LI Network
Published on: November 13, 2023 at 00:10 IST
The Madras High Court has ruled in favor of Co-operative Societies, affirming their eligibility to claim income tax deduction for interest income received from Co-operative Banks.
The decision came in response to a petition challenging the reopening of proceedings under Section 148 of the Income Tax Act, 1961, specifically addressing the entitlement of deduction under Section 80P(2)(d).
The petition argued against the initiation of reopening proceedings and successfully had the reopening notice quashed.
Justice Krishnan Ramasamy, presiding over the Single Judge Bench, emphasized that a Co-operative Society, as defined in Section 2(19) of the Income Tax Act, encompasses entities registered under the Co-operative Societies Act, 1912. This includes Co-operative Societies involved in banking or other businesses, as well as Co-operative Banks.
The case revolved around a Co-operative Society’s investments in a Co-operative Bank, resulting in interest income. The petitioners sought deduction under section 80P(2)(d). However, the Assessing Officer (AO) issued notices under Section 148, contending that the deduction only applied to income and interest from a Co-operative Society, not a Co-operative Bank.
Justice Ramasamy’s carefully considered the arguments presented. It noted that any Co-operative Society deriving income from interest on investments made in another Co-operative Society is eligible for deduction.
In this instance, the petitioner demonstrated that the Co-operative Bank in which they invested was registered under the Tamil Nadu Co-operative Societies Act, 1983, in 2003.
Examining Section 2(19) of the Income Tax Act, the court clarified that a ‘Co-operative Society’ refers to an entity registered under the Co-operative Societies Act, 1912. Consequently, the Co-operative Society in question, whether engaged in banking or other businesses, includes a Co-operative Bank.
Based on these considerations, the Madras High Court granted the petition, affirming that the Co-operative Society is entitled to income tax deduction for interest income received from a Co-operative Bank. The decision provides clarity on the interpretation of relevant sections and strengthens the position of Co-operative Societies engaging with Co-operative Banks in terms of tax benefits.