Case Law Details
Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. Vs ITO (ITAT Pune)
Introduction: In a significant ruling by the Income Tax Appellate Tribunal (ITAT) Pune, in the case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. Vs ITO, a pivotal decision was made on January 1, 2024, regarding the eligibility of interest income earned from co-operative or scheduled banks for deduction under section 80P(2) of the Income Tax Act, 1961. This judgment addresses the critical aspect of how interest income derived by cooperative societies from their deposits in cooperative banks is treated under the income tax provisions.
Detailed Analysis
The appellant, a cooperative society registered under the Maharashtra Co-operative Societies Act, 1960, engaged in providing credit facilities to its members, found itself at the center of a taxation dispute for the assessment year 2018-19. The society’s claim for deduction of interest income amounting to Rs.10,98,491/- earned on fixed deposits with Kolhapur D.C.C. Bank was disallowed by the Assessing Officer (AO), categorizing the income as ineligible for deduction under section 10(38) of the Act, on the premise that the income was not derived from a cooperative society but a cooperative bank.
The National Faceless Appeal Centre (NFAC), Delhi, upheld the AO’s decision, referencing the decisions of the Hon’ble Karnataka High Court in the case of PCIT vs. Totagars Co-operative Sale Society and the Hon’ble Supreme Court in the case of Totgars, Co-operative Sale Society Ltd. vs. ITO. The appellant society challenged this decision before the ITAT Pune, leading to a reevaluation of the applicability of section 80P(2)(d) concerning the said interest income.
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