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

Goa PWD Staff Co-operative Credit Society Limited. Vs ITO (ITAT Panaji)

The assessee, an employees’ co-operative credit society, filed its return for AY 2017-18 declaring nil income after claiming deduction of ₹3,94,466 under Section 80P(2)(d) of the Income-tax Act in respect of interest earned on term deposits with Goa State Co-operative Bank Limited (GSCBL). During scrutiny assessment under Section 143(3), the Assessing Officer denied the deduction by invoking Sections 80P(2)(d) read with 80P(4), holding that the interest was received from a bank. The National Faceless Appeal Centre partly allowed the appeal but confirmed the denial, observing that interest received from a bank did not qualify for deduction as it was inconsistent with the objective of supporting the co-operative movement.

Before the ITAT, the sole issue was whether interest earned by a co-operative society on term deposits with a State Co-operative Bank qualified for deduction under Section 80P(2)(d). The Tribunal noted that an identical issue had already been decided by the Panaji Bench in GOA BAGAYATDAR SAHAKARI VIKRI SAUNSTHA MARYADIT Vs ITO and ACGL BBD Employees Co-op. Credit Society, Ltd. Vs ITO, Goa. Relying on those decisions, the Tribunal observed that Section 80P(2)(d) requires only that both the recipient and the payer be co-operative societies registered under the relevant co-operative law. It further observed that Section 80P(4) applies only where the claimant itself is a co-operative bank and does not deny deduction to a co-operative society receiving interest from another registered co-operative society.