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Facts
The assessee, a co-operative society, earned interest income from deposits made with co-operative banks. This income was claimed as a deduction under Section 80P(2)(d) of the Income Tax Act. The Assessing Officer disallowed this deduction, and the disallowance was upheld by the Commissioner (Appeals).
Held
The Tribunal held that interest income earned by a co-operative society from deposits made with co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act. The Tribunal followed a coordinate bench's decision in a similar case.
Key Issues
Whether interest income earned by a co-operative society from deposits with co-operative banks is deductible under Section 80P(2)(d) of the Income Tax Act.
Sections Cited
80P(2)(d), 250, 143(3), 2(19), 2(10), 5, 80P(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI OMKARESHWAR CHIDARA
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 25.11.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
The Assessee has raised only issue with regard to disallowance of Rs. 76,02,469/- made by the Assessing Officer {AO} vide assessment order dated 11.12.2019 u/s 143(3) of the Act, on account of not allowing the interest income earned from various Co-operative Banks, which was claimed as deduction u/s 80P(2)(d) of the Act, which stands affirmed by the Ld. Commissioner vide impugned order. Thus, the Assessee being aggrieved is in appeal before this Court.
Admittedly, the issue qua deduction claimed u/s 80P(2)(d) of the Act on account of interest income earned from Co-operative Banks which is under consideration before this Court, has been dealt with and allowed in favour of the Assessees by various Courts all across the Nation including by the Hon’ble co-ordinate Bench of the Tribunal in the Assessee’s own case {vide order dated 07.04.2025 in pertaining to 2015-16 by observing and holding as under:
“7. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities. Ld. AR submitted that the issues in the present appeal are fully covered by the decision of coordinate bench of ITAT in case of Ashok tower “D” Co. Op. Housing Society Ltd. Vs. ITO, reported in [2024] 163 taxmann.com 598 (Mumbai-Trib), where in it was held that assessee co-operative housing society was eligible for deduction u/s 80P(2)(d) in respect of interest income earned by it from a co- operative bank and accordingly, AO was directed to grant deduction to assessee on interest income earned from cooperative banks u/s 80(2)(d). The operative portion of the order of the coordinate bench of ITAT is reproduced herein below:
We have heard the rival contentions and perused the orders of the lower authorities. The simple controversy involved in this appeal is that assessee is a co-operative society, has placed certain funds with cooperative banks and earned interest thereon of Rs. 1,472,930/-. The claim of the assessee is that deduction is available under section 80 P (2) (d) of the act to the assessee.
According to the provisions of section 80 P in case of a cooperative society the gross total income if it includes the income referred to in is subsection (2) then same shall be granted as a deduction subject to the conditions and to the extent of amount specified from the total income. In subsection 2, clause (d) provides that in respect of income by way of interest on dividend derived by the cooperative
society from its investment with any other cooperative society the whole of such income is eligible for deduction. Therefore if the cooperative society makes any investment in another cooperative societies and consequently on any the cooper dividend earned from such investment total sum so is eligible for deduction.
The controversy involved here is that the argument of the revenue is that when the assessee has made investment in another cooperative society copy then this deduction is allowable. Therefore according to the if amount is not investment trative society, the deduction is not eligible. The reden to the AO if the count is investment in a cooperative bank which is different from cooperative societies or the says that cooperative societies and therefore the assessee is not entitled to deduction under section 80 P (2) (d) of the Act.
Section 2 (19) of the act defines cooperative society means a cooperative society registered under the Cooperative societies act, 1912 or under any other law for the time being in force in any State for the registration of cooperative societies. Thus if the cooperative banks are falling into the definition of cooperative societies', naturally the deduction would be eligible to the assessee under section 80 P (2) (d) of the act. Therefore it needs to be examined that whether the cooperative banks are operative societies under section 2 subsection (19) of the act are not.
Section 2 (10) of the Maharashtra cooperative societies act defines "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; Therefore according to the above definition, the cooperative banks are also cooperative society
Thus, though the assessee has referred to several judicial precedents, even after considering those precedents, which also holds the same view, we do not have any hesitation to hold that the amount of investment made by the assessee with cooperative banks in Maharashtra are also investment made in cooperative society.
Thus, on plain reading of the sections of the income tax act it is clear that if assessee has made an investment in fixed deposit receipts or in savings bank account, interest earned thereon is eligible for deduction under section 80 P (2) (d) of the act. The words of the statute are plain and clear and there is no room for applying any of the principles of interpretation. We are supposed to interpret them as they stand. It is not the claim of the revenue that assessee is not a cooperative society.
In the result, the orders of the lower authorities are reversed and the learned AO is directed to grant deduction to the assessee on interest income earned from cooperative banks u/s 80 P (2) (d) of The Act.
In the result, Appeal of the assessee is allowed.
Since the facts of the present case are similar to the facts of the above mentioned case, and assessee has also derived income from deposits with Co-operative banks and claimed deduction u/s 80(P)(2) of Income-tax Act. Therefore, in view of the discussion made above and respectfully, following the decision in the case of Ashok tower “D” Co. Op. Housing Society Ltd. (supra) cited above, we decide these grounds in favour of assessee and accordingly direct AO to grant deduction on interest income earned from Co-operative banks u/s 80(P)(2) of the Act raised by the assessee are allowed.”
As the issue is squarely covered in favour of the Assessee by the judgment of the Hon’ble Co-ordinate Bench of the Tribunal, thus the AO is directed to verify the factual aspect qua interest income from co-operative Bank by the Assesse and delete the respective addition.
In the result, the appeal of the Assessee is allowed.
Order pronounced in the open court on 28.07.2025.