Back
2025 Supreme(Guj) 1161
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, D.N. RAY, JJ.
The Principal Commissioner of Income Tax - Appellant
Versus
Shree Aradhana Urban Co-Op. Credit Society Ltd. - Respondent
Tax Appeal No. 400 of 2024
Decided On : 03-03-2025
Advocate Appeared:
For the Appellants : Karan Sanghani, Kalpana K. Raval
Interest income from cooperative banks is deductible under Section 80P(2)(d) if the cooperative society is registered and does not function as a commercial bank.
Headnote:
(A) Income Tax Act, 1961 - Section 260A and Section 80P(2)(d) - Tax Appeal challenging ITAT's order allowing deduction for interest income earned by a cooperative society from a cooperative bank - The Tribunal held that the cooperative bank is a cooperative society eligible for deduction under Section 80P(2)(d) - The provisions of Section 80P(4) do not apply as the cooperative bank does not require a banking license under the Banking Regulation Act, 1949 - The appeal was dismissed as devoid of merit. (Paras 1, 3, 5, 33, 34)
(B) Deduction under Section 80P - The court reaffirmed that interest income from cooperative banks is deductible under Section 80P(2)(d) if the cooperative society is registered under the relevant state act and does not function as a commercial bank. (Paras 5.1, 5.2, 5.3)
Facts of the case:
The assessee, a cooperative society, claimed a deduction for interest income from a cooperative bank, which was initially disallowed by the Assessing Officer but allowed by the CIT(A) and upheld by the ITAT.
Findings of Court:
The ITAT found that the cooperative bank is a cooperative society and eligible for deduction under Section 80P(2)(d), reversing the PCIT's order.
Issues: The main issues were whether the interest income was deductible under Section 80P(2)(d) and whether the cooperative bank fell under the definition of a cooperative society.
Ratio Decidendi: The court ruled that the cooperative bank is a cooperative society eligible for deduction under Section 80P(2)(d), and the provisions of Section 80P(4) do not apply as it does not require a banking license.
Result: Appeal dismissed.
ORDER :
D.N. RAY, J.
1. Heard learned Senior Standing Counsel Mr. Karan Sanghani for the Appellant.
2. The present Tax Appeal is filed under section 260A of the Income Tax Act, 1961, by the Appellant, arising from the order dated 28.11.2023 passed by the learned Income Tax Appellate Tribunal (for short “the ITAT”) Surat, in ITA No. 630/SRT/2023 for the Assessment Year 2014-2015, proposing the following substantial questions of law:-
(i) "Whether on facts and circumstances of the case and in law, the Hon'ble Tribunal had erred in deleting the addition of Rs. 9,56,635/ on account of denial of deduction u/s 80P(2)(d) of the Act, by ignoring the decision of Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. reported in 322 ITR 283, wherein it was held that interest earned from investments made in any bank not being cooperative society, is not deductible under section 80P(2)(d) of the Act?
(ii) "Whether on facts and circumstances of the case and in law, the Hon'ble Tribunal had erred in dismissing the appeal of the Revenue by overlooking the fact that the Hon'ble High Court of Karnataka in the case of Totgars Cooperative Sale Society (2017) 395 ITR, has held that the intention of legislature is clear that cooperative banks are not specie of genus cooperative society, which would entitle to exemption or deduction under the special provisions of chapter VI-A in the form of section 80P of the Act. This finding has also been approved by the Hon'ble High Court of Gujarat in the case Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. for A.Y. 2015-16 in R/SCA No.20585 of 2019?"
(iii) Whether on facts and circumstances of the case and in law, the learned Tribunal had erred in law in relying upon the decision of Hon'ble Jurisdictional High Court in the case of Surat Vankar Sahkari Sangh Ltd. vs ACIT, [2016] 72 taxmann.com 169 (Guj) which pertained to Α.Υ.1991- 92 to 1994-95, ignoring that section 80P(4) was inserted in the Finance Act 2006 w.e.f. 01.04.2007? (iii)
(iv) Whether on facts and circumstances of the case and in law, the learned Tribunal had erred in dismissing the appeal of Revenue by ignoring the facts that only the income received from the members will be eligible for deduction u/s. 80P(2)(a) of the Act.
3. The brief facts of the case are as follows:-
3.1 The assessee-Co-operative society had filed its return of income for the Assessment year 2014-15 on 21.09.2014, declaring the income as Rs. NIL. Subsequently, the case was selected for scrutiny, and the assessment under Section 143(3) of the Act was completed on 06.10.2016 by accepting the returned income filed by the assessee.
3.2 Further, upon verification of the assessment records, it was found that the assessee had shown interest income of Rs.9,56,635/- on Fixed Deposit Receipts of Rs.1,17,87,577/- with Surat District Co-operative Bank Ltd. for the Financial Year 2013-14. The assessee had shown a total income of Rs. NIL after claiming deduction of Rs.9,56,635/-. According to the Appellant, this interest income was required to be treated as ‘income from other sources’ as the same is not eligible for deduction under Section80P(2)(a) of the Act.
3.3 The Ld. PCIT-3, Surat, accorded approval to reopen the proceedings in this case. Subsequently, the Assessing Officer issued notices under Sections 148, 143(2) and 142(1) of the Act on27.04.2018, 04.07.2019 and 21.08.2019 respectively.
3.4 The Assessing Officer completed the re-assessment proceedings under Section 143(3) read with Section 147 of the Act, adding Rs.9,56,635/- to the returned income of the Assessee.
3.5 Aggrieved by the aforesaid order, the Assessee preferred an appeal before the Ld. CIT(A), who, vide order, dated 21.07.2023, allowed the Assessee’s appeal.
3.6 Aggrieved by this order, the Revenue preferred an appeal before the Ld. ITAT, who vide order dated 28.11.2023, dismissed the Revenue’s appeal. Hence, this Appeal.
4. Mr. Karan Sanghani, learned Senior Standing Counsel for the Appellant -Department
