Sikkim State Cooperative Supply and Marketing Federation Limited Vs DCIT (Sikkim High Court)
Non-Bank Cooperative Society Entitled to Section 80P(2)(d) Deduction on Interest from Cooperative Banks | Sikkim High Court Sets Aside ITAT Order
Executive Summary
The High Court of Sikkim has delivered a landmark judgment clarifying the scope of section 80P(4) and 80P(2)(d) of the Income Tax Act, 1961, holding that non-banking cooperative societies are entitled to claim deductions under section 80P(2)(d) on interest income earned from cooperative banks. The court reversed the ITAT’s interpretation and distinguished the applicability of the Supreme Court’s Totgars decision, providing much-needed clarity on cooperative society taxation.
Case Citation and Background
Tax Appeal No. 02 of 2025 | High Court of Sikkim, Gangtok | Decided: 10th December, 2025
Appellant: Sikkim State Cooperative Supply and Marketing Federation Limited (SIMFED)
Respondent: Deputy Commissioner of Income-tax, Circle 3(2), Gangtok
Assessment Year: 2018-19
Facts of the Case
SIMFED is the apex cooperative society of Sikkim, registered under the Sikkim Cooperative Societies Act, 1978, with the Government of Sikkim holding 93% shareholding. During the relevant assessment year, SIMFED earned interest income from investments made in two cooperative banks:
1. Sikkim State Cooperative Bank Limited
2. Citizens Urban Cooperative Bank Limited
Both banks are registered as cooperative societies under the Sikkim Cooperative Societies Act, 1978. These investments were mandatorily made from SIMFED’s surplus funds and statutory reserves as required under the Sikkim Cooperative Societies Act, 1978 (Sections 57-66), which stipulates that funds must be invested only in securities or cooperative banks approved by the Registrar.
