Section 80P(2)(d) Deduction Available On Interest Earned From Investments Made In A Co-Operative Bank: Madras High Court Quashes Reassessment

The Madras High Court, while quashing the reassessment proceedings, held that Section 80P(2)(d) of the Income Tax Act is not available on interest earned from investments made in a cooperative bank.

The bench of Justice Krishnan Ramasamy relied on a division bench decision in the case of Salem Agricultural Producers Co-operative Marketing Society, in which it was held that the co-operative society carrying on the business of banking or providing credit facilities to its members is entitled to avail the benefit under 80P(2)(d).

The petitioners and assessees challenged the notices issued under Section 148 A(b) for reopening the assessment. The central issue that arises in the present case is whether the petitioners are entitled to deduction under Section 80P(2)(d).

The petitioners submitted that they have made investments with the Co-operative Bank from which they received interest, and therefore they are entitled to claim deductions under Section 80P(2)(d). However, the department in the notices has stated that the petitioners or society are not entitled to a deduction, holding that the deduction available is only for the income and interest received from the cooperative society and not from the cooperative bank.

The petitioner contended that any interest received from any cooperative society, including the cooperative bank, is entitled to deduction under Section 80P(2)(d). The petitioner referred to the definition of "cooperative societies” defined under Section 2(19). The department disallowed the deduction without considering the meaning of cooperative societies, under the wrong impression that the interest received from the cooperative bank is not liable for deduction under Section 80P(2)(d).

The department contended that the petitioner received the income from the cooperative bank. As per the provisions of the Income Tax Act, any income received from the cooperative bank is not eligible for deduction under Section 80P(2)(d).

The court noted that, as per Section 2(19), co-operative society means the co-operative society registered under the Co-operative Societies Act, be it a co-operative society carrying on banking business, a co-operative society carrying on other businesses, or a co-operative bank.

The court held that the assessee would be entitled to a deduction under Section 80P(2)(d) on the interest receipts on the investment made in a cooperative bank.

Counsel For Petitioner: Suhrith Parthasarathy

Counsel For Respondent: B.Ramaswamy

Case Title: Thorapadi Urban Co-op Credit Society Limited Versus Income Tax Officer

Case No.: W.P.Nos.11172, 11174, 11177 and 11180 of 2023

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