2022 (12) TMI 959 - AT - Income Tax

Deduction u/s 80P(2)(d) denied - interest earned deposits kept with Goa State Co/op. Bank Ltd . - HELD THAT - The Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. 2022 (1) TMI 419 - ITAT PUNE 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 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. The assessee is also a Cooperative society registered. Ergo, respectfully following the decision of the Division Bench, we overturn the impugned order and direct to grant deduction u/s.80P(2)(d) on the amount of interest earned from Co-operative Banks. Appeal allowed.

Summary

Issues:
Deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest earned from deposits kept with Cooperative Banks.

Analysis:

Issue: Deduction under section 80P(2)(d) of the Income-tax Act, 1961

The appeal was filed against the denial of deduction of Rs.8,01,674/- under section 80P(2)(d) of the Income-tax Act, 1961 in relation to interest earned from deposits kept with Cooperative Banks. The Assessing Officer disallowed the deduction on interest income claimed under section 80P(2)(d) as the banks were scheduled banks. The First Appellate Authority upheld this decision. However, the Tribunal noted that the assessee, a cooperative society, earned interest from deposits kept with Cooperative Banks and was engaged in the business of accepting and lending money to its members. The Tribunal referred to a decision by the Pune Bench in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT, where it was held that a cooperative society is eligible for deduction under section 80P(2)(d) for interest income from investments/deposits with a cooperative bank registered under the Co-operative Societies Act. As the assessee was a registered cooperative society, the Tribunal allowed the appeal and directed the grant of deduction under section 80P(2)(d) for the interest earned from Cooperative Banks.

This judgment clarifies the eligibility of cooperative societies for deduction under section 80P(2)(d) of the Income-tax Act, 1961 for interest income earned from deposits kept with Cooperative Banks. The decision emphasizes that even though co-operative banks other than specific types are not eligible for deduction under section 80P(4), a cooperative society can claim deduction under section 80P(2)(d) for interest income from investments/deposits with a registered cooperative bank. The judgment provides a clear interpretation of the law and sets a precedent based on previous decisions by the Pune Benches. It highlights the importance of the definition of a cooperative society as per the Co-operative Societies Act in determining eligibility for deductions under section 80P(2)(d).