GURUDEODATTA NAGARI SAHAKARI PATSANSTHA LIMITED,PUNE vs. ASSESSING OFFICE WARD- 14(3), PUNE

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE

BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 721/PUN/2026 Assessment Year : 2018-19 Gurudeodatta Nagari Sahakari Assessing Officer, Ward-14(3), Patsanstha Limited, Aayakar Sadan, Office No. F-1, Jagtap Chowk, vs. Bodhi Tower, Salisbury Park, Wanwadi, Pune-411040. Gultekadi, PAN : AAAAG4107H Pune-411037. (Appellant) (Respondent) Assessee by : Adv. Vaibhav B. Nimbalkar & Haripriya S. Suryawanshi Department by : Shri Uodol Raj Singh, DR Date of Hearing : 18-06-2026 Date of Pronouncement : 20-08-2026 O R D E R PER ASTHA CHANDRA, J.M.:

The appeal filed by the assessee is directed against the order dated 04-11-2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”], u/s. 250 of the Income Tax Act, 1961 (the “Act”), pertaining to Assessment Year (“AY”) 2018-19.

2 ITA No. 721/PUN/2026 3. Briefly stated, the facts of the case are that the assessee is a Co-operative Society registered under the Maharashtra Co-operative Societies Act, 1960 and is engaged in the business of accepting deposits from its members and providing credit facilities to its members. The assessee filed its return of income for AY. 2018-19 on 13-09-2018, declaring total income of Rs. NIL after claiming deduction of Rs.63,80,764/- u/s. 80P of the Act. The case of the assessee was selected for complete scrutiny and accordingly statutory notices u/s. 143(2) of the Act was issued and served on the assessee. Thereafter, the Ld. Assessing Officer (“AO”) issued notice u/s 142(1) of the Act along with questionnaire. During the course of assessment proceedings the Ld.AO noted that the assessee has claimed deduction u/s 80P of the Act amounting to Rs.1,04,25,817/- as per the computation of income enclosed with the return of income. The Ld.AO after considering the submission of the assessee, disallowed the deduction claimed by the assessee u/s. 80P(2)(d) of the Act to the extent of Rs. 82,77,393/- in respect of interest income earned from co-operative banks. The Ld.AO further observed that the activities of the assessee are similar to the activities of Co-operative Bank and thus, as per the provisions of section 80P(4) of the Act, the assessee is not eligible for claiming deduction u/s. 80P(2)(a)(i) of the Act. He, therefore, completed the assessment determining the taxable income of the assessee at Rs. 82,77,394/-, vide his order dt. 01-03-2021 passed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act.

3 ITA No. 721/PUN/2026 “Ground No. 1: The learned CIT(A) erred in law and on facts in confirming the disallowance of deduction claimed under section 80P of the Income Tax Act, 1961 in respect of interest income earned from deposits placed with co-operative banks. Ground No. 2: The learned CIT(A) failed to appreciate that interest income earned from investments with co-operative banks qualifies for deduction under section 80P(2)(d), as co-operative banks are co-operative societies registered under the relevant Co-operative Societies Act. The disallowance is contrary to the binding jurisdictional precedent of the Hon'ble Bombay High Court in PCIT vs Quepem Urban Co-operative Credit Society Ltd. (377 ITR 272). Ground No. 3: The learned CIT(A) erred in holding that interest income from deposits is not attributable to the business of providing credit facilities to members, ignoring that such deposits are part of operational and prudential management of funds and integrally connected with the business activities of the appellant, as held by the Hon'ble Supreme Court in CIT vs Karnataka State Co-operative Apex Bank (251 ITR 194). Ground No. 4: The learned CIT(A) erred in relying upon the decision of the Hon'ble Supreme Court in Totgars Co-operative Sale Society Ltd., which is distinguishable on facts and not applicable to co-operative credit societies whose funds are part of business operations. Ground No. 5: The learned CIT(A) erred in relying upon non-jurisdictional High Court decisions while ignoring binding precedent of the Hon'ble Bombay High Court, which is binding on authorities within the State. Ground No. 6: The learned CIT(A) failed to follow consistent decisions of the Hon'ble ITAT Pune Bench allowing deduction to co-operative credit societies on interest earned from co-operative banks. Ground No. 7: The learned CIT(A) erred in not following the decision of the Hon'ble ITAT Pune Bench in Talegaon Nagari Sahakari Patsanstha Ltd. vs ITO (ITA No. 743/PUN/2024 dated 03.06.2024), wherein it was held that interest earned from deposits with co-operative banks is eligible for deduction under section 80P(2)(a) (i) and 80P(2)(d) and that Totgars decision is not applicable. Ground No. 8: The lower authorities erred in not following coordinate bench decisions of the Tribunal on identical facts, contrary to settled principles of judicial discipline. Ground No. 9: The learned CIT(A) failed to appreciate that section 80P is a beneficial provision enacted to promote the co-operative movement and must be interpreted liberally. Ground No. 10: Without prejudice, even if the interest income is held not attributable to business activity, deduction is independently allowable under section 80P(2)(d) as interest derived from investments with co-operative societies. Ground No. 11: The learned CIT(A) failed to properly consider submissions, explanations and supporting documents filed by the appellant and passed the order mechanically.”

