ADIM JATI SEWA SAHKARI SAMITI MYDT JOBAT,ALIRAJPUR vs FACELESS ASSESSMENT OFFICER, ALIRAJPUR

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI

For Appellant: Shri P.D. Nagar, AR

For Respondent: Shri Ashish Porwal, Sr. DR

Hearing: 05.03.2026Pronounced: 27.03.2026

आदेश/ O R D E R

Per B.M. Biyani, AM:

Feeling aggrieved by order of first-appeal dated 04.11.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 13.09.2022 passed by learned Assessment Unit of Income-tax Department [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2020-21, the assessee has filed this appeal on the grounds mentioned in Appeal Memo (Form No. 36).

The registry has informed that the present appeal is delayed by 181 days and therefore time-barred. The assessee has filed an application/

The averments made by assessee in above affidavit, which are self- explanatory and which do not require repetition, were discussed and the Ld. DR for revenue does not have any objection if the bench condones delay and accordingly left it to the wisdom of bench. We have considered the explanation advanced by assessee and in absence of any contrary fact or material on record, the assessee is found to have a “sufficient cause” for delay in filing present appeal. We find that section 253(5) of the Act empowers the ITAT to admit an appeal after expiry of prescribed time, if there is a “sufficient cause” for not presenting appeal within prescribed time.

It is also a settled position by Hon’ble Supreme Court in Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 that whenever substantial justice and technical considerations are opposed to each other, the cause of substantial justice must be preferred by adopting a justice-oriented approach. Thus, taking into account the facts of case, the provision of section 253(5) and the decision of Hon’ble Supreme Court, we take a judicious view, condone delay, admit appeal and proceed with hearing.

4. The assessee is a co-operative society engaged in business of providing credit facilities to its members. For AY 2020-21, the assessee filed return declaring total income of Rs. 40/-. In the return of income so filed, the assessee claimed deduction of Rs. 22,95,983/- u/s 80P(2)(d) pertaining to interest income of Rs. 22,20,130/- from co-operative banks (+) dividend income of Rs. 75,853/- from shares of co-operative banks. The case of Page 5 of 34

Adim Jati Sewa Sahkari Samiti Mydt.

AO passed order u/s 143(3). In the assessment so finalised, the AO disallowed deduction claimed by assessee. During first appeal, the CIT(A) approved AO’s order. Aggrieved, the assessee has come in present appeal before us.

Issue of deduction u/s 80P(2)(d) on interest earned from co-operative banks:

5. This issue is being decided by this very bench in a separate order of even date in the case of M.P. Matsya Mahasangh Sahakari, to 359, 328 to 330/Ind/2024 in favour of assessee. We re- produce below the relevant portion of order for an immediate reference:

M.P. Matsya Mahasangh Sahakari, to 359, 328 to 330/Ind/2024 “Issue of deduction u/s 80P(2)(d): 4. This issue is involved in all five (5) years. At first, we re-produce below the provision of section 80P(2)(d) and section 80P(4) which shall be referred to in subsequent discussions: “Deduction in respect of income of co-operative societies: 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sum referred to in sub-section (1) shall be the following, namely:- XXX (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments

Adim Jati Sewa Sahkari Samiti Mydt. with any other co-operative society, the whole of such income”. XXX (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank.” [emphasis supplied]

5. The controversy between assessee and AO arises from the fact that the AO carries a view that the section 80P(2)(d) allows deduction to interest income earned by a “co-operative society” from another “co-operative society”. According to AO, the interest income earned by a “co-operative society” from a “co-operative bank” is not eligible for deduction u/s 80P(2)(d). In coming to such a conclusion, the AO has precisely relied upon decision of Hon’ble Supreme Court in Totagars Co-operative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) / (2010) 188 Taxman 282 (SC).

6. Before us, the Ld. AR for assessee/appellant has cited decisions of different High Courts and ITAT Benches holding in favour of assessee. The decisions relied by Ld. AR are as follows: (i) Hon’ble Gujrat High Court – PCIT Vs. Ashwinkumar Arban Co-operative Society Ltd. (2024) 168 taxmann.com 314 (Gujrat) (ii) Hon’ble Sikkim High Court – Sikkim State Co-operative Supply and Marketing Federation Ltd. Vs. DCIT (2025) 181 taxmann.com 494 (Sikkim) (iii) Hon’ble Madras High Court – Thorapadi Urban Co-op Credit Society Ltd. Vs. ITO (2023) 156 taxmann.com 419 (Madras)

(iv) ITAT, Indore – Indore Sahakari Dugdh Sangh Maryadit Dairy Compound Vs. ACIT/ITO – & 294/Ind/2024, order dated 17.09.2024.

(v) ITAT, Mumbai – Pathare Prabhu Co-operative Housing Society Ltd. Vs. ITO (2023) 153 taxmann.com 714 (Mum – Trib.)

(vi) ITAT, Mumbai – Shree Raj Crystal Co-op. Housing Society Ltd. Vs. ADIT, order dated 27.11.2025

7. Ld. AR referred relevant paras of decisions and demonstrated that in the Hon’ble Courts have analysed the decision of Hon’ble Supreme Court in Totagars Co-operative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) / (2010) 188 Taxman 282 (SC) relied by AO and come to a conclusion that the said decision was concerned with section 80P(2)(a)(i) and not with section 80P(2)(d) with which we are concerned in present appeals. Finally, after analysis of provisions of section 80P(2)(d)

Adim Jati Sewa Sahkari Samiti Mydt.

80P(4), the Hon’ble Courts have concluded that the interest earned by a “co- operative society” from “co-operative bank” is very much eligible for deduction u/s 80P(2)(d).

