National Federation of Cooperative Sugar Factories Limited Vs ITO (ITAT Delhi)
The appeals before the ITAT Delhi arose from separate orders of the National Faceless Appeal Centre (NFAC) for Assessment Years 2017-18, 2018-19 and 2020-21 involving an identical issue relating to deduction under Section 80P(2)(d) of the Income-tax Act, 1961. The assessee, a co-operative society, had claimed deduction on interest earned from fixed deposits with Delhi State Cooperative Bank Ltd. and Saraswati Cooperative Bank Ltd., along with interest received from employees. The Assessing Officer disallowed the deduction, holding that the interest on surplus funds deposited with banks constituted income from other sources and was not eligible for deduction under Section 80P(2)(d). The NFAC upheld the disallowance.
Before the Tribunal, the assessee relied on decisions of the Gujarat High Court and various coordinate benches of the Tribunal, contending that a co-operative bank is also a co-operative society for the purposes of Section 80P(2)(d), and therefore interest and dividend received from such banks qualify for deduction. The assessee also relied on earlier Tribunal decisions allowing similar claims under identical facts.
The Revenue argued that the issue stood concluded by the Supreme Court’s decision in Totgar’s Co-operative Sale Society Ltd. v. ITO, submitting that interest earned on surplus funds is taxable under the head “Income from Other Sources” and is not eligible for deduction under Section 80P. It was also contended that co-operative societies do not possess banking licences and are not authorised by the RBI to carry on banking business.
