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Facts
The assessee, a co-operative society, earned significant interest income from deposits in co-operative banks for AYs 2016-17 to 2020-21. While the Assessing Officer denied the deduction claimed under Section 80P(2)(d), the CIT(A) allowed it. The revenue filed appeals against the CIT(A)'s orders.
Held
The Income Tax Appellate Tribunal affirmed the CIT(A)'s decision, holding that co-operative banks are to be treated as co-operative societies for the purpose of Section 80P(2)(d) deduction. Relying on consistent judicial precedents from various appellate forums including other ITAT benches, the Tribunal found no error in allowing the deduction.
Key Issues
The core legal issue was whether interest income earned by a co-operative society from deposits in co-operative banks is eligible for deduction under Section 80P(2)(d), specifically whether co-operative banks are considered "co-operative societies" for this purpose.
Sections Cited
80P(2)(d), 80P(4), 194A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI UDAYAN DAS GUPTA
आदेश/ O R D E R
Per Bench:
The captioned four appeals have been filed by revenue challenging four separate orders of first-appeal dated 07.06.2024, 07.06.2024, 06.06.2024 & 07.06.2024, passed by Commissioner of Income-tax, National Faceless Appeal Centre, Delhi [“CIT(A)”] which in turn arise out of respective assessment-orders dated 22.02.2024, 29.03.2023, 29.05.2021 & 26.09.2022 passed by Assessment Unit/NFAC of Income-tax Department [“AO”] for AY 2016-17, 2017-18, 2018-19 & 2020-21 respectively.
M.P. State Minor Forest produce T and D Limited to 555/Ind/2024- AYs 2016-17 to 2018-19 & 2020-21
The assessee is a co-operative society registered under the provisions of Madhya Pradesh Co-operative Societies Act, 1960. It is appointed by the order of Hon’ble Governor of Madhya Pradesh as an implementing agency for collection and trading/marketing of minor forest produce. For the relevant AYs 2016-17, 2017-18, 2018-19 and 2020-21 under consideration, the assessee earned interest income from co-operative banks amounting to Rs. 9,81,84,104/-, 6,87,66,387/-, 7,76,69,407/- and 8,36,13,160/- and claimed the same as eligible for deduction u/s 80P(2)(d). However, the AO denied deduction. The assessee carried the matter in first-appeal whereupon the CIT(A) reversed AO’s order. Now, the revenue has come in next appeals before us.
Since these appeals relate to the same assessee, are represented by same counsels and the issue for adjudication is also identical; they were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity. The adjudication by us shall apply mutatis mutandis to all four appeals. For the sake of reference, we re-produce below the grounds raised by revenue in first appeal for AY 2016-17:
“1. "Whether on the facts and in the circumstances of the case and in pursuant to sub-section (4) of section 80P, the Ld. CIT (A), NFAC, Delhi was justified in allowing the claim of deduction u/s 80P(2)(d) of Rs. 9,81,84,104/-on account of interest income earned from deposits/investments of share application money received from M.P. State Government at the time of incorporation which was deposited with co-operative banks." 2. "Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in allowing the claim of deduction u/s.80P(2)(d) on account of Page 2 of 4
M.P. State Minor Forest produce T and D Limited to 555/Ind/2024- AYs 2016-17 to 2018-19 & 2020-21 interest income earned from deposits / investment in the co-operative banks ignoring the fact that even though a cooperative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, regulated by Banking Regulation Act, 1949". 3. "Whether on the facts and circumstances of the case the Ld.CIT(A) was justified in allowing the claim of deduction u/s.80(P(2)(d) by assessee society when the amendment of section 194A(3)(v) itself excluded the Co-operative Banks from the definition of 'Co-operative Society by Finance Act, 2015 and required them to deduct tax at source u/s.194A which makes the legislative intent clear that the co-operative banks are not that species of genus Co- operative society?"
Basically, the controversy arises from the fact that the AO carries a view that the section 80P(2)(d) allows deduction to interest income earned by a “co-operative society” from another “co-operative society”. According to AO, although the assessee is a “co-operative society” but it has earned income from “co-operative banks” and “co-operative banks” are not “co-operative societies”. This issue is consistently coming in several cases and the various appellate forums including ITAT, Indore have held that “co-operative banks”, even if engaged in banking business, are very much “co-operative societies”.
Therefore, the deduction u/s 80P(2)(d) is allowable. The CIT(A) has made a vehement discussion of legal precedents, particularly the order dated 02.09.2019 of ITAT, Jaipur in Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. Vs. DCIT. The Indore bench of ITAT, has also taken the same view in following decisions:
& 327/Ind/2023 – M.P. Police Co-operative Credit Society Vs. NFAC, Delhi Page 3 of 4
M.P. State Minor Forest produce T and D Limited to 555/Ind/2024- AYs 2016-17 to 2018-19 & 2020-21 (ii) Pr. CIT vs. Bhopal Dugdh Sangh Sahakari Maryadit in ITANo.
71/Ind/2023 and CO No.03/Ind/2023.
Ld. DR for revenue although dutifully relied upon the order of AO but could not dispute the above stated legal position taken by appellate forums.
Therefore, the orders passed by Ld. CIT(A) giving deduction to assessee u/s 80P(2)(d) in relation to interest income earned from co- oeprative bank is in accordance with various decisions of ITAT as noted above. Consequently, we do not find any error in the orders of CIT(A), the same are hereby upheld and the appeals filed by revenue are dismissed.
Resultantly, all these appeals are dismissed.
Order pronounced in open court on 27/01/2025