Interest from Cooperative Banks Eligible for 80P Deduction: ITAT Allows ₹12.53 Lakh Claim Treating Banks as Societies [Read Order]
Income Tax Tribunal Upholds ₹12.53 Lakh Deduction for Cooperative Societies
In a significant ruling impacting cooperative societies across India, the Income Tax Appellate Tribunal (ITAT) has allowed a deduction claim of ₹12.53 lakh, pertaining to interest income earned from cooperative banks. The tribunal’s decision hinges on treating these cooperative banks as cooperative societies themselves, making the interest income eligible for deduction under Section 80P(2)(d) of the Income Tax Act.
Understanding Section 80P and its Implications
Section 80P of the Income Tax Act provides deductions for certain income earned by cooperative societies. Specifically, Section 80P(2)(d) allows deductions for interest income derived by a cooperative society from its investments with other cooperative societies. This provision is designed to encourage inter-cooperative transactions and support the growth of the cooperative sector.
The Core of the Dispute
The central issue in this case was whether cooperative banks should be treated as cooperative societies for the purpose of Section 80P(2)(d). The assessing officer had previously denied the deduction claim, arguing that the cooperative banks did not qualify as cooperative societies under the relevant provisions. However, the ITAT, after reviewing the facts and legal arguments, ruled in favour of the assessee.
ITAT’s Ruling and its Rationale
The ITAT, in its order, emphasized the cooperative nature of the banks and their role in serving the interests of their members. The tribunal highlighted that these banks are essentially financial institutions established and managed on cooperative principles. Therefore, income derived from them by other cooperative societies should be eligible for the deduction under Section 80P(2)(d).
Potential Impact on Cooperative Sector
This ruling is expected to bring relief to numerous cooperative societies that invest their funds with cooperative banks. It clarifies the applicability of Section 80P(2)(d) in such cases, providing greater certainty and encouraging investments within the cooperative ecosystem. The decision reinforces the legislative intent behind promoting and supporting cooperative movements across India.
- ITAT allows ₹12.53 lakh deduction claim for interest income from cooperative banks.
- The ruling treats cooperative banks as cooperative societies under Section 80P(2)(d).
- Decision provides clarity and relief to cooperative societies investing in cooperative banks.
- Cooperative societies can claim deductions on interest earned from cooperative banks under Section 80P(2)(d).
- The ITAT ruling promotes financial transactions within the cooperative sector.
- This decision could influence future assessments and reduce tax liabilities for cooperative societies.
- The ruling could lead to increased investment by cooperative societies within the cooperative banking sector.