Gangadhareshwara Souharda Pattina Sahakari Sangha Ni Gangavathi Vs ITO (ITAT Bangalore)
Section 80P(2)(d) not eligible on interest on surplus funds deposited with Co-Op banks by cooperative society: ITAT Bangalore
In the case of Gangadhareshwara Souharda Pattina Sahakari Sangha Ni Gangavathi Vs ITO, the Income Tax Appellate Tribunal (ITAT) Bangalore ruled that cooperative societies cannot claim deductions under Section 80P(2)(d) of the Income Tax Act for interest earned from surplus funds deposited with cooperative banks. The case revolved around the assessment year 2014–15 and examined whether such interest income qualified for tax deductions.
The assessee, a cooperative society providing credit facilities to its members, earned interest income by depositing surplus funds in cooperative banks, including District Central Cooperative Bank and CBS Cooperative Bank. The Assessing Officer (AO) denied the deduction under Section 80P(2)(d), reasoning that the interest income was not derived from transactions with members but from cooperative banks, which are not considered members of the society. The CIT(A) upheld this view, citing Supreme Court precedents and other case laws.
The assessee argued that the interest income qualified for deduction under Section 80P(2)(d), or alternatively under Section 80P(2)(a)(i), as it was integral to its primary business activities. However, the Revenue countered by relying on the Karnataka High Court’s judgment in Totgars Co-operative Sale Society Ltd. v. ITO (395 ITR 611), which held that interest on surplus funds placed in banks does not qualify for deductions under Section 80P(2)(d).
