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Facts
The assessee, a co-operative credit society, claimed deduction under Section 80P(2)(d) for interest income received from a co-operative bank. The CPC and the Ld. Addl. CIT(A) disallowed this claim.
Held
The Tribunal held that interest income received by a co-operative society from investments in another co-operative bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, following the High Court's ruling.
Key Issues
Whether interest income received by a co-operative society from investments in a co-operative bank is eligible for deduction under Section 80P(2)(d).
Sections Cited
143(1), 80P, 80P(2)(d), 2(19), 80P(2)(a)(i)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A)-4, Kolkata [hereinafter “Addl. CIT(A)”] dated 01.02.2024 against the intimation u/s. 143(1) of the Income-tax Act, 1961 (hereinafter “the
Dharapuram Public Servants Co-Operative Thrift and Credit Society Ltd. CE17 ITA No.2148/Chny/2025
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Act”) issued by Centralized Processing Centre, Bengaluru (hereinafter “CPC”) dated
There is a delay of 458 days in filing the appeal by the assessee.
The assessee has filed condonation petition/affidavit stating the reasons for delay in filing the appeal. We have considered the petition/affidavit of delay in filing the appeal and satisfied that there was sufficient cause for not filing the appeal within the prescribed time limit. Hence, the delay is hereby condoned.
The assessee is a co-operative credit society registered under Tamil Nadu Co-operative Societies Act and has filled return of income at Nil after claiming deduction u/s 80P of the Act. The CPC, vide intimation issued u/s.143(1) of the Act, has disallowed the claim of deduction u/s. 80P(2)(d) of the Act on account of interest income received from co-operative societies. Aggrieved by the same, the assessee preferred an appeal before the Ld. Addl. CIT(A). However, the Ld. Addl. CIT(A) upheld the disallowance made by the CPC.
The Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee is a co-operative society and the interest
Dharapuram Public Servants Co-Operative Thrift and Credit Society Ltd. CE17 ITA No.2148/Chny/2025
:- 3 -: income has been received from a co-operative bank, which itself is a co-operative society, and therefore the interest income qualifies for deduction under section 80P(2)(d) of the Act. The assessee has further relied on the decision of the Co-ordinate Bench of the Tribunal in the cases of M/s. Ottar Karattupalayam MPCS Ltd. v. ITO in for A.Y 2021-22 dated 15.01.2025 and The Nedunchalai Nagar Co-op. House Building Society Ltd. v. ITO in ITA No.339/Chny/2025 for A.Y 2020-21 dated 26.05.2025 (Chennai-Trib.) in support of the its claim.
On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities.
We have heard the rival contentions, perused the materials available on record. The CPC in the in the intimation u/s. 143(1) of the Act has disallowed the claim of interest of Rs. 9,93,242/- claimed u/s 80P(2)(d) of the Act. On identical facts, the Co-ordinate Bench of this Tribunal in the case of the Erode City Municipal Corporation Emp. Co- op. T & C Limited K831 vs. The Assessing Officer, Ward-1(1), Erode, has held that the interest earned from co-operative bank registered
Dharapuram Public Servants Co-Operative Thrift and Credit Society Ltd. CE17 ITA No.2148/Chny/2025
:- 4 -: under Co-operative societies Act are eligible for deduction u/s 80P(2)(d) of the Act as under:
“13. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We find that the issue ‘whether the assessee Co-operative Society is entitled for a deduction for the interest income received from the Co- operative Bank’ is covered in favour of the assessee by a judgment of the Hon’ble Jurisdictional High Court of Madras in the case of Thorapadi Urban Co-op Credit Society Limited & Another Vs ITO [WP. Nos.11172, 11174, 11177 and 11180 of 2023 and WMP Nos. 11034, 11038, 11044 and 11048 of 2023 dated 10.10.2023. The judgment of the Hon’ble Jurisdictional High Court of Madras reads as under:
‘’8. The main issue is to decide in the present case is as to whether the petitioner Co-operative Society is entitled for a deduction for the interest income received from the Co-operative Bank?
9. It would be appropriate to extract hereunder the relevant portion of Section 80P(2)(d).
80 P. Deduction in respect of income of co-operative societies: (1) ...... ..... ..... (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) to (c) ..... ..... ...... (d) “in respect of any income by way of interest or dividends derived y the co-operative society from its investment with any other co-operative society, the whole of such income”
A reading of the above said provision makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term Co-operative Society-. In the present case, the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co- operative Societies Act, 1983 on 20.5.2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co- operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co-operative Bank registered under the Co-
Dharapuram Public Servants Co-Operative Thrift and Credit Society Ltd. CE17 ITA No.2148/Chny/2025
:- 5 -: operative Societies Act. The Income Tax Act, 1961 has also defined –Co-operative Society- under Section 2(19) as follows:
“2(19). “Co-operative society“ means a co-operative society registered under the Co~ operative Societies Act, 1912 (2 of 1912 ), or under any other law for the time being in force in any State for the registration of co~ operative societies.
A reading of the above definition would make it clear that Co- operative Society- means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co- operative bank.
The learned counsel for the respondent referred to the judgment of the Hon-ble Supreme Court rendered in Totgars Co-operative Sale Society Ltd., v. Income-tax Officer, Karnataka, wherein the issue came up for consideration as to whether the interest income received by a Co-operative Bank from its members by way of providing the credit facilities to its members is eligible for deduction or not. Ultimately the Hon-ble Supreme Court found that under Section 80P(2)(a)(i), the same is eligible for deduction. Therefore, the law laid down by the Hon-ble Supreme Court is not applicable for in the present case as the eligibility of deduction of interest has to be decided under Section 80P(2)(d) and not under Section 80P(2)(a)(i). The learned counsel has also relied upon other judgments which are not applicable for the present facts of the present case.
At this juncture, it would be appropriate to refer a judgment passed by a Division Bench of this Court in Commissioner of Income Tax Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd” in Tax Case Appeal No.5 of 2015, wherein, apart from other substantial issues, the following issue has been framed for consideration, which reads as under:
“Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 with respect to the interest received from Class B members who were involved in non- agricultural society?”.
While answering to the above, the Division Bench held that the respondent therein, which is a Co-operative society, is entitled to Dharapuram Public Servants Co-Operative Thrift and Credit Society Ltd. CE17 ITA No.2148/Chny/2025
:- 6 -: avail the benefit under 80P(2)(d) of the Act. The judgment was rendered on 10.08.2016, where the judgement rendered by the Hon’ble Supreme Court in 2010 was considered’’. 14. Hence considering byelaw and respectfully following the judgment of Hon’ble Jurisdictional High Court of Madras, we allow the appeal (ITA No.510/Chny/2024 for AY 2020-21) of the assessee.”
As the facts are identical, by respectfully following the order of the Co-ordinate Bench of this Tribunal in the case of the Erode City Municipal Corporation Emp. Co-op. T & C Limited K831 vs. The Assessing Officer, Ward-1(1), Erode, supra, we hold that the assessee is eligible for deduction u/s. 80P(2)(d) of the Act of Rs.9,93,242/- received from other Co-operative society. In view of the above, the appeal filed by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 30th day of October, 2025 at Chennai.