In a significant relief for the cooperative credit sector, the Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has allowed Section 80P tax deduction benefits to Hamdard Co-operative Society Ltd., reinforcing the tax eligibility of genuine credit cooperatives.
The tribunal set aside the Income Tax Department’s objections regarding interest income earned from deposits with Shimoga District Central Cooperative Bank and also rejected the contention that the presence of nominal members would make the society ineligible for deduction under Section 80P.
The case related to Assessment Year 2017-18, where the department had treated interest income of Rs 5.78 lakh as “income from other sources” and denied deduction benefits.
However, the ITAT observed that the society was exclusively engaged in providing credit facilities to its members and the interest income was directly linked to its core cooperative business activities.
The tribunal relied on landmark judgments including Mavilayi Service Co-operative Bank Ltd. vs CIT and Tumkur Merchants Souharda Credit Cooperative Ltd. vs ITO while granting relief.
The ruling is expected to strengthen the position of cooperative credit societies claiming deductions under Section 80P of the Income Tax Act.