8. Per contra, Ld. DR for revenue at first relied upon the decision of Hon’ble Supreme Court in Totagars Co-operative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) / (2010) 188 Taxman 282 (SC) and contended that the Hon’ble Supreme Court has disallowed deduction u/s 80P qua the interest income. Thereafter, he relied upon another decision of Hon’ble Karnataka High Court in PCIT Vs. Totagars Co-operative Sale Society (2017) 395 ITR 611 (Karnataka) / (2017) 83 taxmann.com 140 (Karnataka) as well as following decisions of ITAT, Benches favouring revenue:

(i) ITAT, Bangalore - Savanoor Primary Agriculture Co-operative Society Ltd. (2024) 159 taxmann.com 1493 (Bangalore – Trib.), order dated 09.01.2024 (ii) Paravur Service Co-operative Bank Ltd. Vs. ITO (2018) 96 taxmann.com 654 (Cochin – Trib).

9. With the support of above decisions, Ld. DR contended that the section 80P(2)(d) does not grant deduction qua the interest earned from “co-operative bank”. He also contended that even section 80P(4) prohibits deduction in such cases.

10.

We have considered rival submissions of both sides. Admittedly, there is no dispute on facts that (i) the assessee is a “co-operative society” but not a “co- operative bank” and (ii) the assessee has earned interest from “co-operative banks”. Now, the controversy before us is purely legal i.e. whether or not the interest earned by assessee (which is a “co-operative society” but not a “co-operative bank”) from “co- operative banks” is eligible for deduction u/s 80P(2)(d)?

11. At first, we refer two recent decisions of ITAT, Ahmedabad which in turn follows the decision of PCIT Vs. Ashwinkumar Arban Co-operative Society Ltd. (2024) 168 taxmann.com 314 (Gujrat) quoted by Ld. AR.

(i) ACIT Vs. The Gujrat State Co-Op. Housing Finance Corp Ltd., to 925/Ahd/2023, order dated 05.12.2024:

This order is authorized by Hon’ble Vice-President, Dr. B.R.R. Kumar. The relevant paras of order are re-produced below:

“3. Heard the arguments of both the parties and perused the material available before us. In these cases, the order for the relevant Assessment Years, i.e. 2013-14, 2014-15 and 2017-18, have been passed by the ACIT, Circle 5(2)(1), Ahmedabad u/s. 143(3) r.w.s. 147/263 of the Act, disallowing the interest income earned by the assessee by way of FD investment in other Co-op. Society, i.e. Gujarat State Co-op. Bank Ltd. (GSCB) and the rental income from HUDCO and SHARK Systems, which were claimed by the assessee u/s 80P(2)(d) of the Act.

4. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the additions made by the Assessing Officer in these assessment years, relying the order of the Hon'ble High Courts in the cases of Totgar's Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and State Bank of India (2016) 389 ITR 578 (Guj.).

5. Aggrieved by the order of the ld. CIT(A), the Revenue is now in appeal before the Tribunal.

6. The provisions of section 80P(2)(d) of the Act are as under:-

Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely XX (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income;

7. In this case, the undisputed facts are as under:-

The assessee is a Co-operative Society,

The assessee had deposits as FDs in GSCB, The assessee earned income as interest, The GSCB is a Co-operative Society as per Co-operative Societies Act, registered in 1960 with registration No. 560 under Urban Co- operative Bank, Thus, the assessee who is a co-operative society earned interest out of the FDs made in another co-operative society.

8. The only legal issue involved in this case is that whether the assessee is eligible for deduction u/s 80P(2)(d) of the Act on the interest earned on Fixed Deposits made in a Co-operative Bank (GSCB) or not.

9. On this issue, we are guided by the judgment of Hon'ble jurisdictional High Court in the case of PCIT Vs. Ashwinkumar Arban Co-Operative Society Ltd, [2024] 168 taxmann.com 314 (Gujarat). For the sake of ready reference, snippets of the said order is reproduced below:-

"Section 80P, read with section 263 of the Income-tax Act, 1961 Deductions Income of co-operative societies (Interest from co- operative bank) Assessment year 2018-19- Principal Commissioner invoked revisional powers under section 263 on ground that Assessing Officer had allowed deduction on interest earned by assessee, a cooperative society, from investment made with a cooperative bank under section 80P(2)(d) which was erroneous and prejudicial to Interest of revenue Tribunal reversed Principal Commissioner's order holding that cooperative bank was a cooperative society registered under Gujarat State Cooperative Societies Act and, therefore, interest earned by assessee from said bank was eligible for deduction under section 80P(2)(d) - Whether deduction under section 80P(2)(d) is available to cooperative societies on income earned as interest on investment made with cooperative bank which in turn, is a cooperative society itself - Held, yes - Whether exclusion of applicability of section 80P to cooperative banks by section 80P(4) would not disentitle assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in said section - Held, yes - Whether thus, provisions of section 80P(2)(d) would be applicable to instant case and Principal Commissioner was not justified in invoking revisional powers under section 263 which was rightly reversed by Tribunal - Held, yes [In favour of assessee) ***

The controversy sought to be canvassed with regard to deduction under section 80P(2)(d) is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v Asstt. Commissioner of Income Tax [2022] 140 taxmann.com 602 (Guj.) as well as in case of State Bank of India v Commissioner of Income Tax (2018) 389 ITR 578 (Guj.) wherein it was held that the deduction under section 80P(2)(d) is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. [Para 28] Reliance placed by the revenue on decisions of the Karnataka High Court in Totgars' Cooperative Sale Society (2017) 395 ITR 611 and Supreme Court in case of Totgars Cooperative Sale Society Ltd v. Income Tax Officer 322 ITR 283 (S.C), the Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears that the interpretation made by the Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act, 2015 by amending section 194A(3)(v) is concerned, on perusal of section 194A(3), it appears that it provides for exemption from deducting Tax Deducted at Source from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that Page 10 of 34

