Supreme Court Rejects Revenue’s SLP; Cooperative Societies Eligible for Section 80P(2)(d) Deduction on Bank Interest.
Facts of the Case
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The Income: The assessee, a cooperative society, earned interest income on fixed deposits (FDs) kept with a Cooperative Bank.
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The Claim: The society claimed a 100% deduction on this interest under Section 80P(2)(d).
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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.
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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:
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Limitation Period: The SLP was filed 225 days late. The Court found the explanation for this delay insufficient and refused to condone it.
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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
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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.
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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.
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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.