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Facts
The assessee, a cooperative society, claimed deduction under Section 80P(2)(d) for interest income earned from investments with a cooperative bank. The Assessing Officer allowed deduction under Section 80P(2)(a)(i) but disallowed deduction under Section 80P(2)(d). The CIT(A) upheld the Assessing Officer's order.
Held
The Tribunal held that interest income earned from deposits with cooperative banks is eligible for deduction under Section 80P(2)(d) of the Act, as such income is derived from investments with other cooperative societies. The Tribunal relied on previous decisions where this issue was consistently decided in favor of the assessee.
Key Issues
Whether interest income earned by a cooperative society from investments in a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
143(3), 250, 80P, 80P(2)(a)(i), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
This appeal at the instance of assessee pertaining to the Assessment Year 2017-18 is directed against the order dated 15.02.2025 of Addl/JCIT(A)-2, Hyderabad passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 07.12.2019 passed u/s.143(3) of the Act.
When the appeal was called for, none appeared on behalf of the assessee despite due service of notice of hearing. With the assistance of ld. Departmental Representative and on perusal of record, I find that the sole grievance of the assessee is that deduction u/s.80P(2)(d) of the Act has not been allowed on the interest income earned from investments with Cooperative Bank. Ld. Departmental Supported the order of ld.CIT(A) but failed to place any binding precedent in its favour.
I have heard the ld. Departmental Representative and perused the record placed before me. Assessee is a Cooperative Society engaged in the business of banking/providing credit facilities to its Members. Assessee claimed deduction u/s.80P of the Act at Rs.98,29,990/- in the return of income e-filed on 07.10.2017 for A.Y. 2017-18. Ld. Assessing Officer after selecting the case for scrutiny under CASS framed the assessment order u/s.143(3) of the Act and allowed the deduction u/s.80P(2)(a)(i) of the Act at Rs.93,28,426/- but did not allow the deduction u/s.80P(2)(d) of the Act at Rs.5,00,564/- for the interest earned on investments with Cooperative Bank, namely Pune District Central Cooperative Bank.
This issue is no longer res integra by virtue of catena of decisions taking consistent view that interest income earned from deposits with Cooperative Banks is eligible for deduction u/s.80P(2)(d) of the Act. Recently, this Bench in the case of Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal Vs. ITO in order dated 07.05.2025 has allowed the deduction claimed by the assessee u/s.80P(2)(d) of the Act observing as under :
“5. We have heard the rival submissions and perused the record placed before us. There is no dispute to the fact that assessee has earned interest income of Rs.1,02,95,103/- from deposits/investments with Cooperative Banks. This fact has been accepted by the Assessing Officer in the assessment order also. Admittedly, assessee has not filed the requisite details before ld.CIT(A). We however considering the fact that the issue regarding allowability of deduction u/s.80P(2)(d) of the Act for the interest earned from Cooperative Banks is no longer res integra as the very same issue has been decided by this Tribunal in catena of decisions and in assesse’s own case for A.Y. 2020-21 holding that the assessee is eligible for deduction u/s.80P(2)(d) of the Act as the Cooperative Banks are basically Cooperative Societies. For the sake of brevity, the finding given in is reproduced below:
“7. We have heard both the sides and perused the record placed before us. In the instant case, the Assessing Officer disallowed the interest income of Rs.1,63,98,998/- earned out of the Fixed deposits/Investments made with Cooperative Banks treating the same as Income from Other Source. Ld.CIT(A) dismissed the appeal in limine without discussing anything on merits of the issues and on the ground that the assessee has not provided plausible explanation for admission of additional evidences.
Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s.80P of the Act. we find that this issue is no more res integra as the Coordinate Benches of this Tribunal has been consistently holding that the interest income earned out of the FDs/Investments kept with Cooperative Banks is allowable u/s.80P(2)(d) of the Act. We find that this Tribunal in case of Kolhapur District Central Co- op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., Vs. ITO in dated 01.01.2024 dealing with similar issue after placing reliance on another decision of this Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in dated 27.05.2022 has held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s.80P(2)(d) of the Act as Cooperative Banks are basically Cooperative Societies only but have turned into Bank on getting necessary banking license.
Respectfully following the above referred decisions taking consistent view along with considering the facts of the case, where the assessee made investment with the Cooperative Banks we hold that the assessee is eligible for deduction u/s.80P(2)(d) of the Act for the interest income earned from Cooperative Banks at Rs.1,63,98,998/-. Findings of the ld. CIT(A) is set-aside and the Assessing Officer is directed to allow the claim made by the assessee. Effective grounds of appeal raised by the assessee are allowed.”
6. Respectfully following the same, we hold that deduction of Rs.1,02,95,103/- u/s.80P(2)(d) of the Act claimed by the assessee on the interest earned from deposits/Investments with Cooperative Banks deserves to be allowed. Relevant finding of ld.CIT(A) on merits is set aside and grounds of appeal No.5 to 8 raised by the assessee are allowed.”
Respectfully following the same, I hold that deduction claimed by the assessee on the interest income earned from deposits/Investments with PDCC Bank u/s.80P(2)(d) of the Act at Rs.5,00,564/- deserves to be allowed. Impugned finding of ld.CIT(A) is set aside and effective Grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on this 24th day of June, 2025.