Case Law Details
Saikrupa Nagari Sahakari Patsanstha Maryadit Kolhapur Vs ITO (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune has ruled in favor of Saikrupa Nagari Sahakari Patsanstha Maryadit, Kolhapur, allowing a deduction under Section 80P(2)(d) of the Income-tax Act, 1961. The case pertained to the Assessment Year 2018-19, where the assessee, a cooperative credit society, had declared nil income after claiming deductions under Chapter VIA, including a deduction of ₹26,32,236 under Section 80P. The dispute arose when the Assessing Officer (AO) disallowed the deduction of ₹19,33,878 on interest earned from fixed deposits in cooperative banks, classifying it as “Income from Other Sources” under Section 56. The disallowance was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], prompting the assessee to appeal before the ITAT.
The tribunal examined the applicability of Section 80P(2)(d), which allows deductions on interest or dividends earned from investments made in other cooperative societies. The core argument was whether cooperative banks qualify as cooperative societies for this deduction. The ITAT referred to multiple precedents, including the case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. vs. ITO (ITA No.1365/PUN/2023, dated 01.01.2024), which held that cooperative banks, though functioning as banks, are essentially cooperative societies and should be treated accordingly for tax purposes. Another cited case, The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO (ITA No.84/PAN/2018, dated 27.05.2022), reinforced this interpretation, allowing deductions under Section 80P(2)(d) for interest earned from cooperative banks.
The ITAT ruled that since the investments were made with cooperative banks, which are cooperative societies by nature, the assessee was entitled to the deduction. The tribunal set aside the findings of the CIT(A) and directed the AO to allow the deduction of ₹19,33,878. The decision aligns with previous rulings that establish cooperative banks as eligible entities for deductions under Section 80P(2)(d), ensuring that cooperative credit societies benefit from tax exemptions on such interest income.
The ruling is significant as it reaffirms that interest income from cooperative banks qualifies for deduction under Section 80P(2)(d), providing clarity on similar disputes. By following the judicial precedents, the ITAT Pune upheld the legislative intent behind Section 80P, aimed at supporting cooperative credit societies. The decision may influence other pending cases where tax authorities have challenged such deductions. The appeal was allowed, and the order was pronounced on January 7, 2025.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal pertaining to Assessment Year 201819 at the instance of assessee is directed against the order dated 15.10.2024 passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) which in turn is arising out of Assessment Order dated 08.04.2021 passed u/s.143(3) r.w.s.143(3A) & 143(3B) of the Act.
2. Succinctly, the facts of the case are that the assessee is a Cooperative Credit Society registered under the Maharashtra Cooperative Societies Act, 1960. It is engaged in the activity of accepting deposits from its members and providing credit facilities to them. Return of income for the A.Y. 2018-19 was furnished on 22.10.2018 declaring Nil income after claiming deduction under Chapter VIA at Rs.26,32,236/-. After the case selected for Limited Scrutiny followed by validly serving of statutory notices u/s.143(2)/142(1), the assessee filed the requisite details. Based on the information furnished by the assessee, the Assessing Officer noticed that the assessee earned interest income of Rs.19,33,878/- on investment with Cooperative Banks, which in his opinion does not quality for deduction u/s.80P(2)(d) of the Act. Thus, he brought to tax the said interest income disallowing the deduction u/s.80P(2)(d) claimed by the assessee.
3. Aggrieved assessee preferred appeal before the ld.CIT(A) who vide impugned order affirmed the action of the Assessing Officer.
4. Now the assessee is in appeal before the Tribunal.
5. When the case was called for, none appeared on behalf of the assessee despite due service of notice of hearing. I therefore proceed to dispose of the appeal with the able assistance of ld. Departmental Representative exparte qua the assessee.
6. Coming to the issue on merits, I have heard the ld. Departmental Representative and perused the material on record. In the instant case, the Assessing Officer disallowed interest income of Rs.19,33,878/- earned out of the Fixed deposits/Investments made with Cooperative Banks treating the same as Income from Other Sources u/s.56 of the Act and the same was affirmed by the ld.CIT(A) in the First Appellate Proceedings.
7. Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s.80P of the Act. I find that this issue is no more res integra as the Coordinate Benches of this Tribunal has been consistently holding that the interest income earned out of the FDs/Investments kept with Cooperative Banks is allowable u/s.80P(2)(d) of the Act. I find that this Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., Vs. ITO in ITA No.1365/PUN/2023, dated 01.01.2024 dealing with similar issue after placing reliance on another decision of this Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018, dated 27.05.2022 has held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s.80P(2)(d) of the Act as Cooperative Banks are basically Cooperative Societies only but have turned into Bank on getting necessary banking license. I therefore respectfully following the above referred decisions and taking consistent view along with considering the facts of the case, where the assessee made investment with the Cooperative Banks and hold that the assessee is eligible for deduction u/s.80P(2)(d) of the Act for the interest income earned from Cooperative Banks at Rs.19,33,878/-. Findings of the ld. CIT(A) is set-aside and the Assessing Officer is directed to allow the claim by the assessee. Effective grounds of appeal raised by the assessee are allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced on this 07th day of January, 2025.
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