Deduction u/s. 80P(2)(d) towards interest from co-operative bank allowed: Gujarat HC

PCIT Vs Rajkot Lodhika Sahakari Kharid Vechan Sangh Ltd (Gujarat High Court)

Gujarat High Court held that interest from co-operative bank is eligible for deduction under section 80P(2)(d) of the Income Tax Act as Cooperative bank is a Cooperative society registered under the Gujarat State Cooperative Societies Act. Accordingly, appeal of revenue dismissed.

Facts- The respondent assessee is a registered Cooperative Society and engaged in business of supply of fertilizer, seeds, equipments, etc. to its members. AO completed the scrutiny assessment by making disallowance of deduction of Rs. 71,38,435/- claimed u/s. 80P of the Act on interest received from PGVCL and interest received on refund.

Thereafter, PCIT proposed remedial action u/s. 263 holding that the Assessment Officer’s order was erroneous and prejudicial, as Section 80P(2)(d) of the Act allows deductions only for interest earned from other cooperative societies and not cooperative banks.

Tribunal quashed order u/s. 263 and allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.

Conclusion- Held that the provisions of section 80P(2)(d) is applicable in the facts of the case and the Principal Commissioner of Income-Tax, Rajkot was not justified in invoking revisional powers under section 263 of the Act which was rightly reversed by the Tribunal holding that the Cooperative bank is a Cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of Section 80P(2)(d) of the Act which is in consonance with the various decisions of the Court as the twin condition invoking Section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled.