DCIT Vs Pursottam Farmers Co-op. Cotton Grnning and Pressing Soc. Ltd. (ITAT Surat)
These cross-appeals before the ITAT Surat arose from an order dated 05.03.2024 passed by the Commissioner of Income Tax (Appeals), NFAC, Delhi, for AY 2017–18. The dispute concerned the allowability of deduction under Section 80P(2)(d) of the Income-tax Act, 1961, on interest and dividend income earned by a co-operative society from investments made with a co-operative bank.
The assessee filed its return declaring nil income after claiming deduction of ₹2.65 crore under Chapter VIA, including ₹2.32 crore under Section 80P(2)(d). The Assessing Officer disallowed deduction of ₹2.27 crore relating to interest and dividend received from Surat District Co-operative Bank Ltd., holding that Section 80P(2)(d) does not apply to income from co-operative banks due to Section 80P(4). The AO relied on several judicial precedents, including Totagars Co-operative Sale Society Ltd., and assessed total income at ₹1.83 crore. Deduction was allowed only for dividend from other co-operative societies and godown rent under Section 80P(2)(e).
On appeal, the CIT(A) partly allowed relief. He directed the AO to grant deduction under Section 80P(2)(a)(i) on income from providing credit facilities to members (excluding associate/nominal members) and allowed deduction under Section 80P(2)(d) on interest from deposits with co-operative societies/banks not governed by the RBI Banking Regulation Act, but not from scheduled commercial banks, subject to verification.