Adim Jati Sewa Sahkari Samiti Mydt. cooperative banks are excluded from the definition of cooperative societies by such an amendment. [Para 29] Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) in the facts of the case is also not possible to accept as section 80P(4) would be applicable to the cooperative bank when the cooperative bank is liable to pay tax under the provisions of the Act and in such eventuality, the provision of section 80P would not be applicable as per the amendment of sub-section (4) of section 80P. Therefore, the exclusion of applicability of section 80P to cooperative banks by section 80P (4) would not disentitle the respondent-assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in the said section and that would not be sufficient to deny the claim of the respondent-assessee for deduction of interest earned from investment made in a cooperative bank which is also a cooperative society from the total income. [Para 30]

The Apex Court in case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer in 458 ITR 184 while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) would not be applicable to a cooperative bank which is not a bank as per the provisions of the Banking Regulation Act, 1949.[Para 31] In view of the above the provisions of section 80P(2)(d) would be applicable in the facts of the case and the Principal Commissioner was not justified in invoking revisional powers under section 263 which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. [Para 33] i. In view of the foregoing reasons the question is answered in favour of the assessee and against the revenue. Tax Appeals being devoid of any merit are dismissed [Para 34]."

10. Similar view has been taken by this Tribunal in the case of :-

(i) Ratneshwari Co. Op. Credit Society Limited Vs. ACIT [ITA No. 1409/Ahd/2024 dated 29.11.2024], (ii) Shree Vivekanand Co-op. Credit Society Limited Vs. ITO [ITA No. 1003/Ahd/2024 dated 22.11.2024], (iii) The Deesa Merchantile Co. Society Ltd. Vs. PCIT [ITA No. 382/Ahd/2024 dated 05.11.2024],

(iv) Sai Prerna Co-operative Society Ltd. Vs. CIT [ITA No. 5741/Mum/2018 dated 03.12.2018].

11. In the absence of any change in the factual matrix and legal proposition, respectfully following the order of the Hon'ble jurisdictional High Court, the appeals of the Revenue are hereby dismissed.”

(ii) Sohamnagar Co-op. Housing Society Vs. ITO, order dated 20.02.2025:

This order is authorized by Hon’ble Judicial Member but Hon’ble Vice- President, Dr. B.R.R. Kumar was a part of the bench. The relevant paras of order are re-produced below:

“3. The issue for consideration before us is whether the assessee is eligible for deduction under Section 80P(2)(d) of the Act in respect of interest income of Rs. 2,80,904/- earned from cooperative banks.

Before us, the Counsel for the assessee submitted that the issue is now covered in favour of the assessee by order of the Hon'ble Gujarat High Court in the case of PCIT vs. Ashwinkumar Arban Co Operative Society Ltd. 168 taxmann.com 314 (Gujarat), in which it was held that deduction under Section 80P(2)(d) is available to cooperative societies on income earned as interest on investment made with cooperative bank which in turn, is a cooperative society itself.

We observe that the issue is now settled in favour of the assessee by the Jurisdictional High Court in the case of Principal Commissioner of Income- tax vs. Shree Madhi Vighag Khand Udyog Sahakari Mandli Ltd. [2025] 171 taxmann.com 22 (Gujarat) [24.12.2024], the High Court held that where assessee, a cooperative society, earned interest on investment made with a cooperative bank and claimed deduction under Section 80P(2)(d), since cooperative bank was a cooperative society registered under Gujarat State Cooperative Societies Act, assessee was to be allowed to claim deduction under Section 80P(2)(d) of the Act. While passing the order, the jurisdictional High Court made the following observations:

“11. Learned Senior Standing Counsel Mr. Karan Sanghani appearing for the appellant-Revenue candidly submitted that issue involved in this appeal is already decided by this Court in favour of the assesee in case of Principal Commissioner of Income Tax v. Ashwin kumar Arban Cooperative Society Limited reported in [2024] 168 taxmann.com 314 (Gujarat) wherein this Court held as under:

"28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of Page 12 of 34

Adim Jati Sewa Sahkari Samiti Mydt.

Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 80P(2)(d) of the Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself.

29.

Reliance placed by the learned advocate for the revenue on decisions of the Hon'ble Karnataka High Court and Hon'ble Supreme Court in case of Totgars' Cooperative Sale Society Ltd, the Hon'ble Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) of the Act wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears that the interpretation made by the Hon'ble Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the co-operative societies by Finance Act, 2015 by amending section 194A(3)(v) of the Act is concerned, on perusal of section 194A (3) of the Act, it appears that it provides for exemption from deducting Tax Deducted at Source ['TDS' for short] from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that cooperative banks are excluded from the definition of cooperative societies by such an amendment.

30.

Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) of the Act in the facts of the case is also not possible to accept as section 80P(4) of the Act would be applicable to the cooperative bank when the cooperative bank is liable to pay tax under the provisions of the Act and in such eventuality, the provision of section 80P would not be applicable as per the amendment of sub-section (4) of section 80P of the Act. Therefore, the exclusion of applicability of section 80P to co-operative banks by section 80P(4) of the Act would not disentitle the respondent-assessee from claiming deduction under section 80P(2)(d) of the Act in absence of any amendment in the said section and that would not be sufficient to deny the claim of the respondent-assessee for deduction of interest earned from investment made in a co- operative bank which is also a cooperative society from the total income. Kerala State Co- 31. The Hon'ble Apex Court in case of operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer (supra) while considering various provisions of the Banking Regulation Act read with provisions of Page 13 of 34

Adim Jati Sewa Sahkari Samiti Mydt.

Income Tax Act has held that the provision of section 80P(4) of the Act would not be applicable to a cooperative bank which is not a bank as per the provisions of the BR Act,1949, as under: "5. Interpretation.-- In this Act, unless there is anything repugnant in the subject or context, XXX (b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) "banking company" means any company which transacts the business of banking in India. Explanation.-- Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;"

32.

