Chokkadi Vyavasaya Seva Sahakari Bank Niyamitha Vs ITO (ITAT Bangalore)
Section 80P(2)(d) deduction on interest / dividend income out of investments with co-op society
The case of Chokkadi Vyavasaya Seva Sahakari Bank Niyamitha vs. Income Tax Officer (ITAT Bangalore) revolves around the interpretation and application of Section 80P(2)(a)(i) and Section 80P(2)(d) of the Income Tax Act, 1961 pertaining to deductions for cooperative societies. The appeals were filed against orders of the Income Tax Department disallowing deductions claimed by Chokkadi Vyavasaya Seva Sahakari Bank Niyamitha (the assessee) for the assessment years 2017-18 and 2020-21.
Background and Facts of the Case
Chokkadi Vyavasaya Seva Sahakari Bank Niyamitha, a primary agricultural credit cooperative society, provides credit facilities to its members and distributes ration articles in accordance with state government guidelines. The society filed its income tax returns claiming deductions under Section 80P(2)(a)(i) for interest income earned from credit facilities extended to its members, and under Section 80P(2)(d) for interest and dividend income earned from investments made in other cooperative societies and cooperative banks.
The Income Tax Officer (ITO) disallowed these deductions primarily based on the interpretation of precedents such as the decision of the Hon’ble Supreme Court in Citizen Cooperative Society Ltd. vs. ACIT, where it was held that cooperative societies which do not exclusively cater to agriculture-related activities or do not restrict their membership to agriculturists are not eligible for deductions under Section 80P(2)(a)(i).
