ITAT Grants Section 80P Tax Relief to Co-operative Society

In a major relief for the cooperative credit sector, the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench, has allowed tax deduction benefits under Section 80P of the Income Tax Act to Hamdard Co-operative Society Ltd. The ruling strengthens the position of genuine cooperative credit societies seeking tax benefits.

The case pertained to the Assessment Year 2017-18. The Income Tax Department had denied the deduction claim on interest income of Rs 5.78 lakh earned from deposits with Shimoga District Central Cooperative Bank. The department treated this income as “income from other sources” and argued that the society was not eligible for the deduction.

But the ITAT ruled in favour of the society. The tribunal noted that Hamdard Co-operative Society was only providing credit facilities to its members and the interest income was closely tied to its normal co-operative business activities.

The tribunal also dismissed the department’s contention that the society would not be eligible to claim benefits under Section 80P as there were nominal members. The court held that this factor did not affect the society’s eligibility for the deduction.

The ITAT held that the assessee was entitled to relief in view of substantial judicial precedents, including the decision of the Apex Court in Mavilayi Service Co-operative Bank Ltd vs CIT and the ruling of the Karnataka High Court in Tumkur Merchants Souharda Credit Co-operative Ltd vs ITO.

The ruling is likely to provide substantial backing to cooperative credit societies across the country and strengthen their right to claim deductions under Section 80P of the Income Tax Act.