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Facts
The assessee, a co-operative society, claimed deduction under Section 80P(2)(d) for interest income earned from co-operative banks. The Assessing Officer disallowed this deduction, and the CIT(A) upheld the disallowance. The assessee appealed to the Tribunal.
Held
The Tribunal held that the interest income received from Sabarkantha District Central Co-operative Bank Ltd., a registered co-operative society, is allowable for deduction under Section 80P(2)(d). However, the interest income from Dena Gujarat Gramin Bank was not allowed as it was not established to be a co-operative society.
Key Issues
Whether interest income earned from co-operative banks by a co-operative society is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, when the banks are registered under the Co-operative Societies Act.
Sections Cited
250, 80P(2)(d), 144B, 80P(4), 2(19), 80P, 143(1), 143(3), 147, 148, 142(1), 143(2), 80P(2)(a)(i)
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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Ms. Suchitra Kamble & Shri Makarand V. Mahadeokar
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 31-08- 2023 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2014-15.
The grounds of appeal are as under:- “1.1 The order passed u/s 250 on 31.08. 2023 by NEAC (CIT(A), Delhi (for short NEAC) for A.Y 2014-15 confirming the disallowance u/s 80P(2)(d) of Rs.16,71,482/ in respect of interest income from Co-operative banks is wholly illegal, unlawful and against the principles of natural justice. 1.2 The order passed by Ld. AO is wholly illegal and unlawful in as much as the new assessment procedure laid down u/s Malpur Taluka Primery Teachers’ Sahkari Sakh & Grahak Sahkari Mandali , A.Y. 2014-15 144B read with the National Faceless Assessment Scheme which is mandatory. 1.1 The Ld. NFAC has grievously erred in law and or on facts in not considering fully & properly the written submissions, recent case laws, past record and orders passed in earlier years on the issue under appeal. 2.1 The Ld. NFAC has grievously erred in law and or on facts in confirming the disallowance of the deduction u/s.80P(2)(d) in respect of interest income of Rs. 16,71,482/- though the same were received from cooperative society. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. NFAC has grievously erred in confirming the disallowance of the deduction u/s.80P(2)(d) in respect of interest income of Rs. 16,71,482/-. 3.1 That in the facts and circumstances of the case as well as in law, the Ld AO has grievously erred in invoking section 80P(4), though the cooperative bank from which the appellant received the impugned interest income were cooperative society under the Act. It is therefore prayed that the disallowance deduction u/s.80P of Rs. 16,71,482/- made by the AO should be deleted.”
3. The assessee is a co-operative society carrying out business of banking by providing credit facilities to its members. The assessee society is registered under the Co- operative Society Act within the meaning of section 2(19) of the Income Tax Act, 1961 and is eligible for deduction u/s. 80P of the Act. The assessee filed return of income on 19- 09-2014 declaring total income of Rs. nil after claiming deduction u/s. 80P of Rs. 38,89,501/- which was processed u/s. 143(1). In this case, the assessment proceedings were finalized u/s. 143(3) of the Act on 30-11-2016 and assessed the total income nil after allowing deduction u/s. 80P of Rs. 38,89,501/-. Subsequently, in this case, reasons were recorded for reopening u/s. 147 of the Act. On the basis of Malpur Taluka Primery Teachers’ Sahkari Sakh & Grahak Sahkari Mandali , A.Y. 2014-15 the same, notice u/s. 148 of the Act was issued on 29-03- 2021 and served to the assessee. Notice u/s. 142(1) of the Act was issued on 05-11-2021. No compliance was made in response to the notice u/s. 148 of the Act and 142(1) of the Act by the assessee. Again, notice u/s. 142(1) of the Act was issued on 15-12-2021 and 23-12-2021. The assessee filed written submission on 28-12-2021 and also furnished the copy of acknowledgement of return of income which was filed on 28-12-2021 declaring total income at Rs. nil. The notice u/s. 143(2) of the Act was issued to the assessee on 09-02-2021. The assessee furnished written submission in compliance to notices and stated that the assessee is a co- operative society engaged in business of providing credit facilities to its member. The assessee also gave registration no. SE 2501 which was registered with District Registrar Co-operative Society from 29-06-1961. The assessee categorically mentioned and therefore eligible for deduction u/s. 80P. Specific query was issued on 25-01-2022 thereby asking the assessee to furnish the ledger account of interest received of Rs. 3,07,707/- from Dena Gujarat Gramin Bank and Rs. 13,63,755/- from Sabarkantha District Central Co- operative Bank Ltd. In compliance to the said notice, the assessee filed the reply. After taking cognizance of the said reply, the Assessing Officer rejected the contentions of the assessee and made addition of Rs. 16,71,482/- thereby disallowing deduction u/s. 80P (2)(d) which is the interest received from Gujarat Gramin Bank (Rs. 3,07,707/-) and interest received from Sabarkantha District Central Co- operative bank Ltd. at Rs. 13,63,775/-. 3
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The ld. A.R. submitted that the CIT(A) totally ignored the fact that the assessee is registered society as per the district registrar co-operative society from 29-06-1992 which clearly mentioned in para 2.5 of the assessment order. The ld. Assessing Officer as well as CIT(A) totally ignored the fact that the interest income received from the co-operative bank which are co-operative banks registered under Co-operative Societies Act (State Statute) are eligible for deduction u/s. 80P(2)(d) of the Act. The ld. A.R. submitted that the disallowance has been made following the decision in case of Totagarh Co-operative Sale Society Ltd. vs. ITO, Karnataka (2010) 155 taxman 282 (SC) and Cooperative Sales Society vs. PCIT 92017) 83 Taxmann. Com 140 (SC). The ld. A.R. submitted that this decision is not applicable in the assessee’s case because in that case the said society had placed the deposits with the State bank of India and claimed deduction u/s. 80P(2)(a)(i) but in the present case, the assessee received the interest income from the deposit placed with another co-operative societiy i.e. Dena Gujarat Gramin Bank and Sabarkantha Dist. Central Co-operative Bank Ltd. The ld. A.R. relied upon the decision of the Tribunal in case of Saco Bank Staff Co-op. Credit Society Ltd. vs. ITO (ITA No. 441/Ahd/2023) order dated 03-11-2023 wherein the interest income derived from 4 Malpur Taluka Primery Teachers’ Sahkari Sakh & Grahak Sahkari Mandali , A.Y. 2014-15 Sabarkantha District Co-operative Bank was taken into account and the deduction u/s. 80P(2)(d) is allowed by the Tribunal.
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused the materials available on record. It is pertinent to note that only the Sabarkantha District Central Co-operative Bank Ltd. is a registered co-operative society and therefore the component of Rs. 13,63,775/- which is an interest received on deposits are allowable as deduction u/s. 80P(2)(d) of the Act. As regards, the Dena Gujarat Gramin Bank, the ld. A.R. could not point out whether this was registered co- operative society or not and after taking into account the submission of the ld. A.R. it is found that the said Dena Gujarat Gramin Bank is not co-operative society, question of the interest of Rs. 3,07,707/- received from the said Dena Gujarat Gramin Bank will not be eligible for deduction u/s. 80P(2)(d) of the act.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 25-04-2025 Sd/- Sd/- (Makarand V. Mahadeokar) (Suchitra Kamble) Accountant Member Judicial Member Ahmedabad : Dated 25/04/2025 5 Malpur Taluka Primery Teachers’ Sahkari Sakh & Grahak Sahkari Mandali , A.Y. 2014-15 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद