Loading judgment…
Facts
The Revenue filed an appeal against the CIT(A)'s order allowing deduction under Section 80P for interest income earned by a cooperative society from cooperative and nationalized banks. The Revenue contended that a cooperative bank is a commercial bank and not a cooperative society for the purpose of Section 80P(2)(d), and that the assessee was not eligible for deduction.
Held
The Tribunal held that the issue is covered by Supreme Court decisions in favour of the appellant. The appellant society is entitled to deduction under Section 80P(2)(d) of the Act for interest earned from cooperative banks. The Tribunal further noted that interest from nationalized banks is also exempt.
Key Issues
Whether income earned by a cooperative society from cooperative and nationalized banks is eligible for deduction under Section 80P of the Income Tax Act.
Sections Cited
80P(2)(d), 80P(2)(a)(i), 80P(2)(c)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, Mumbai “F” Bench, Mumbai.
Before: Smt. Kavitha Rajagopal (JM) & Shri Omkareshwar Chidara (AM)
1. On the facts and in circumstances of the case and in law, the ld.CIT(A) has erred in not appreciating the fact that co-operative bank is a commercial bank and does not fall under the purview of "Co- operative Society" referred in Section 80P(2)(d) of the Income Tax Act, 1961 and therefore the assessee society is not eligible for deduction u/s.80P(2)(d) of the Income Tax Act, 1961.
2. On the facts and in circumstances of the case and in law, the Ld.
2 CIT(A) erred in not appreciating that the assessee has also earned income from Dena Bank, which admittedly is not a co-operative bank, but a commercial bank.
3. The Ld.CIT(A) has mentioned in Para 9, that it is not section 80P makes it clear that deduction uls.80P(2)(d) is only available for deposits made in cooperative societies while in the instant case the assessee earned interest from investment made in a bank and not a cooperative society and therefore the assessee was not eligible for deduction. The CIT(A) has further mentioned that this view was upheld in the decision of Hon'ble Supreme Court in the case of Totgars Co-operative Society 322 ITR 283. On the facts and in circumstances of the case, the ld.CIT(A) erred in ignoring the Hon'ble SC decision and following various jurisdictional ITATs decisions.
The appellant Society filed a Cross Objection with following grounds of appeal :-
The assessee being a co-operative credit society is entitled for deduction of its entire income including interest from co-operative and nationalized banks u/s 80(P)(2)(a)(i) of The Income Tax Act, 1961 2. Alternatively, the assessee is entitled for deduction u/s 80(P)(2)(d) in respect of interest income earned from other co-operative societies.
3. The assessee being a co-operative society is eligible for deduction u/s 80P(2)(c) amounting to Rs 50,000/-.
4. The appellant further reserves the right to add, amend or alter the aforesaid grounds of appeal as they may think fit by themselves or by their representatives.
Since the issue in both the appeals is common and same, the Income Tax Appeal and Cross objection are clubbed and a consolidated order is passed.
From the above grounds of appeal of Revenue and from the Cross objection filed by the appellant society, it is observed that the issue deals with deduction of income from interest from cooperative and national banks under section 80P(2)a)(i)/80(P)(2)(d)/80P(2)(c) of the Income Tax Act. The Revenue filed an appeal stating that the appellant society is not entitled to 3 deduction under section 80P for the interest earned from the cooperative banks and placed reliance on the decision of Hon'ble Supreme Court in the case of Totgar Cooperative Society, 322 ITR 283(SC).
During the hearing proceedings, the Ld. DR relied on the assessment order and the grounds of appeal and pleaded that the addition made by denying the deduction claimed by appellant under section 80P should be confirmed and the order of Ld. CIT(A) be reversed.
6. Per contra, Ld. AR of the appellant has argued that the case of Totgar Cooperative Society (supra) relied on by the Revenue is not applicable to the facts of this case because their society does not hold banking license and hence entire income from cooperative banks is exempt under section 80P(2) of the Act. The Ld. AR of the appellant filed a paper book containing several Tribunal and High Court decisions, where it was held that the income from cooperative banks and nationalized banks is exempt under section 80P(2) of the Act. It was argued that the issue is no more debatable because of the following Supreme Court decision on this point :-
“We would like to bring to your notice that the Supreme Court in the following cases observed that any Co-operative Credit society not holding banking license is eligible for deduction for its entire income u/s 80(P)(2) of the Income Tax act. 1)The Citizen Cooperative Society Ltd V/s. ACIT vide order dated 8th of August 2017, appeal number 10245 of 2017 2)The Mavilayi Service Cooperative Vs. Commissioner Of Income Tax on 12 January, 2021 Civil Appeal No.8315 of 2019. 3)The Pr. Commissioner Of Income Tax 17 Vs. Annasaheb Patil Mathadi Kamgar Sahakari Patpedhi Ltd. (IA No. 36473/2020 20.04.2023).
4) Kerala state cooperative Agricultural and Rural Development Bank Ltd. V/s. The A.O. Trivandrum Civil Appeal No.10069 of 2016 dt.14th September 2023 in this case the entire 80(P) has been allowed by observing as follows.
"In the result, the appeals filed by the appellant are allowed and the order(s) of the Kerala High Court and other authorities to the contrary are set aside. Consequently, we hold that the appellant is entitled to the 4 benefit of deduction under Section 80P of the Act. The questions for consideration are answered accordingly."
As far as the interest received from nationalized banks is concerned, the appellant relied on the decision of Vavveru Cooperative Rural Bank 396 ITR 371 (Telangana & AP High Court), where it was held that the interest received by the cooperative society from National Banks is exempt under section 80P of the Act.
Heard both sides. Since the issue is covered by the decisions of Hon'ble Supreme Court (supra) in the case of Citizen Coop. Society Ltd. and the Mavilayi Service Coop. Society (supra) in favour of appellant, where it was held that the appellant society is entitled to deduction under section 80P(2)(d) of the Act. Hence, the appeal of the Revenue is dismissed and cross objection filed by the appellant society is allowed. Order pronounced in the open Court on 23/07/2025.