4 ITA No. 721/PUN/2026 6. We have heard the Ld. Representatives of the Parties and perused the material available on record as well as the judicial precedent relied upon by the Ld.AR. We find that although several grounds of appeal have been raised by the assessee, the only issue to be decided in this appeal pertains to the allowability of deduction u/s. 80P(2)(d)/80P(2)(a)(i) of the Act in respect of interest received by the assessee from the co-operative banks amounting to Rs. 82,77,390/- during the relevant AY under consideration.

5 ITA No. 721/PUN/2026 proceedings on the issue of applicability of deduction u/s. 80P(2)(d) and 80P(2)(a)(i) of the Act. We have perused the said order of the Tribunal (supra) and find that the Tribunal in the said case has upheld the order of the Ld.PCIT for the reason that the Assessing Officer had not conducted any enquiry on the issue of applicability of deduction u/s. 80P(2)(d) and 80P(2)(a)(i) of the Act which rendered the order of the Assessing Officer erroneous and prejudicial to the interest of the Revenue. However, the present appeal has been filed challenging the order of the Ld.AO passed u/s. 143(3) of the Act in the scrutiny assessment which has been confirmed by the Ld.CIT(A)/NFAC. Perusal of the order(s) of the Ld.AO as well as Ld.CIT(A)/NFAC reveals that the impugned issue has been duly and thoroughly examined and analysed by them. Thus, in our view, the order of the Tribunal (supra) passed pursuant to section 263 proceedings for AY. 2020-21 would not have any bearing on the present appeal. Having opined so, we find force in the arguments advanced by the Ld. Counsel for the assessee and observe that the Co-ordinate Bench in catena of cases have held that the interest income derived by a Co-operative society from its investments with Co-operative Banks would be entitled for claim of deduction u/s. 80P(2)(d)/80P(2)(a)(i) of the Act. The Ld.DR has not brought on record any material/decision to rebut the submissions of the Ld.AR.

6 ITA No. 721/PUN/2026 Society vs. ITO in ITA No.84/PAN/2018 for A.Y. 2012-13 order dated 27.05.2022 held in favour of the appellant society. The relevant paragraphs of the said order of Co-ordinate Bench of the Tribunal (supra) is reproduced herein under :- “8. We heard the rival submissions and perused the material on record. The only issue in the present appeal is pertaining to the allowability of deduction under the provisions of section 80P(2)(d) of the Act. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) of the Act is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon’ble Supreme Court in the aforesaid case (supra) not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. 9. Even the decision of Pune Bench of the Tribunal in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, 120 taxmann.com 10 wherein the Tribunal after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Cooperative Sales Society Ltd. (supra) and having noticed the divergent views of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, 55 taxmann.com 447 and the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. vs. CIT, 50 taxmann.com 278, decision of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (supra) had not been preferred to view of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra). The relevant observation of the Pune Bench of the Tribunal in the case (supra) is as under :- “9. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016, dated 9-4-2019) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014, dated 19-8-2015) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (2010) 322 ITR 283 (SC). There being no direct judgment from the Hon'ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon'ble Karnataka High

7 ITA No. 721/PUN/2026 Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). 10. Insofar as the reliance of the ld. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we find that the issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee co-operative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon'ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the impact of this decision, it turns out that the same is not germane to case under consideration in view of the position that the claim of the instant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d). Moreover, so many decisions relied on by the ld. AR amply go to prove that the view taken by the AO, cannot by any standard, be construed as not a possible view. We, therefore, hold that the ld. Pr. CIT was not justified in exercising the revisional power anent to interest income of Rs.22,34,270/- earned on investments made with co-operative banks.” 9. Following the decision of the Co-ordinate Bench of this Tribunal (supra), we are of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Thus, we direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative banks. The grounds of appeal filed by the assessee stands allowed.” 10. Undisputedly, in the instant case, the assessee earned interest income from its investments made with Co-operative Banks during the relevant AY 2018-19, which is claimed as deduction u/s. 80P(2)(d)/ 80P(2)(a)(i) of the Act. Considering the totality of facts and the legal position set out above, we hold that the assessee is entitled to claim deduction in respect of the income earned from the Co-operative Banks. The grounds raised by the assessee are accordingly allowed.

Sd/- Sd/- (RAMA KANTA PANDA) (ASTHA CHANDRA) VICE PRESIDENT JUDICIAL MEMBER पुणे/Pune; दिन ांक/Dated : 20-08-2026 Tadepalli Naga Digitally signed by Tadepalli Naga Murali Mohan TNMM Murali Mohan Date: 2026.08.20 15:16:55 +05'30'

8 ITA No. 721/PUN/2026 आिेश की प्रदिदिदप अग्रेदिि / Copy of the Order is forwarded to: 1. अपीि र्थी / The Appellant प्रत्यर्थी / The Respondent 2. 3. The concerned Pr.CIT, Pune 4. DR, ITAT, „A‟ Bench, Pune 5. ग र्ड फ ईि / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीिीय अदिकरण ,पुणे / ITAT, Pune