Section 80P(2)(d) Deduction Allowable To Co-operative Society On Interest Earned From Co-operative Bank: Delhi ITAT

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that the deduction under Section 80P(2)(d) of the Income Tax Act is allowable to the co-operative society on interest earned from co-operative banks.

The bench of Kul Bharat (Judicial Member) has observed that the assessee is a Co-operative society and it has earned interest and dividend income by making deposits with the Delhi State Co-operative Bank Ltd. which is registered under Co-operative Societies Act and the Division Bench of the Tribunal after considering the binding precedents, held that Co-operative Bank is primarily a Co-operative Society. Therefore, for the purpose of section 80P(2)(d) of the Income Tax Act, the assessee would be entitled for deduction under section 80P(2)(d) of the Income Tax Act.

As per Section 80P all co-operative societies other than those coming under the control of RBI are eligible for a deduction. A co-operative society conducting banking activities is not a co-operative bank licensed by the Reserve Bank of India. It can, therefore, claim deductions under Section 80P.

The appellant/assessee is a Co-operative Credit Society Ltd. and filed its return of income under the status of “AOP” for the year under consideration on 31.08.2018, declaring total income at Rs. NIL. The return of income was processed by the Centralized Processing Centre (CPC).

Therefore, statutory notices were issued to the assessee. In response to the notices, the assessee submitted its reply alongwith details as called for. It was noticed by the Assessing Authority that the assessee had claimed deduction of INR 43,29,747 under section 80P.

The Assessing Officer (AO) noticed that the amount is interest income derived from deposits in banks/Co-operative banks. The Assessing Authority was of the view that deduction is not allowable as the income is not from the business activities of the assessee. The assessee had deposited its surplus fund with banks and earned interest income on which in the opinion of the Assessing Authority, from other sources.

The Assessing Authority did not accept the submissions of the assessee and proceeded to make additions. Hence, the AO made an addition of INR 7,60,197 and assessed the income of the assessee at INR 7,60,197 after making disallowance of deduction claimed under section 80P(2)(a)(i).

The assessee preferred appeal before CIT(A) who sustained the addition and dismissed the appeal of the assessee.

The assessee contended that the interest on term deposits was received by the assessee from Delhi State Co-operative Bank Ltd, Janpath Branch and interest from Saving Bank was also received from Delhi State Co-operative Bank Ltd, Janpath Branch. The assessee is eligible for deduction under Section 80P of the Income Tax Act in respect of the interest on fixed deposits, interest in Saving Bank Account and dividend income, received from Delhi State Co-operative Bank Ltd.

The department contended that section 80P(2)(d) of the Income Tax Act would not be applicable in view of the provision of section 80P(4) of the Act. Section 80P(4) specifically prohibits application of section 80P(4) qua the Co-operative Banks.

The tribunal while allowing the appeal held that the assessee would be eligible for deduction under section 80P(2)(d) of the Income Tax Act.

Counsel For Appellant: Rajiv Kumar Jain

Counsel For Respondent: Om Parkash

Case Title: The Janta Adarsh Co-operative Thrift & Credit Society Ltd. Versus ITO

Case No.: ITA Nos.3692 & 3693/Del/2023

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