Vidhyut Board Credit & Consumers Co-operative Society Limited Vs ACIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, delivered a ruling in the case of Vidhyut Board Credit & Consumers Co-operative Society Limited regarding its eligibility for deductions under Section 80P of the Income Tax Act, 1961, on interest income earned from bank deposits. The main issue was whether a Co-operative Society can claim a deduction on interest earned from fixed deposits held with a Regional Rural Bank (RRB) and a State Bank of India (SBI) branch.
Factual Matrix and Lower Authority Decisions
The assessee is a Co-operative Credit and Consumers Society formed for the benefit of employees of the Gujarat Vidhyut Board. For Assessment Year (AY) 2017-18, the assessee claimed deductions under Section 80P on two distinct sources of interest income:
1. ₹1,08,418 interest from fixed deposits (FDs) with State Bank of India (SBI).
2. ₹13,97,679 interest from FDs with Saurashtra Gramin Bank, a Regional Rural Bank (RRB).
The Assessing Officer (AO) disallowed the deduction for both amounts. For the SBI interest, the AO held that the income did not arise from the routine activities of a Credit Society and was therefore taxable as ‘Income from Other Sources’ under Section 56. For the RRB interest, the AO disallowed the deduction under Section 80P(2)(d), stating that the Regional Rural Bank was not a member of the Co-operative Society. Section 80P(2)(d) specifically allows a deduction for income derived by a co-operative society by way of interest or dividends from its investments with any other co-operative society.
