2024 (8) TMI 1427 - AT - Income Tax

Deduction u/s 80P(2)(a) - interest on fixed deposit receipt and savings bank account received by the assessee from the cooperative banks for - HELD THAT - According to section 2(10) of the Maharashtra State cooperative societies act 1860 provides Co-operative bank means a Co-operative society which is doing the business of banking as defined in clause (b) of sub-sections (1) of section 5 of the Banking Companies Act, 1949 and includes any society which is functioning or is to function as an Agricultural and Rural Development Bank under Chapter XI. The cooperative banks are also the cooperative societies which are doing the banking business. In view of this it cannot be said that the interest income earned by the assessee on account of fixed deposit receipt is in savings bank account is not received from a co-operative society. It may be an altogether another thing that such cooperative societies are carrying on the banking business. Therefore, these banks are accepting fixed deposit receipts from the assessee. In view of the above analysis, it is clear-cut that cooperative banks are also co-operative society and interest income earned by the assessee on fixed deposit as well as savings bank account is an investment income of the assessee and therefore it qualifies for deduction u/s 80P(2)(d) of the act. Number of decisions of the coordinate benches are cited wherein it has been held that a co-operative society is eligible for deduction of investment income if it is placed with other co-operative banks which is also a co-operative society. DR has failed to show that the cooperative banks are not registered under the cooperative societies. AO is directed to grant deduction to the assessee u/s 80P(2)(d) of the act on interest on fixed deposit receipt and savings bank account received by the assessee from the cooperative banks for both the years. Assessee appeal allowed.

Summary

Issues:
Appeals filed by the assessee against the order passed by the additional CIT for assessment years 2020-21 and 2021-22 denying deduction under section 80P(2)(d) of the Income Tax Act on interest income received from cooperative banks.

Analysis:
The appeals were filed by the assessee against the order denying deduction under section 80P(2)(d) of the Income Tax Act for the assessment years 2020-21 and 2021-22. The main issue in both appeals was whether the assessee, a cooperative housing society, was entitled to deduction on interest income received from cooperative banks. The interest income for the two years was Rs. 174,100 and Rs. 130,752, respectively. The assessee earned interest from fixed deposits and savings accounts with cooperative banks, which were denied as deductions under section 80P(2)(d) by the assessing officer. The CIT(A) upheld the denial based on a Supreme Court ruling but failed to differentiate between section 80P(2)(a) and section 80P(2)(d) of the Act.

The Tribunal analyzed the provisions of section 80P(1) and 80P(2)(d) of the Income Tax Act. Section 80P(1) allows deductions for income derived by a cooperative society, subject to the provisions of the Act. Section 80P(2)(d) specifically mentions deduction for income by way of interest derived from investments with other cooperative societies. The definition of "cooperative society" under section 2(29) includes societies registered under the Co-operative Societies Act. Additionally, section 2(10) of the Maharashtra State Cooperative Societies Act defines a "Cooperative bank" as a society engaged in banking business, which includes cooperative societies. Therefore, the Tribunal concluded that cooperative banks are also cooperative societies engaged in banking activities, making the interest income earned by the assessee eligible for deduction under section 80P(2)(d).

The Tribunal noted that previous decisions supported the eligibility of cooperative societies for deduction on investment income placed with other cooperative banks. It emphasized that the departmental representative failed to establish that the cooperative banks were not registered under cooperative societies. Consequently, the Tribunal directed the assessing officer to grant the deduction to the assessee for both years under section 80P(2)(d) on the interest income from fixed deposits and savings accounts with cooperative banks. As a result, the orders of the lower authorities were reversed, and the appeals of the assessee were allowed for both assessment years.