In ITA No. 111/Hyd/2023 -ITAT- Ghatkesar Farmers Service Cooperative Society eligible for deduction under Section 80P(2)(a)(i) of Income Tax Act for investments in Union Bank of India, rules ITAT (Hyderabad)
Member K. Narasimha Chary (Judicial) [11-04-2023]

Read Order: The Ghatkesar Farmers Service Cooperative Society Limited v. Income Tax Officer, Ward-(15)1, Hyderabad

LE Correspondent

Mumbai, May 9, 2023: While hearing an appeal filed by the Ghatkesar Farmers Service Cooperative Society Limited (assessee), the Hyderabad bench of the Income Tax Appellate Tribunal has held that the assessee, being a primary agricultural co-operative society, had invested its own surplus funds in Union Bank of India and thus, the assessee was eligible to claim the deduction under section 80P(2)(a)(i) of the Income Tax Act.

Factual matrix of the case was that the assessee is a farmer’s services cooperative society. The assessee had filed their income tax return and had claimed a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 for the interest they earned on deposits with banks/institutions. However, the Assessing Officer had denied the deduction on the basis that the Union Bank of India, from which the assessee derived the interest, was not considered a cooperative bank.

The Tribunal observed that the assessee was a primary agricultural co-operative credit society. The society's by-laws demonstrated that the assessee was engaged in providing loans to its members and also dealt with the procurement and sale of agricultural inputs like seeds, fertilizers, and pesticides. Upon examining the balance sheet, it was found that the society did not have any liabilities towards its members or any other party regarding the payment of dues. Consequently, it was concluded by the Tribunal, that the funds deposited by the assessee in Union Bank of India represented its own funds and did not constitute any liability towards its members or others.

The Tribunal placed reliance on The Vavveru Co-operative Rural Bank Ltd. & Another v. The Chief Commissioner of Income Tax & Another [LQ/TelHC/2017/155], wherein the Telangana High Court has concluded that if the investment is made in fixed deposits in nationalised banks from out of the own funds of the assessee, the interest derived from such investment would be from the activities listed in clause (i) to (vii) of section 80P(2)(a) of the Act and would be eligible for deduction.