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2025 Supreme(Online)(ITAT) 4451
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
SATBEER SINGH GODARA, JM, S. RIFAUR RAHMAN, AM
Co-operative Cane Development Union Ltd. Rohana Kalan – Appellant
Versus
DCIT, Circle-1, Muzaffarnagar – Respondent
ITA No.6441/Del/2014
For the Appellants/Petitioners: None
For the Respondents: Sh. Rajesh Kumar Dhanesta, Sr. DR
Interest income from cooperative bank deposits qualifies for tax deduction under the Income Tax Act when attributed to cooperative activities.
Headnote:(A) Income Tax Act, 1961 - Section 80P - Deduction - The assessee, a cooperative society, claimed deductions for interest income derived from fixed deposits in cooperative banks, which was denied by the lower authorities. The Tribunal upheld the exemption under sections 80P(2)(a)(i) and 80P(2)(d) reasoning that the interest income qualifies as it is attributable to the society's activities involving cooperative banks. (Paras 2-4)
(B) Taxation - Exemption claims - The court observed that a cleavage of judicial opinion exists regarding eligibility for exemptions under the Income Tax Act, specifically concerning interest earned from deposits with banks by cooperatives, but leaned towards a broader interpretation favorable to the cooperative's business objectives. (Paras 6)
Facts of the case:
The case revolves around the assessee’s appeal against the denial of Section 80P deductions on substantial interest income derived from cooperating banks, involving detailed examination of existing case law on similar circumstances.
Findings of Court:
The Tribunal ruled in favor of the assessee’s claim under Section 80P, affirming prior rulings that exempt similar interest income derived from cooperative investments.
Issues: The central issue was the justification for claiming deductions under Section 80P on interest income from cooperative investments despite differing judicial views.
Ratio Decidendi: The court reinforced that interest income from cooperative banks, derived from surplus funds, constitutes business income and qualifies for deduction, stressing a commitment to upholding cooperative functions.
Result: The appeal was allowed.
| Table of Content |
|---|
| 1. claim for tax deduction on interest income. (Para 2) |
| 2. rejection of deduction for interest income. (Para 3) |
| 3. ruling on tax exemption eligibility. (Para 4) |
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.6441/Del/2014 Assessment Year: 2011-12
Co-operative Cane Development Union Ltd. Rohana Kalan, C/o- Mashkoor Ahmad, Adv., 10-Dr. Suresh Market, Bhagat Singh Road, Muzaffarnagar
Vs. DCIT,
Circle-1, Muzaffarnagar
PAN: AAAJC0343A
(Appellant) (Respondent)
Assessee by None Department by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of hearing 01.07.2025 Date of pronouncement 01.07.2025 ORDER PER SATBEER SINGH GODARA, JM This assessee’s appeal for assessment year 2011-12, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Muzaffarnagar’s order dated 27.08.2014, in case no 212/13-14/MZR, involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Case called twice. None appears at the assessee’s behest. It is accordingly proceeded ex-parte.
2. It emerges during the course of hearing that the learned lower authorities have refused section 80P(2) deduction to the assessee on the ground that the corresponding interest income amounting to Rs.58,09,540/- representing interest income derived from FDRs from district cooperative banks and other banks amounting to Rs.4,93,131/- and Rs.53,16,409/-; respectively.
3. We have given our thoughtful consideration to the assessee’s and Revenue’s vehement contentions against and in support of the impugned section 80P disallowance/addition. The Revenue quotes case law Totgars Co-operative Sale Society Ltd. Vs. ITO , Karnataka [2010] 188 Taxman 282 (SC) that such an interest income could not be held to have been derived from the regular business activity carried out by the assessee-society; and, therefore, the impugned disallowance deserves to be upheld.
4. The assessee, on the other hand, quotes this tribunal’s decision (2024) 164 taxmann.com 382, ITO Vs. Shri Bhairavnath Multistate Cooperative Credit Society Ltd. (Pune Trib.);
distinguishing the above case law, as follows:
“5. We heard the rival submissions and perused the material on record. We find this issue is no more res integra by virtue of catena of decisions passed by the Coordinate Benches of this Tribunal. In the present case, we find that admittedly the interest income was earned from the investments out of surplus funds made with cooperative banks/societies, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s.80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s.80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited Vs. ITO in ITA No.1700/PUN/2017 wherein the Tribunal held as under :-
"9. We heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act,1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as well as the CIT(A) were of the opinion that the interest earned from third parties or non- members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as 'income from other sources' There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon'
