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Facts
The assessee, a cooperative society, claimed deduction under section 80P(2)(d) for interest income earned from cooperative banks. The Assessing Officer and CIT(A) disallowed this deduction.
Held
The Tribunal held that cooperative banks are to be considered cooperative societies, and interest income earned from them is eligible for deduction under section 80P(2)(d), following various judicial precedents.
Key Issues
Whether interest income earned by a cooperative society from cooperative banks is eligible for deduction under section 80P(2)(d).
Sections Cited
80P(2)(d), 254(1)
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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of Ld. CIT(A)/ADDL/JCIT(A)-2 dated 31.01.2025 for assessment year (AY) 2017-18.
The assessee has raised following grounds of appeal:
”1. Appellant prays that the Returned Income as per the return of income filed by the Appellant be accepted as Taxable Income.
2. The Appellant prays that the deduction under section 80P(2)(d) amounting to Rs. 23.25, 120 claimed in the Return be allowed as the Appellant is a Co- operative Housing Society.
2.1 The learned CIT (A) erred when he ignored the fact that a co-operative bank is also a co operative society which has obtained banking licence issued by Reserve Bank of India.
2.2 The learned CIT (A) erred when he failed to follow the principle laid down by the Order of Hon. Supreme Court that co-operative banks are also cooperative societies and income derived by a cooperative society from its investment held with a co-operative bank would be entitled for claim of deduction u/s. 80P(2)(d) of the Act.
2.3. The learned CIT(A) erred when he dismissed the Appellant's contention that precedent set by the Department in the Appellant's case in the AY 2014 has not been followed.
2.4 The learned CIT(A) erred when he passed the Order merely two days after the Appellant made its final submission thereby disposing off appeal injudiciously without following the judgment of Hon. Supreme Court.
3. The Appellant prays that the consequential interest levied should be deleted.
4. The Appellant prays that the refund as per the Return of Income be granted.
5.The appellant prays that the demand raised by the learned Assessing Officer be kept in abeyance till this appeal is heard and order passed.
The appellant relied on the various decisions of the Hon’ble ITAT Mumbai and also on the order of the CIT(A) in its own case for FY 2023-24 on this matter where the deduction u/s 80P(2)(d) of the Act has been allowed to the appellant.
Rival submissions of both the parties have been heard and record perused.
The learned Authorised Representative (ld. AR) of the assessee submits that assessee is seeking a very limited relief in the present appeal on account deduction under section 80P(2)(d). During the relevant financial period under consideration, the assessee has shown interest income from Punjab and Maharashtra Co-operative Bank and Maharashtra State Co Operative Bank.
The assessee claimed deduction of interest of Rs. 22,85,754/-, received from Co-operative Banks. The interest earned from co-operative bank is not in dispute. The various benches of Tribunal held that co-operative banks are treated as primarily co-operative society and the interest earned from co- operative bank has been consistently allowed in a series of decision. Even in assesses own case in FY 2023-24, the assessee is allowed similar interest income earned from Co-operative Bank under section 80P(2)(d). Thus, the grounds of appeal raised by assessee is covered in favour of assessee and against the revenue. To support her submission, the ld. AR of the assessee relied upon the following case laws: Sai Ankur Co-operative Housing Society Ltd. Vs. ITO (171 taxmann.com
44. (Mumbai-Trib) Chinar Co-op Hsg. Society Ltd. Vs. CIT(A) NFAC, ITO (174 taxmann.com 457 (Mumbai-Trib) Charkop Lands End Co-operative Housing Society Ltd. Vs. ITO (174 taxmann.com 602 (Mumbai-Trib) Gautam Dhan Co-op Housing Society Ltd. Vs. ITO (ITA No. 997/M/2023) (Mumbai-Trib) Palm Court M Premises Co-operative Society Limited Vs. PCIT-30 (ITA No. 561/M/2021) (Mumbai – Trib) Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO (ITA No. 6547/M/2017) (Mum-Trib) PCIT Vs. Totagars Co-operative Sale Society (78 taxmann.com 169 (Karnataka)/392 ITR
74. (Karnataka) Totgars Co-operative Sale Society Ltd. Vs. ITO (188 Taxman 282 (SC)/ 322 ITR 283 (SC).
On the other hands, the ld SR DR for the revenue supported the orders of lower authorities.
We have considered the rival submissions of both the parties and gone through the orders of authorities below. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that there is no dispute that assessee has earned interest from co-operative bank. In a series of decision in various case laws as relied by ld. AR of the assessee, it has been consistently held that co-operative banks are primarily co-operative society and the interest or dividend earned from co-operative banks are eligible for deduction. We also find that Karnataka High Court in PCIT Vs Totgars Co- operative Sale Society (supra) also held that for the purpose of section 80P(2)(d), the co-operative bank should be considered as a co-operative society. The decision was rendered after considering earlier decision of Totgars Co-operative Society Vs. ITO 322 ITR 283 (SC). The ld CIT(A) also relied on the decision of Hon’ble Apex Court in Totgars Co-operative Society Vs. ITO 322 ITR 283 (SC), such reliance is misplaced as said case relates to deduction under section 80P(2)(d). However, the basis grounds of appeal related to the deduction under section 80P(2)(d). Clause (a) of sub-section (2) of Section 80P deals with the income earned by cooperative society from its activities, however, Clause (d) of sub-section (2) of Section 80P deals the income derived by way of interest or dividend from other co-operative society. Thus, considering consistent decision of various benches of co- operative benches of Tribunal and various High Courts, wherein it has been held that for the that for the purpose of section 80P(2)(d), the co-operative bank should be considered as a co-operative society. The grounds of appeal raised by assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order was pronounced in the open Court on 08/07/2025.