After considering the above interpretation of various provisions and the Case laws, the Hon'ble Apex Court has analyzed the provisions as under: "14.1. In Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd., it was categorically held that under Section 56 of the BR Act, 1949 only three co-operative banks have been defined, namely, state cooperative bank, central co-operative bank and primary co-operative bank which are covered under Section 56(cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. Thus, it is only these three banks which are co- operative banks which require a licence under the BR Act, 1949 to engage in banking business. If any bank does not fall within the nomenclature of the aforesaid three banks as defined under the NABARD Act, 1981, it would not be a co- operative bank within the meaning of Section 56 of BR Act, 1949 irrespective of whatever nomenclature it may have or structure it may possess or incorporated under any Act. It was further stated that if a bank has to be a state co- operative bank, there has to be a declaration made by the State Government in terms of Section 2(u) of NABARD Act, 1981. Hence, it is necessary to go into the question as to, whether, the appellant herein

Adim Jati Sewa Sahkari Samiti Mydt. has been so declared as a state cooperative bank. This question would need not detain us for long as the Kerala High Court in A.P. Varghese had categorically stated that the "Kerala State Co-operative Bank" is a "state co-operative bank" as defined under the NABARD Act, 1981. Therefore, the appellant bank has not been declared as a state co- operative bank under the provisions of NABARD Act, 1981. Further, in the case of Mavilayi Service Co-operative Bank, this Court observed that a co-operative bank would engage in banking business on obtaining a licence under Section 22(1b) of the BR Act, 1949. In the instant case, the appellant herein is not a co-operative bank having regard to the aforesaid conspectus of the provisions so as to require a licence under the aforesaid provision for carrying on banking business. In the circumstances, the question could still arise as to whether the appellant herein is entitled to benefit of deduction under Section 80P of the Act. 14.2. In Mavilayi Service Co-operative Bank, it has been observed that Section 80P of the Act is a beneficial provision which was enacted in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and therefore, has to be read liberally in favour of the assessee. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub- section (2) of Section 80P must be given by way of deduction vide Citizen Cooperative Society. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in sub- sections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section 5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: (i) Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operative societies" is significant as it indicates the general "drift" of the provision.

(ii) Secondly, for purposes of eligibility for deduction, the assessee must be a "co-operative society". (iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). (iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being "engaged in", inter alia, carrying on the business of banking or providing credit facilities to its members. (v) Fifthly, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. (vi) Sixthly, the expression "providing credit facilities to its members" does not necessarily mean agricultural credit alone. It was highlighted that the distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. (vii) Seventhly, under Section 80P(1)(c), the co-operative societies must be registered either under Cooperative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). (viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other cooperative societies, the whole of such income is eligible for deduction, the object of the provision being furtherance of the co-operative movement as a whole. 14.4. In paragraph 42 of Mavilayi Service Co-operative Bank, this Court observed that the object and purpose of sub-section (4) of Section 80P is to exclude only co-operative banks that function on par with other commercial banks i.e. which lend money to members of the public. That on a reading of Section 3 read with Section 56 of the BR Act, 1949, the primary co-operative bank cannot be a primary agricultural credit society. As such co-operative bank must be engaged in the business of banking as Page 16 of 34

Adim Jati Sewa Sahkari Samiti Mydt.

Section 5(b) of the BR Act, 1949, which means accepting, for the purpose of lending or investment, of deposits of money from the public. Also under Section 22(1)(b) of the BR Act, 1949, no co- operative society can carry on banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by Reserve Bank of India. It was pointed out that as opposed to the above, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6. Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That subsection (4) of Section 80P which is in the nature of a proviso specifically excludes co- operative banks which are co- operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from Reserve Bank of India."

33.

In view of the above dictum of law as well as the provisions of the Act which are considered we are of the opinion that the provisions of section 80P(2)(d) would be applicable in the facts of the case and the PCIT was not justified in invoking revisional powers under section 263 of the Act which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) of the Act which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled.

34.

In view of the foregoing reasons we answer the question in favour of the assessee and against the Revenue. Tax Appeals are being devoid of any merit accordingly dismissed. No order as to costs."

12. In view of the above dictum of law as well as the provisions of the Act which are considered in the said judgment, no question of law much-less any substantial question of law arises from the impugned order of the Tribunal. Tax Appeal being devoid of any merit is accordingly dismissed. No order as to costs.”

In view of the above judicial precedents rendered by the Jurisdictional High Court, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.”

12. Now, we refer the decision of Hon’ble Sikkim High Court in Sikkim State Co- operative Supply and Marketing Federation Ltd. Vs. DCIT (2025) 181 taxmann.com 494 (Sikkim) wherein it was held thus: “9. The primary reason for allowing the Revenue's appeal has been quoted hereinbefore. A plain reading of the quoted portion of the impugned order of the learned Tribunal dated 18th June, 2025, reveals that the learned Tribunal has relied substantially on a judgment of the Karnataka High Court in Pr. CIT v. Totagars Cooperative Sale Society [2017] 83 taxmann.com 140 / [2017] 395 ITR 611 (Karnataka), as well as the judgment of the Hon'ble Supreme Court rendered in Totgars, Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282 (SC) / [2010] 322 ITR 283 (SC) / (2010) 3 Supreme Court Cases 223. 10. Now, in order to answer the first substantial question of law, we need to look into section 80P(4) of the Income Tax Act, 1961 carefully, which bars only co-operative banks (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) from claiming deduction from their own income. Section 80P(4) reads as follows:- “….... (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.—For the purposes of this sub-section,— (a) “co-operative bank” and “primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) “primary co-operative agricultural and rural development bank” means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.”

11.

