The Madras High Court held that a Co-operative Society can claim income tax deduction for the interest income received from the Co-operative Bank.
While considering a petition challenging initiation of reopening proceedings under Section 148 of the Income Tax Act, 1961 which was framed on the issue of entitlement of deduction under Section 80P(2)(d), the Madras High Court allowed the petition and quashed the reopening notice.
The Single Judge Bench of Justice Krishnan Ramasamy observed that “a Co-operative Society referred [in Section 2(19) of Income Tax Act] is only a co-operative society as defined under the Co-operative Societies Act, 1912, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.”
The brief facts of the case were that the Petitioners have made investments with the Cooperative Bank from which, they received interest and therefore they are entitled to claim deduction under section 80P(2)(d). However, the AO issued notices under section 148 stating that the petitioners / Society are not entitled for deduction holding that the deduction available in the said provision is only for the income and interest received from the Co-operative Society and not from the Co-operative Bank.
After considering the submission, the Bench observed that if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction.
In the present case, the Bench found that the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co-operative Societies Act, 1983 in the year 2003.
Therefore, the investment made by the petitioner is a Co-operative Bank registered under the Co-operative Societies Act, added the Bench.
The Bench found from the perusal of Section 2(19) of the Income tax Act, that ‘Co-operative Society’ means a Co-operative Society registered under Co-operative Societies Act, 1912, and thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.
Accordingly, the High Court allowed the petition.