Baroda District Cooperative Milk Producers Union Limited Vs ACIT (ITAT Ahmedabad)
Co-operative Bank Is Still a Co-operative Society: Ahmedabad ITAT Allows ₹68.33 Lakh Deduction under Section 80P(2)(d)
Summary: The assessee, Baroda District Co-operative Milk Producers Union Limited, earned interest income of ₹68,33,529 from investments or deposits maintained with Baroda District Co-operative Central Bank Limited. It claimed deduction of the entire interest income u/s 80P(2)(d), which permits a co-operative society to deduct interest or dividend income derived from investments made with another co-operative society.
The Assessing Officer disallowed the deduction on the ground that Baroda District Co-operative Central Bank was functioning as a full-fledged bank providing banking facilities to the general public. According to the AO, it was a co-operative bank and not a co-operative society for the purposes of Section 80P(2)(d).
The CIT(A) upheld the disallowance by relying principally upon PCIT v. Totgars Co-operative Sale Society Ltd. (2017) 395 ITR 611 (Karnataka), the Supreme Court decision in Totgars Co-operative Sale Society Ltd. v. ITO (2010) 322 ITR 283, and State Bank of India v. CIT (2016) 389 ITR 578 (Gujarat).
The assessee’s appeal had initially been disposed of by the Tribunal on 8 July 2025. However, on a miscellaneous application filed by the Revenue, the earlier order was recalled on 29 June 2026 for the limited purpose of reconsidering the claim under Section 80P(2)(d).
Issue before the Tribunal
The question was whether interest earned by a co-operative society from deposits with a co-operative bank qualifies for deduction under Section 80P(2)(d), or whether the deduction is barred by Section 80P(4) because the entity paying the interest is a co-operative bank.
Rival contentions
The Revenue contended that Section 80P(4) excludes co-operative banks from the benefit of Section 80P. Therefore, interest earned from a co-operative bank could not qualify for deduction under Section 80P(2)(d). Reliance was placed on the Karnataka High Court’s decision reported in 395 ITR 611, which had denied deduction on interest received from a co-operative bank.