A plain reading of the above quoted provision of law reveals that the statute makes a clear distinction between a co-operative bank (other than a primary agricultural credit society or a primary co-operative agricultural or rural development bank) and any other co-operative entity registered as a co- operative society, which SIMFED happens to be.

12. The explanation provided under section 80P(4), which has also been reproduced hereinabove, makes it further clear that a "co-operative bank" will have the same meaning, as assigned to it under Part V of the Banking Regulation Act, 1949. It is nobody's case that SIMFED is a cooperative bank, functioning within the meaning assigned to it under Part V of the Banking Regulation Act, 1949. Rather, it is clearly evident that it is a non-banking co- operative society and received interest only from some co-operative banks, that too, based on investments made from the surplus funds and statutory reserves of the federation, as required under the relevant provisions of Sikkim Co-operative Societies Act, 1978.

13. Now we must look at section 80P(2)(d), which reads as follows:. "....... (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; ......"

14.

It is a matter of record that SIMFED earned interest from investments made in two co-operative banks, namely, Sikkim State Cooperative Bank Limited and Citizens Urban Co-operative Bank Limited, both registered as co- operative societies under the Sikkim Co-operative Societies Act, 1978. As stated hereinbefore, these investments were made from the surplus funds and statutory reserves of SIMFED as required under sections under the relevant provisions of Sikkim Cooperative Societies Act, 1978, more specifically, sections 57 to 66, under Chapter V of the Sikkim Co-operative Societies Act, 1978, which mandates prudent management and investment of funds only in approved securities of co-operative banks approved by the Registrar. In our view, a plain reading of the provisions of law quoted 15. above, clearly reveals that the learned Tribunal misinterpreted the provision of section 80P(4) of the Income Tax Act, 1961, which specifically excludes co-operative banks (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) and erroneously applied it in respect of SIMFED, thereby disentitling it from claiming benefit under section 80P of the Income Tax Act, 1961. As such, the first substantial question of law is answered in favour of the assessee. 16. So far as the second substantial question of law as framed by us is concerned, we are of the view that the Hon'ble High Court of Gujarat in the Page 19 of 34

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PCIT v. Ashwin Kumar Urban Co-operative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), has squarely answered this question in favour of the assessee by observing inter alia that the Hon'ble Supreme Court's decision rendered in Totgars' Cooperative Sale Society Ltd. (supra) was not applicable in the facts of that case — which is identical to the instant case — as the eligibility of deduction of interest in the facts of the instant case has to be decided under section 80P(2)(d) and not under section 80P(2)(a)(i). Totgars' Cooperative Sale Society Ltd. (supra) was primarily concerned with section 80P(2)(a)(i) and retained members' funds shown as liability to deny deductions under section 80P(2)(d). The facts of the Totagars' Cooperative Sale Society Ltd (supra) — as well as the applicability of the statutory provisions in so far as in our case is concerned — are factually and materially different. As such, the second substantial question of law as framed by us is also answered in favour of the assessee.

17.

Now, so far as the two judgments referred to by the learned Deputy Solicitor General of India are concerned, namely, Totgars Co-operative Sale Society Ltd. (supra) and the Totagars Co-operative Sale Society (supra), we have already held earlier that the judgment of the Hon'ble Supreme Court's judgment in Totgars' Cooperative Sale Society Ltd (supra) is not applicable in the facts of our case. So far as judgment of the Karnataka High Court is concerned — which was relied upon by the learned Income Tax Appellate Tribunal, while rendering its impugned judgment and order dated 18th June, 2025 — the Gujarat High Court in Ashwin Kumar Urban Co-operative Society Ltd. (supra) has considered the said Karnataka High Court judgment and has clearly held the same to be distinguishable and not applicable in a similar fact situation as our present case.

18.

We are, therefore, of the view that in the facts of the instant case, the assessee is entitled to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961.

19.

For reasons stated above, the impugned judgment and order dated 18th June, 2025, passed by the learned Income Tax Appellate Tribunal in I.T.A. Nos.: 1582/KOL/2024 in respect of the Assessment Year: 2018-19, is liable to be set aside and is accordingly set aside.

20.

Tax Appeal No. 02 of 2025 is accordingly allowed.” [emphasis supplied] 13. To the same effect is the decision of Hon’ble Madras High Court in Thorapadi Urban Co-op Credit Society Ltd. Vs. ITO (2023) 156 taxmann.com 419 (Madras), the relevant paras are as under: “8. The main issue is to decide in the present case is as to whether the petitioner Co-operative Society is entitled for a deduction for the interest income received from the Co-operative Bank?

9. It would be appropriate to extract hereunder the relevant portion of section 80P(2)(d). "80P. Deduction in respect of income of co-operative societies: (1) ** ** ** (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) to (c) ** ** ** (d) "in respect of any income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society, the whole of such income" 9.1 A reading of the above said provision makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term 'Co-operative Society'. In the present case, the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co- operative Societies Act, 1983 on 20-5-2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co- operative Bank registered under the Co-operative Societies Act. The Income Tax Act, 1961 has also defined 'Co-operative Society' under section 2(19) as follows: '2(19). "Co-operative society" means a co-operative society registered under the Co- operative Societies Act, 1912 (2 of 1912 ), or under any other law for the time being in force in any State for the registration of co- operative societies.' 10. A reading of the above definition would make it clear that 'Co-operative Society' means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank. 11. The learned counsel for the respondent referred to the judgment of the Hon'ble Supreme Court rendered in Totgars Co-operative Sale Society Ltd. (supra), wherein the issue came up for consideration as to whether the interest income received by a Co-operative Bank from its members by way of providing the credit facilities to its members is eligible for deduction or not. Ultimately the Hon'ble Supreme Court found that under section 80P(2)(a)(i), the same is eligible for deduction. Therefore, the law laid down by the Hon'ble Supreme Court is not applicable for in the present case as the eligibility of Page 21 of 34

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80P(2)(d) and not under section 80P(2)(a)(i). The learned counsel has also relied upon other judgments which are not applicable for the present facts of the present case.

