Supreme Court Rejects Revenue’s SLP; Cooperative Societies Eligible for Section 80P(2)(d) Deduction on Bank Interest.
Facts of the Case
The Income: The assessee, a cooperative society, earned interest income on fixed deposits (FDs) kept with a Cooperative Bank.
The Claim: The society claimed a 100% deduction on this interest under Section 80P(2)(d).
The Revenue’s Objection: The Assessing Officer (AO) argued that a “Cooperative Bank” is distinct from a “Cooperative Society” (citing the 2006 amendment to Section 80P(8)). The AO issued a reopening notice under Section 148 to tax this interest.
The High Court’s Stand: Following the precedent in Ashwinkumar Arban Co-operative Society Ltd. (2024), the Gujarat High Court held that since a cooperative bank is essentially a cooperative society, the interest earned from it is fully deductible. It quashed the reopening notice.
The Supreme Court’s Decision
The Supreme Court dismissed the Revenue’s challenge on two fronts:
Limitation Period: The SLP was filed 225 days late. The Court found the explanation for this delay insufficient and refused to condone it.
Merits of the Case: By dismissing the SLP, the Court allowed the High Court’s favorable ruling to stand, reinforcing that the reopening of such assessments is not legally tenable.
Key Takeaways for Cooperative Societies
Eligibility for Deduction: Even if the interest is earned from a “Cooperative Bank” (scheduled or non-scheduled), you are entitled to the deduction under Section 80P(2)(d). The restriction in Section 80P(8) applies to the bank’s own income, not to the society receiving interest from the bank.
Protection Against Reopening: If the department tries to reopen your past assessments (Section 147/148) solely on the grounds that interest from a cooperative bank is taxable, this judgment serves as a strong shield to have those notices quashed.
The “Cooperative” Identity: The judicial consensus is that a “Cooperative Bank” does not lose its character as a “Cooperative Society” simply because it holds a banking license.