The Madras High Court has ruled that Section 80P(2)(d) of the Income Tax Act does not apply to interest received from investments done in a cooperative bank.
The court, in its decision to repeal the reassessment proceedings, relied on a previous decision given by a division bench in the case of Salem Agricultural Producers Co-operative Marketing Society. According to the earlier ruling, cooperative societies engaged in banking or giving credit options to their members are eligible for the benefit under Section 80P(2)(d).
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The notices issued in accordance with Section 148 A(b) to reopen the assessment were challenged by the petitioner and assessee. The main issue in the case was whether the petitioners were subject to a deduction mentioned in Section 80P(2)(d).
The petitioners argued that they had invested with the cooperative bank and received interest, thus making them eligible for a deduction in accordance with Section 80P(2)(d). The department claimed through the notifications that the petitioners or society were not entitled to a deduction, asserting that the deduction was only applicable to income and interest which was earned from the cooperative society, not the cooperative bank.
The petitioners argued that any interest received from any cooperative society should be eligible for a deduction under Section 80P(2)(d), including the cooperative bank. They allude to the definition of “cooperative societies” as mentioned in Section 2(19). The deduction was disallowed by the department without contemplating the definition of cooperative societies, mistakenly believing that the interest received from the cooperative bank was not eligible for a deduction under Section 80P(2)(d).
The department argued that the petitioner received income from the cooperative bank, which, according to the provisions of the Income Tax Act, is not eligible for a deduction under Section 80P(2)(d).
The court emphasized that as per the definition provided in Section 2(19), a cooperative society encompasses any society registered under the Co-operative Societies Act. This encompasses cooperative societies engaged in banking operations, cooperative societies involved in diverse business activities, and cooperative banks.
The court ruled that under Section 80P(2)(d), the taxpayer would be eligible for a tax deduction for the interest income received from investments made in a cooperative bank.
| Case Title | Thorapadi Urban Co-op Credit Society Limited Vs ITO |
| Citation | W.P.Nos.11172, 11174, 11177 and 11180 of 2023 |
| Date | 10.10.2023 |
| Madras High Court | Read Order |
