In a landmark ruling, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld that cooperative credit societies are entitled to deductions under Section 80P of the Income Tax Act.
This decision came recently in response to appeals filed by Mumbai based Samarth Raghuveer Sahakari Patsanstha Ltd., challenging the National Faceless Assessment Centre’s (NFAC) orders for the assessment years 2017-18 and 2018-19. The dispute centered around the denial of deductions under Section 80P, which encourages the growth of cooperative societies.
The appellant society sought deductions under Section 80P(2)(a)(i) for income from business activities with its members and Section 80P(2)(d) for interest earned from deposits with cooperative banks. The Assessing Officer (AO) had disallowed these deductions, claiming that interest income from cooperative banks was taxable under “Income from Other Sources.”
However, the ITAT disagreed, ruling that a cooperative credit society without a banking license is not a cooperative bank and thus remains eligible for deductions.
Referring to previous rulings, including those by the Karnataka High Court and the Supreme Court, the ITAT affirmed that interest earned from cooperative banks qualifies for deductions under Section 80P(2)(d).
The tribunal also clarified that income from providing credit facilities to members falls under Section 80P(2)(a)(i). This ruling provides significant clarity and reinforces tax benefits for cooperative credit societies in India.
The copy of judgement is with the Indian Cooperative.
