Uttar Gujarat Uma Co-op Credit Society Ltd. Vs ITO (ITAT Ahmedabad)
Co-op Credit Society Ltd can claim deduction under Section 80P(2)(d) of the Income Tax Act, 1961 on interest income earned from deposits with co-operative banks: ITAT Ahmedabad
In a significant ruling for co-operative credit societies, the Income Tax Appellate Tribunal (ITAT) Ahmedabad has clarified the eligibility of deduction under Section 80P(2)(d) of the Income Tax Act, 1961, for interest income earned from deposits with co-operative banks. The decision came in the appeals filed by Uttar Gujarat Uma Co-op Credit Society Ltd. against orders from the Commissioner of Income Tax (Appeals) (CIT(A)) for Assessment Years 2014-15 and 2015-16.
The core issue revolved around the CIT(A)’s denial of a deduction amounting to Rs. 3,30,062 (for AY 2014-15) and Rs. 6,07,377 (for AY 2015-16), which included interest income from the Ahmedabad District Co-operative Bank (ADC Bank) and a smaller sum from Axis Bank. The assessee, a co-operative credit society, had claimed this deduction under Section 80P(2)(d), asserting that investments with co-operative banks should be treated as investments with “other co-operative societies.”
Judicial Precedents and Arguments:
The assessee’s counsel presented several judicial precedents to support its claim. A key reference was the Hon’ble Gujarat High Court’s decision in State Bank of India (SBI) vs. CIT (2016) 72 com 64 (Guj), where the High Court had distinguished between deductions under Section 80P(2)(a)(i) and 80P(2)(d). The Gujarat High Court had observed that “if the appellant wants to avail the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under s.80P(2)(d) of the Act.” Further support came from the Tribunal’s own decision in The Peoples Co-operative Credit Society Ltd. vs. ACIT (ITA No. 1891/Ahd/2014), which had echoed a similar view after considering the Gujarat High Court’s ruling in CIT vs. Sabarkantha District Cooperative Milk Producers Union Ltd. (Tax Appeal No. 473 of 2014).
