BALAJI CO -OPERATIVE CREDIT SOCIETY LIMITED,MUMBAI vs. ASSESSMENT UNIT - INCOME TAX DEPARTMENT, DELHI

This appeal by the assessee is directed against the order dated 20.11.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [‘learned CIT(A)’], under section 250 of the Income-tax Act, 1961 (‘the Act’), arising from the assessment order dated 20.09.2022 passed under section 143(3) read with section 144B of the Act for the assessment year 2020-21.

At the outset, it is noticed that the appeal is filed with a delay of 112 days. The Ld. Authorised Representative (AR) has filed an affidavit explaining the circumstances which prevented it from filing the appeal within the prescribed time. Having considered the explanation and the material placed on record, we are satisfied that the delay was neither deliberate nor attributable to any lack of bona fides. In order to advance substantial justice, the delay of 112 days is condoned and the appeal is admitted for adjudication on merits.

Briefly stated, the assessee is a co-operative credit society engaged in providing credit facilities to its members. It filed its return of income on 14.01.2021 declaring total income at nil after claiming deduction of ₹62,70,490 under section 80P of the Act. During scrutiny proceedings, the Assessing Officer noticed that the said amount included interest income of ₹4,42,659 earned on fixed deposits of ₹60,38,466 kept with Apna Sahakari Bank Limited. Holding that such interest was earned by investing surplus funds not immediately required for business and was assessable as income from other sources, the Assessing Officer denied deduction under section 80P(2)(a)(i) to the extent of ₹4,42,659. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A).

On appeal, the Ld. CIT(A) upheld the disallowance. The learned CIT(A) held that interest on surplus funds deposited with a bank did not constitute operational income eligible under section 80P(2)(a)(i). Although the assessee had specifically claimed deduction under section 80P(2)(d), the learned CIT(A) rejected the appeal by applying, inter alia, the decision of the Hon’ble Supreme Court in Totgars Co-operative Sale Society Ltd. v. Income Tax Officer (2010) 322 ITR 283 (SC) and confirmed the addition.

Before us, the learned Authorised Representative submitted that the payer, Apna Sahakari Bank Limited, is a co-operative bank, which comes under co-operative society. It was submitted that section 80P(2)(d) independently allows deduction of the whole of the interest derived by a co-operative society from its investment with any other co- operative society. The learned Authorised Representative further submitted that, the learned CIT(A), in the assessee's own case for A.Y. 2018-19, has allowed the claim of deduction under section 80P(2)(d) of the Act. The learned Authorised Representative therefore, prayed that the deduction of ₹4,42,659 be allowed.

The learned Departmental Representative relied upon the orders of the authorities below and submitted that the claim may, at the highest, be allowed only after verification of the nature of the payer and the amount of interest.

We have heard the rival submissions and perused the material available on record. Section 80P(2)(d) provides for deduction, in the case of a co-operative society, ‘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’. The material fact for the present controversy is thus whether the interest was derived from an investment with another co-operative society.

In the present case, the Assessing Officer has recorded in paragraphs 3.1, 3.2 and 3.6 of the assessment order that the assessee earned interest of ₹4,42,659 on fixed deposits kept with a co-operative bank, namely Apna Sahakari Bank Limited. The learned CIT(A) has also recorded that the impugned interest was earned from deposits with a co- operative bank. Thus, the character of the payer as a co-operative bank emanates from the orders of both the authorities below. A co-operative 3

In view of the above, the assessee is eligible for deduction under section 80P(2)(d) in respect of interest of ₹4,42,659 earned from the fixed deposits with Apna Sahakari Bank Limited.

In the result, the appeal filed by the assessee is allowed.