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Facts
The assessee, Indocount Employees Co-op Credit Society Ltd., appealed against the CIT(A)'s order which denied a deduction under Section 80P(2)(d) for interest income earned from deposits with Kolhapur District Central Co-operative Bank for Assessment Year 2018-19. The original order was passed under Section 143(3) of the Income-tax Act, 1961.
Held
The Tribunal, following consistent past decisions, held that interest earned by a co-operative society from deposits with co-operative banks is eligible for deduction under Section 80P(2)(d) as co-operative banks are considered co-operative societies. It therefore overturned the CIT(A)'s order and allowed the deduction for the interest income.
Key Issues
Whether interest income earned by a co-operative society from deposits with other co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.
Sections Cited
250, 143(3), 80P(2)(d), 80P(2)(a)(i), 234A, 234B, 234C, 80P(4), 2(19)
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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: Dr. MANISH BORAD & MS. ASTHA CHANDRA
आदेश/ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
1. This appeal at the instance of the assessee is directed against the order of Ld. CIT Appeal (NFAC) u/s 250 of the Income-tax Act, 1961 dated 08.10.2024 which is arising out of Order passed u/s.143(3) of the Act dated 23.03.2021.
2. Assessee has raised following grounds of appeal:-
1. The learned AO and CIT(A) grossly erred in denying the deduction under section 80P(2)(d) on interest received on investment with cooperative societies or cooperative Banks to the assessee. The deduction u/s 80P(2)(d) be allowed to the assessee.
Without prejudice to the above, the assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act in respect of interest income and same should be allowed.
3. On the facts and circumstance of the case and in law the levy of interest U/s 234A, 2348, 234C is not justified. 4. The appellant craves leave to add/amend or alter any of the above grounds of Appeal.
3. Sole grievance of the assessee is that Ld. CIT(A) erred in not allowing deduction u/s 80P(2)(d) for the interest earned from deposits held with Kolhapur district Central Co-operative Bank (KDCC bank).
4. At the outset Ld. counsel for the assessee referring to plethora of decisions of this Tribunal stated that it has been consistently held by this Tribunal that interest earned from deposits/investments with Co-operative Banks is eligible for deduction u/s 80P(2)(d) of the Act.
5. On the other hand Ld. DR failed to controvert by placing any other binding proceedings in favour of Revenue on this issue.
We have heard rival contentions and perused the record placed before us. The issue remains no longer res integra that the interest earned from deposits/investments with co-operative Banks is eligible for deduction u/s 80P(2)(d) of the Act, since Co-operative Banks are basically Co-operative societies only. Though Ld. counsel of the assessee has referred to plethora of decisions of this Tribunal taking this consistent view but we would like to reproduce below the findings of this Tribunal in the case of Vanashri Nanasaheb Mahadik Multi State Urban Co- operative Credit Society Ltd.Vs ITO, Ward-5, Sangli (ITA No. 37/PUN/2023 Sangli dated 27.02.2023
I have heard both the sides and gone through the relevant material on record. It is seen that the assessee is a co-operative society which earned interest from various cooperative banks, scheduled banks/financial institutions. Insofar as the allowability of deduction u/s.8P(2)(a)(i) interest income earned from banks is concerned, I find that the Pune Tribunal in Suresh dada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016) has decided the question of availability
of deduction u/s 80P on interest income by noticing that the Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon'ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). The position continues to remain the same before this Tribunal also. I thus hold that no exception can be taken to the granting of deduction on interest income by the AO u/s 80P(2)(a) (i) of the Act.
The Pune Benches of the Tribunal in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT (ITA No. 1249/PUN/2018) has held, vide its order dated 07-01-2022, that though co- operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income оп investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co- operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessee is also a co-operative society, being, registered as such.
Respectfully following the decisions of the Division Bench as discussed supra, I overturn the impugned order and direct to grant deduction u/s.80P of the Act on the amount of interest income earned by the assessee.
Respectfully following the above decision of this Tribunal we are inclined to hold in favour of the assessee and thus set aside the order of the Ld. CIT(A) holding that the alleged interest income received by assessee from KDCC bank (Co-operative Bank) is eligible for deduction u/s 80P(2)(d). Ground No. 1 of the appeal raised by the assessee is allowed. Ground No. 2 raised by the assessee being alternative in nature is rendered infructuous since we have allowed Ground No.
Ground No. 3 is consequential in nature therefore needs no adjudication. Ground No. 4 is general in nature.
In the result appeal of the assessee is allowed as per terms indicated above.
Order pronounced on this 18th day of March, 2025.