Veeracharya Babasaheb Kuchnure Zilla Nagari Sahakari Pat Sanstha Ltd Vs ITO (ITAT Pune)
Pune ITAT Allows Section 80P(2)(d) Deduction on Interest Earned from Co-operative Banks – Totgars Not Applicable to Section 80P(2)(d) Claims
The Pune Bench of the ITAT held that a co-operative credit society is entitled to deduction u/s 80P(2)(d) in respect of interest income earned from deposits and fixed deposits kept with co-operative banks. The Tribunal reversed the orders of the AO and CIT(A)/NFAC, who had treated the interest income as “Income from Other Sources” relying upon the Supreme Court decision in Totgars Co-operative Sale Society Ltd.
The assessee, a co-operative credit society engaged in providing credit facilities to its members, had earned substantial interest income from investments with co-operative banks and claimed deduction u/s 80P(2)(a)(i) and alternatively u/s 80P(2)(d). The Revenue authorities denied the claim by holding that the deposits represented surplus funds and that co-operative banks stood excluded by virtue of Section 80P(4).
The Tribunal observed that the controversy is no longer res integra and relied upon a consistent line of Pune ITAT decisions holding that interest earned from investments with co-operative banks qualifies for deduction u/s 80P(2)(d), since co-operative banks are fundamentally co-operative societies carrying on banking business after obtaining banking licence. The Bench followed its earlier rulings including The Karad Urban Sevak Sahakari Patsanstha Maryadit Karad, Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal, Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., and The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society.
The ITAT distinguished the reliance placed on Totgars by clarifying that the present case involved deduction under Section 80P(2)(d), which specifically grants deduction for interest/dividend received from investments with “any other co-operative society.” Since co-operative banks continue to be co-operative societies, the deduction could not be denied merely because they function as banks. Accordingly, the Tribunal set aside the order of the CIT(A)/NFAC and directed allowance of deduction u/s 80P(2)(d)
FULL TEXT OF THE ORDER OF ITAT PUNE