12.

At this juncture, it would be appropriate to refer a judgment passed by a Division Bench of this Court in CIT v. Salem Agricultural Producers Co- operative Marketing Society Ltd. [2016] 76 taxmann.com 225 (Mad.)/[Tax Case Appeal No. 5 of 2015], wherein, apart from other substantial issues, the following issue has been framed for consideration, which reads as under : "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 with respect to the interest received from Class B members who were involved in non- agricultural society?". While answering to the above, the Division Bench held that the respondent therein, which is a Co-operative society, is entitled to avail the benefit under 80P(2)(d) of the Act. The judgment was rendered on 10-8-2016, where the judgement rendered by the Hon'ble Supreme Court in 2010 was considered.

13.

In such view of the matter, since the impugned orders are passed without considering all these aspects, this Court is of the view that the same are liable to be set aside. Accordingly, the Writ Petitions are allowed and all the impugned notices are set aside. No costs. Consequently, all the connected miscellaneous petitions are closed.”

14. Lastly, we would like to refer the decision of co-ordinate bench of ITAT, Indore itself in Indore Sahakari Dugdh Sangh Maryadit Dairy Compound Vs. ACIT/ITO – & 294/Ind/2024, order dated 17.09.2024:

“4.2 Thus, there is no dispute that the interest income received by the assesse for these two years were from the deposit made with the Cooperative Bank which is primarily Cooperative Society registered under M.P. Cooperative Societies Act 1960. At the outset, we note that this Tribunal has considered an identical issue in a series of decision including in case of Pr. CIT vs. Bhopal Dugdh Sangh Sahakari Maryadit (supra) in para 5 to 7 as under: “5. We have considered rival submissions as well as relevant material on record. The AO has disallowed the claim of deduction u/s 80P(2)(d) of the Act in respect of the interest income received by the assessee on the fixed deposit made with Bhopal Co-operative Central Bank on the ground that the only interest or dividend received on the investment made with the other Co-operative Society is eligible for deduction u/s 80P(2)(d) of the Act. On appeal the CIT(A) has allowed the claim of the assessee by accepting Co-operative Bank for the purpose of section 80P(2)(d) of the Act as Co-operative Society. We

Adim Jati Sewa Sahkari Samiti Mydt.

Pune Benches of the Tribunal in case of Rena Sahakari Sakhar Karkhana vs. Pr. CIT (supra) has considered an identical issue in para 7 & 8 as under: “7. We have heard the ld. authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether or not the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order. In our considered view, the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative bank, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act.

After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely :- (a)............................................................................................ (b)............................................................................................ (c)............................................................................................ (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income;”

On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub- section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardize the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co- operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term “co-operative society” had been defined under Sec. 2(19) of the Act, as under:-

“(19) “Co-operative society” means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;” We are of the considered view, that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co- operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.”

6. Thus, the Tribunal has referred and relied upon the various decisions on the point wherein the interest income earned by Co-operative Society on the investment held in Co-operative Bank was eligible for claim of deduction u/s 80P(2)(d) of the Act. We further note that Indore Bench of this Tribunal in case of Indore Pragatishil Sahakari Sakh Sanstha Maryadit vs. ITO in ITANo. 317/Ind/2023 vide order dated 10.01.2024 has considered and decided this issue in para 9 to 12 as under:

“9. We have considered the facts, rival submissions and perused the record placed before us. The assessee is a Credit Cooperative Society and during the year under consideration, it has earned interest income of Rs. 10,77,910/- on FDRs. The assessee has shown the interest income on FDR under the head “income from other sources” and against such interest income has claimed incidental expenses including interest paid to depositors at Rs. 5,38,955/-, commissioner paid to Collection Agent at Rs. 4,71,586/- and stationery and printing expenses at Rs. 28,450/-. Both the lower authorities have held that the incidental expenses claimed are in the nature of business expenditure and needs to be allowed against business receipts and have also observed that FDR interest being income from other sources is not eligible for deduction u/s 80-P of the Act.

10. We, however, on perusal of computation of income filed in the paper book at page no.11 noticed that the alleged FDR interest income has been received by the assessee from deposits made with Indore Premier Cooperative Bank Limited. Though during the course of hearing, the Ld. Counsel for the assessee has not made any specific contention regarding the eligibility of the deduction u/s 80P(2)(d) in respect of any income by way of interest or dividend derived by the Cooperative Society from its investment with any other Cooperative Society. However, since we have come across this fact which are discernible from the paper book filed before us, it remains undisputed fact that the alleged FDR interest income of Rs. 1077,910/- has been received from FD held with Cooperative Bank. Before moving further, we would like to go through the provisions of Section 80P of the Act, which reads as under :-

“Deduction in respect of income of co-operative societies 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce of its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or Page 25 of 34

(v) the processing, without the aid of power, of the agricultural produce of its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities ; (b) in the case of co-operative society, being a primary society engaged in supplying milk raised by its members to a federal milk co-operative society, the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause(b) [either independently of, or in addition to, all or any of the activities so specified], so much of its profits 1[fifteen and gains attributable to such activities as does not exceed thousand rupees]; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society, or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities chargeable under section 18 or any income from house property chargeable under section 22. Explanation.—For the purposes of this section, an urban consumers' co- operative society means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area, or cantonment.

(3) In a case where the assessee is entitled also to the deduction under section 80H or section 80J, the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income, as reduced by the deductions under section 80H and section 80J.

