2024 (8) TMI 926 - AT - Income Tax

Allowability of deduction u/s. 80P(2)(d)/ 80P(2)(a)(i) - interest income earned by a Cooperative Society formed with the object of accepting deposits from Members and lending money to its Members - HELD THAT - On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. What is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. This issue was considered in the case of CIT vs. Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT wherein after referring to the decision of Totgar s Co-operative Sale Society Ltd.Vs. ITO ( 2010 (2) TMI 3 - SUPREME COURT held that the ratio of decision of the Hon ble Supreme Court is not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. In the light of this discussion, I am of the considered opinion that the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks qualify for deduction under the provisions of section 80P(2)(d) of the Act. Therefore, the grounds of appeal raised by the appellant stand allowed.

Summary

The appeal was filed against the order of National Faceless Appeal Centre for the assessment year 2018-19. The appellant, a Credit Cooperative Society, claimed deduction under Chapter VIA which was disallowed by the AO. The CIT(A)/NFAC confirmed the disallowance, but the Tribunal allowed the appeal. The interest income earned on deposits with Cooperative Banks qualifies for deduction under section 80P(2)(d) of the Act.