Section 80P(2)(a)(i) Deduction Eligible for Interest Earned from Credit Facilities to Members, Including Nominal/Associate Members

Sullia Taluk Women’s Multipurpose Cooperative Society Ltd Vs ITO (ITAT Bangalore)

The Income Tax Appellate Tribunal (ITAT) Bangalore recently issued a significant ruling in the case of Sullia Taluk Women’s Multipurpose Cooperative Society Ltd vs. Income Tax Officer (ITO). This ruling pertains to the applicability of Section 80P(2)(a)(i) of the Income Tax Act, which grants deductions to cooperative societies. The primary issue at hand was whether the interest income earned from credit facilities extended to both regular and nominal/associate members qualifies for this deduction.

Detailed Analysis

The appeal arose from an order by the Additional/Joint Commissioner of Income Tax (JCIT) for the assessment year 2017-18, which had denied the society’s claim for a deduction under Section 80P(2)(a)(i). The society contended that this deduction should apply to the interest income earned from loans provided to its members, including nominal and associate members. The lower authorities had denied the deduction based on the principle of mutuality and the involvement of nominal members, referencing the Supreme Court’s judgment in the Citizen Cooperative Society Ltd case.

1. Grounds of Appeal

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