ITAT Panaji Allows Section 80P(2)(d) Deduction on Interest From Co-Operative Bank Deposits

Goa Bagayatdar Sahakari Vikri Saunstha Maryadit Vs ITO (ITAT Panaji)

The Income Tax Appellate Tribunal (ITAT) decided a batch of three appeals filed by the assessee under Section 253(1) of the Income-tax Act, 1961, challenging separate orders dated 13.11.2024 passed by the National Faceless Appeal Centre under Section 250, arising from assessments completed under Section 143(3) for Assessment Years 2017-18, 2018-19 and 2020-21. Since the issue involved in all three appeals was common, the Tribunal disposed of them by a common order, with the findings in the lead case applying mutatis mutandis to the remaining appeals.

The assessee, a co-operative society, had filed its return declaring total income of ₹42,57,690 after claiming deduction of ₹1,32,98,695 under Section 80P(2). The return was initially processed under Section 143(1) without variation. Subsequently, scrutiny assessment resulted in denial of deductions claimed under Sections 80P(2)(a)(i), 80P(2)(a)(iii)/(iv), 80P(2)(c)(i) and Section 80P(2)(d) in respect of ₹63,12,666 earned as interest on term deposits with Goa State Co-operative Bank Limited (GSCBL). On appeal, the National Faceless Appeal Centre allowed all deductions except the deduction claimed under Section 80P(2)(d). The assessee therefore challenged only the denial of deduction under Section 80P(2)(d).

The Tribunal identified the issue as whether interest income earned on term deposits with the Goa State Co-operative Bank qualifies for deduction under Section 80P(2)(d). It noted that there was no dispute that the assessee was a co-operative society or that the income in question was interest earned on deposits with GSCBL. The Revenue denied the deduction on the grounds that GSCBL was a bank and not a co-operative society within the meaning of Section 2(19), that the investment of surplus funds violated the principle of mutuality, and that the interest was not eligible for deduction in view of PCIT Vs Totgar’s Co-operative Sale Society Ltd. [2017, 292 ITR 74 (Kar)].