BIBHISANPUR SAMABAY KRISHI UNNAYAN SAMITY LTD.,KOLKATA vs. I.T.O., WARD - 27(4), HALDIA/ WBG-W-176(3), HALDIA

Facts

The assessee, Bibhisanpur Samabay Krishi Unnayan Samity Ltd., claimed a deduction of ₹32,79,394/- under Section 80P of the Income Tax Act for AY 2020-21. The Assessing Officer disallowed this deduction, treating the interest income from investments in co-operative/commercial banks as 'income from other sources' under Section 56. The CIT(A) upheld the AO's decision, leading the assessee to appeal to the Income Tax Appellate Tribunal.

Held

The Tribunal, relying on Supreme Court decisions in Totgars Co-Operative Sale Society Ltd. and Mavilayi Service Co-operative Bank Ltd., held that interest income from deposits in commercial banks or co-operative banks (which function like commercial banks and require an RBI license) is not 'operational income' eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). Section 80P(4) specifically excludes co-operative banks (other than primary agricultural credit societies) from Section 80P benefits, thus confirming the disallowance.

Key Issues

Whether interest income earned by a co-operative society from deposits in co-operative/commercial banks is eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d) of the Income Tax Act, considering its nature as 'other income' and the specific exclusion of certain co-operative banks under Section 80P(4).