Interest Income Earned From Co-Operative/ Scheduled Bank Eligible For Deduction U/s 80P(2): Pune ITAT

Relying on decisions of Supreme Court and High Court, the Pune ITAT directed the AO to allow the deduction u/s 80P(2)(a)(i) and 80P(2)(d) of Income Tax Act, 1961 in respect of interest income earned from co-operative bank/scheduled bank.

The Member of the ITAT comprising Inturi Rama Rao (Accountant Member) observed that, “the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted.” (Para 7)

As per the brief facts of the case, the Assessee filed a return of Income as nil. The assessment was completed by the AO by disallowing the claim for deduction of interest income earned on fixed deposits made with Kolhapur D.C.C. Bank by holding it to be not a co-operative society but a co-operative bank. The NFAC confirmed the action of the AO.

The Coram noted that the only issue is as to the allowability of exemption under the provisions of section 80P(2)(d) in respect of interest income earned by a cooperative society from the cooperative bank.

The Bench observed that the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society.

Therefore, ITAT allowed the appeal filed by the assesee.

Counsel for Appellant/ Taxpayer: None

Counsel for Respondent/ Department: Uma Shankar Prasad

Case Title: Kolhapur District Central Co-op Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. verses ITO

Case Number: ITA No.1365/PUN/2023

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