The Madras High Court has ruled that the deduction under Section 80P(2)(d) of the Income Tax Act is available for interest earned from investments made in a cooperative bank.
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
Decided on: 10th October, 2023
CORAM: THE HON’BLE Mr. JUSTICE KRISHNAN RAMASAMY
Facts of the Case
Notices under Section 148 A(b) have been objected to by petitioners and assessees, who are contesting the reopening of their assessments. They vigorously contend that, considering these interest revenues, they are entitled to deductions under Section 80P(2)(d). In contrast, the department claims that neither the petitioners nor the society are entitled to these reductions in the notices that have been sent out. The department maintains that the deduction does not apply to interest earned from cooperative banks; rather, it only applies to income and interest received from cooperative societies. In response, the petitioners assert that Section 80P(2)(d) does, in fact, allow for the deduction of any interest paid from a cooperative society, including a cooperative bank.
The petitioners highlight that Section 80P (2) (d) should be applied to interest received from a cooperative bank. The department contends that any income received from a cooperative bank is ineligible for a Section 80P (2) (d) deduction in accordance with the Income Tax Act. This claim is based on a particular interpretation that makes a distinction between income that comes from a cooperative bank and income that comes from a cooperative society. The petitioners emphasize that the phrase is comprehensive and covers cooperative banks, but the department takes a narrower approach and does not include cooperative bank interest in the deduction.
Legal Provisions
In this case, the petitioner’s actions are bound by the legal provisions set forth in the Section 80P(2)(d) of the Income Tax Act.
Issues
Is the deduction under Section 80P(2)(d) of the Income Tax Act limited exclusively to income and interest received from a cooperative society, with no allowance for interest received from a cooperative bank?
Courts analysis and decision
The court cited a division bench decision in the Salem Agricultural Producers Co-operative Marketing Society case as one of its main sources of precedent for making its decision. According to that precedent, a cooperative society that conducts banking operations or offers credit to its members is qualified to receive benefits under Section 80P(2)(d). This decision established a standard for interpreting Section 80P(2)(d)’s application to cooperative societies that engage in banking operations. The Income Tax Act’s definition of a cooperative society, which is defined as an organization registered under the Co-operative Societies Act, was emphasized by the court as the basis for its decision.
According to the court’s ruling, interest earnings from investments placed in cooperative banks qualify for a deduction under Section 80P(2)(d) for the assessee. This result is consistent with the understanding that cooperative societies—which include those engaged in banking—are covered by Section 80P(2)(d), which permits deductions for interest income received from investments made in these kinds of organizations.
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Written by- Rupika Goundla