequently, the Tribunal allowed the appeal, directing the AO to allow the deduction as claimed by the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that a co-operative society, as defined under the Act, encompasses co-operative banks as well. The judgment highlighted the eligibility of the appellant for deduction under Section 80P(2)(d) for interest income earned from deposits with co-operative banks registered under the Co-operative Societies Act, 1912.