Income Tax Appellate Tribunal

The ACIT vs. The Sardar Patel Co Opertaive Credit Society

MANU/IB/0267/2022

20.05.2022

Direct Taxation

Interest earned by the assessee on surplus held with cooperative banks would be eligible for deduction under Section 80P(2)(d) of the IT Act

The Revenue is in appeal in respect of the allowability of deduction under Section 80P(2)(d) of the Income Tax Act, 1961 (IT Act) in respect of interest earned on surplus funds deposited with other cooperative banks. The issue for consideration before present Tribunal is whether the assessee is eligible to claim deduction on interest earned from Co-Operative Banks under Section 80P(2)(d) of the IT Act.

The Hon'ble Gujarat High Court in the case of State Bank of India Vs. CIT, held that that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Section 80P(2)(d) of the IT Act. In the case of Surat Vankar Sahakari Sangh Ltd. v Assistant Commissioner of Income-tax, the Gujarat High Court held that, assessee-co-operative society was eligible for deduction under Section 80P(2)(d) of IT Act in respect of gross interest received from co-operative bank without adjusting interest paid to said bank.

In the case of Surendranagar District Co-op. Milk Producers Union Ltd. v Deputy Ld. CIT(A), the ITAT held that assessee-co-operative society could not claim benefit of Section 80P(2)(d) in respect of interest earned by it from deposits made with nationalised/private banks, however, said benefit was available in respect of interest earned on deposits made with co-operative bank.

In the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society, the Karnataka High Court has held that, the interest income earned by a co- operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Section 80P(2)(d) of the IT Act.

In view of decision of High Court of Gujarat and other cases, interest earned by the assessee on surplus held with cooperative banks would be eligible for deduction under Section 80P(2)(d) of the IT Act. The appeal of the revenue is dismissed.

Tags : Interest Deduction Eligibility

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