[(4) Nothing contained in this section shall apply to a co- operative society carrying on insurance business in respect of the profits and gains of that business computed in accordance with section 44.]”

11. From specifically going through the provisions of Section 80P(2)(d) of the Act, we find that the assessee is eligible for deduction u/s 80P(1) in respect of the income derived by way of interest or dividend from its investment with any cooperative bank society. In the instant case,

Adim Jati Sewa Sahkari Samiti Mydt.

Cooperative Bank, but basically it is a Cooperative Society, which has taken a banking license. Recently in Coordinate Bench of Mumbai in the case of Amore Commercial Premises Co-Op. Society Limited vs. Central Processing Centre, & 2874/M/2022 dated 17.01.2023 has dealt with the similar issue and after placing reliance on the judgement of Hon'ble High Court of Karnataka in the case of Pr. CIT and Others vs. Totgars Co-operative Society Limited, (2017) 292/ITR 74 (Karnataka) and judgement of Hon'ble Gujarat High Court in the case of State Bank of India vs. CIT, (2016) 389 ITR 578 (Guj) has held that interest income earned by Cooperative Society on its investment held with Cooperative Bank would be eligible for claim of deduction u/s 80P(2)(d). Relevant portion of the decision of the Coordinate Bench, Mumbai in the case of Amore Commercial Premises Co-Op. Society Limited vs. Central Processing Centre, (supra) reads as follows :-

“7. Issue as to the allowability of the deduction claimed by the Assessee u/s. 80P (2)(d) of the Act, is no longer Res-Integra having being decided by the co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd. in order dated 09.09.2022 by settling the issue in favour of the assessee by distinguishing the judgment rendered by Hon’ble Supreme Court in case of Totgar’s Co-operative Sale Society Ltd. Vs. Income Tax Officer, 188 Taxman 282(SC) and by discussing the decision rendered by Hon’ble Bombay High and Hon’ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act by returning following findings:

“8. We have given a thoughtful consideration to the contentions advanced by the Id. Authorized representatives for both the parties in context of the aforesaid issue under consideration. As stated by the ld. A.R, and rightly so, the issue that interest received by a co-operative society on its deposits with co- operative banks would be eligible for deduction w/s 80P(2)(d) of the Act is covered in assessee’s favour by orders of the various coordinate benches of the Tribunal in the following cases: (i). M/s Solitaire CHS Ltd. Vs. Pr.CIT-26, Mumbai, dated 29.11.2019 (ii) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum.) (iii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017. (iv) Marvwanjee Cama Park Cooperative Housing Society Ltd. V’s. ITO-Range 20(2)(2), Mumbai (ITA NO. 6139/Mum/2014, dated 27.09.2017. (v)Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. In the aforesaid orders, it has been held by the Tribunal that though the cooperative banks pursuant to the insertion of sub-

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(4) to Sec. 80P of the Act would no more be entitled for claim of deduction u/s 80P of the Act, but as a co-operative bank continues to be a co- operative society registered under the Co- operative Societies Act, 1912 (2 of 1912) or under any other law for the time being in force in any State for the registration of co- operative societies, therefore, the interest income derived by a cooperative society from its investments held with a co-operative bank would be entitled for claim of deduction w/s 80P(2)(d) of the Act. We find that the aforesaid issue had exhaustively been looked into by the ITAT, “G” bench, Mumbai in the case of M/s Solitaire CHS Ltd, Vs. Pr.CIT-26, Mumbai dated 29.11.2019, wherein the Tribunal had observed as under: “6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section. 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr.CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2) (d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with cooperative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not co- operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act.

7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2) (d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2) (d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2). The sums referred to in sub- section (1) shall be the following, namely:-

(a)……………………………………………………….. (b) …………………………………………….. (c) …………………………………………….. (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income;”

On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other cooperative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co- operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co- operative society under Sec. 80P(2)(d) in respect of its interest income investments/deposits parked with a co- operative bank. In our considered view, as long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available.

We find that the term cooperative society” had been defined under Sec. 2(19) of the Act, as under:- “(19) “Co-operative society” means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies;”

We are of the considered view, that though the cooperative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co- operative societies, therefore, the interest income derived by a cooperative society from its investments held with a cooperative bank would be entitled for claim of deduction under Sec.80P(2) (d) of the Act.

8. We shall now advert to the judicial pronouncements that have been relied upon by the Id. A.R. We find that the issue that a co-operative society would be Page 29 of 34

Adim Jati Sewa Sahkari Samiti Mydt.

Sec. 80P(2)(d) on the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH $2 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2). Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. (iv). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. We further find that the Hon’ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon”ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec. 80P(2) (d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may observe that the Hon’ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars cooperative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2) (d). At the same time, we find, that the Hon’ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co- operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2) (d) of the Act. We find that as held by the Hon’ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court’s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support

Adim Jati Sewa Sahkari Samiti Mydt.

Hon’ble High Court of jurisdiction, we respectfully follow the view taken by the Hon’ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.

9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with cooperative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we “set aside” his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016.” As the facts and the issue involved in the present case before us remains the same as were there before the Tribunal in the case of M/s Solitaire CHS Ltd. (supra), wherein the order passed by the Pr. CIT u/s 263 of the Act was quashed, we, thus, respectfully follow the same. Backed by our aforesaid deliberations, we are unable to uphold the view taken by the Pr. CIT that the failure on the part of the A.O to be disallow the assessee’s claim for deduction u/s 80P(2)(d) had rendered the assessment order passed by him u/s 143(3) of the Act, dated 31.08.2017 as erroneous in so far it was prejudicial to the interest of the revenue.

9. Accordingly, on the basis of our aforesaid observations, we herein not finding favor with the view taken by the Pr. CIT that the order passed by the A.O u/s 143(3), dated 31.08.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act set-aside the same and restore the order passed by the A.O u/s 143(3) of the Act, dated 31.08.2017.”

