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Facts
The assessee, a cooperative housing society, received interest income from deposits with a cooperative bank. The Assessing Officer (AO) denied the deduction claimed under Section 80P(2)(d) of the Income Tax Act, and the CIT(A) upheld this disallowance.
Held
The Tribunal held that cooperative banks fall within the definition of cooperative societies. Therefore, interest income earned by a cooperative society from its investment in a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Act.
Key Issues
Whether interest income earned by a cooperative society from its investment in a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
80P(2)(d), 80P(4), 234A, 234B, 2(19), 2(10)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI B R BASKARAN & SHRI SANDEEP GOSAIN
Per: SHRI. SANDEEP GOSAIN, J.M.: The present appeals have been filed by the assessee and revenue challenging the common impugned order 18.11.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A) Mumbai, for the A.Y 2016-17.
Asian Paints Employees Cooperative Credit Society Ltd, Mumbai 1. Ground No 1 - Rejection of claim U/sec 80P(2) (d) of Rs. 1,40,462/- 1.1 On the facts and circumstances of the case and in Law, the Commissioner of Income Tax (Appeal), ADDL/JCIT (A)-3 Bengaluru, erred in confirming the disallowance of the claim of Rs. Rs.1,40,462/- u/s 80P(2)(d) r.w.sec 80P(4) being interest received by the Appellant on its investment with Abhyudaya Co-operative Bank ignoring the fact that the said bank is a registered co-operative society under the Co-operative Society Act, 1912 and therefore interest income from the said bank is eligible deduction U/sec 80P(2)(d). 1.2 The said CIT(A) also erred in not considering the fact that the provision of Section 80P (4) are applicable to Co-operative Banks and not to Co-operative societies.
2. Ground No 2 - Levy of Interest u/s 234A and 234B The said A.O. erred in charging excess interest u/s 234A and 234B when no such interest is chargeable.
3. The appellant craves leave to add, amend, alter, modify and / or delete all or any of the above grounds on or before the date of hearing.
As per the facts of the case, the assessee is a cooperative housing Society registered under Maharashtra cooperative societies Act, 1960. Since during the year under consideration, the assessee had received interest on deposits with cooperative bank, therefore claimed deduction u/s 80P(2)(d) of the act. But the same was denied by AO, and appeal filed by the assessee was also dismissed by Ld. CIT(A).
Aggrieved by the order of Ld. CIT(A), assessee has preferred the present appeal before us on the grounds mentioned herein above.
All the grounds raised by the asesee are interrelated and interconnected relates to challenging the order of Ld. CIT(A) in confirming the disallowance of deduction u/s 80P(2)(d) of the Act. Therefore, we have decided to take all the issues together and to adjudicate the same through the present consolidated order.
At the outset Ld. AR submitted that the issue in question is squarely covered in favour of assessee by the decision of the Coordinate Bench of ITAT in the case of Ashok Tower D Cooperative Housing Society Ltd., Vs. ITO [2024] 163 taxmann.com 598 (Mum).
On the other hand, Ld. DR representing the respondent relied upon the orders passed by the revenue authorities.
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.
11. 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. 12. 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 Asian Paints Employees Cooperative Credit Society Ltd, Mumbai 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 14. 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 Asian Paints Employees Cooperative Credit Society Ltd, Mumbai 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 hence the grounds raised by the assessee are allowed.
In the result the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 07/04/2025