Kallapanna Awade Ich Janata Vs ITO (ITAT Pune)
Income Tax Appellate Tribunal (ITAT), Pune Bench, has provided a significant ruling for co-operative societies, holding that interest income earned from deposits with co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961. The decision came in the case of Kallapanna Awade Ich Janata Vs ITO, where the tribunal allowed a deduction claim of ₹12.53 lakh.
The dispute arose during the assessment for the assessment year 2020-21. The assessee, a co-operative society, had earned interest income from its investments in two co-operative banks: K.A. Ich Janata Multistate Co-op. Bank Ltd. and Kolhapur District Central Co-op. Bank Ltd. The assessee claimed this income as a deduction under Section 80P(2)(d), which allows for a deduction on income by way of interest or dividend derived by a co-operative society from its investment with any other co-operative society.
However, both the Assessing Officer (AO) and the Commissioner of Income-Tax (Appeals), or CIT(A), denied the deduction. Their reasoning was based on the premise that co-operative banks are not considered co-operative societies for the purpose of this section, thereby making the interest income ineligible for the deduction. The assessee challenged this stance, arguing that co-operative banks are, in essence, co-operative societies that have obtained a banking license.