Hon’ble High Court of Karnataka in case of Pr. CIT & Anr.Vs. Totgar’s Co-operative Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and Hon’ble Gujarat High Court in case of State Bank of India vs. CIT (2016) 389 ITR 578 (Guj.) had held that interest income earned by a co-operative society on its investment held with cooperative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act.”

10. So following the decision rendered by Hon’ble Karnataka High Court (supra) and Hon’ble Gujarat High Court (supra), we are of the considered view that assessee society who has earned an amount of Rs. 6,96,725/- from its investment of surplus fund with cooperative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. 8. In view of but has been discussed above, I am of the consider view that Ld. CIT(A) has erred in upholding the denial of deduction claimed by the Assessee Society u/s. 80P (2)(d) of the Act, hence Assessing Officer is directed to allow the same.”

12. On examination of facts of the instant case, we find that the above referred decision is squarely applicable and, therefore, respectfully following the same, we are inclined to hold that the assessee is eligible for deduction u/s 80P(2)(d) of the Act at Rs. 10,77,910/- in respect of FDR interest received from Cooperative Bank. Thus, the finding of the Ld. CIT(A) is set-aside and the impugned addition/disallowance stands deleted. Ground nos. 1, 2 & 3 of the assesse’s appeal stand allowed. “ 7. Accordingly in view of the decision of this Tribunal referred above we do not find any error or illegality in the impugned order of the CIT(A) in allowing deduction u/s 80P(2)(d) of the Act on the interest received by the assessee from the deposit made in Bhopal Co-operative Central Bank. The revenue is devoid of any merits.” 4.3 Accordingly to maintain the rule of consistency this issue is decided in favour of the assesse and against the revenue and the claim of the assesse u/s 80P(2)(d) is allowed.”

15.

Thus, the above decisions rendered by the Hon’ble High Courts of Gujarat, Sikkim and Madras as well as by different benches of the Tribunal, have extensively dealt with and negated the arguments advanced by the Ld. DR. These decisions have undertaken a detailed examination of the scope and interplay of (i) section 80P(2)(d), (ii) section 80P(4), (iii) the judgment of the Hon’ble Supreme Court in Totagars Co-operative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) / (2010) 188 Taxman 282 (SC) and (iv) decision of Hon’ble Karnataka High Court in PCIT Vs. Totagars Co-operative Sale Society (2017) 395 ITR 611 (Karnataka) / (2017) 83 taxmann.com 140 (Karnataka). It has been consistently held that the decision of the Hon’ble Supreme Court in Totagars Co-operative Sale Society Ltd. (supra) was rendered in the context of section 80P(2)(a)(i) concerning business income and not in the context of section 80P(2)(d) which specifically deals with deduction in respect of interest or dividend income derived from investments with other co-operative societies. Therefore, the said judgment is clearly distinguishable both on facts and in law. Similarly, the decision of the Hon’ble Karnataka High Court in Totagars Co-operative Sale Society (supra)

Adim Jati Sewa Sahkari Samiti Mydt. has also been distinguished in subsequent judicial pronouncements. The consistent judicial view that emerges is that section 80P(2)(d) grants deduction in respect of interest income earned by a “co-operative society” from investments made with another “co-operative society”. A co-operative bank, being registered under the relevant Co-operative Societies Act, partakes the character of a “co-operative society”. Thus, the interest income earned by a “co-operative society” from a “co-operative bank” would squarely fall within the ambit of section 80P(2)(d) of the Act. Furthermore, the provisions of section 80P(4) excludes only a “co-operative bank” from claiming deduction u/s 80P. The embargo contained in section 80P(4) is applicable only to an assessee which is a “co-operative bank” but not to an assessee which is a “co-operative society” earning interest from a “co-operative bank”. We make it clear that every “co-operative bank” is a “co-operative society” but reverse is not true i.e. every “co-operative society” is not a “co-operative bank”.

16.

In view of the foregoing discussion and respectfully following the judicial precedents cited above, we too hold that the interest income earned by the assessee, being a “co-operative society” from “co-operative banks” is eligible for deduction under section 80P(2)(d) of the Act. However, for the sake of completeness, we may also add here even if it is said that there are two views on this issue, the assessee shall be entitled to favourable view as per decision of Hon’ble Supreme Court in CIT Vs. Vegetable Products Ltd. (1972) 88 ITR 192. In this decision, the Hon’ble Supreme Court has laid down a principle that “if two reasonable constructions of a taxing provision are possible, that construction which favours the Assessee must be adopted.” Accordingly, the issue is decided in favour of assessee. The additions made by the Ld. AO and sustained by the Ld. CIT(A) are hereby deleted. With this, the grounds raised by the assessee on this issue are allowed for all five years under consideration.

6. Respectfully carrying the same reasoning and view, we hold that the interest earned by assessee from co-operative banks is eligible for deduction u/s 80P(2)(d). We delete the addition made by AO in this regard.

Accordingly, this issue raised by assessee is allowed.

Issue of deduction u/s 80P(2)(d) on dividend earned from shares of co- operative banks:

7. This issue shall also go in favour of assessee. The rationale and reasoning remain identical to those adopted here-in-above while

Adim Jati Sewa Sahkari Samiti Mydt. adjudicating the issue of interest income from co-operative banks. Hence, we hold that the dividend earned by assessee from shares of co-operative banks is eligible for deduction u/s 80P(2)(d) and delete the addition made by AO in this regard. Accordingly, this issue raised by assessee is also allowed.

8. Resultantly, this appeal is allowed.

Order pronounced in open court on 27/03/2026

ADIM JATI SEWA SAHKARI SAMITI MYDT JOBAT,ALIRAJPUR vs. FACELESS ASSESSMENT OFFICER, ALIRAJPUR