SHRI LAXMI VYANKATESH CREDIT SOUHARD SAHAKARI LTD,NIPPANI vs. INCOME TAX OFFICER, NIPPANI

आदेश / ORDER

PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 04.03.2026 passed by Ld. Addl./JCIT(A)-2, Pune [‘Ld. CIT(A)’] for the assessment year 2017-18.

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“1. The impugned order of the Appellate Commissioner of Income Tax is liable to set aside in so far as the same is incorrect, irregular, improper, unlawful and oppose to the law and facts of the case. 2. Because, the learned Commissioner of Income Tax (Appeals) erred in law as well as on facts while deciding, the assessee as ineligible to claim deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961. 3. Because, the learned lower authorities have erred in denying the deduction claimed under section 80P(2)(a)(i) of Income Tax Act, 1961. 4. Because, the learned Commissioner of Income Tax (Appeals) erred in confirming the interest levied by the lower authorities u/s 234A of the Income Tax Act, 1961 for default in furnishing return of income which is against law and facts of the case. 5. The appellant craves leave to add / alter any of the grounds of appeal before or at the time of hearing.”

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and 142(1) of the IT Act respectively were issued to the assessee. After considering the reply and submissions of the assessee, the Assessing Officer vide order dated 22.11.2019 completed the assessment proceedings u/s 143(3) of the IT Act by determining the income of the assessee at Rs.14,41,990/- as against the income of Rs.1,36,500/- returned by the assessee. The above assessed income includes addition of Rs.13,05,488/- being disallowance on account of deduction u/s 80P(2)(a)(i) of the IT Act, since according to the Assessing Officer, the assessee does not fall in the category of cooperative society since it was registered as per provisions of section 5(3) of Karnataka Souharda Sahakari Act, 1997 but not as per definition u/s 2(19) of the Income Tax Act, 1961 and as per Karnataka Cooperative Societies Act, 1959. 4. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A). Not being satisfied with the reply and submissions of the assessee and by

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following the judgment passed by Hon’ble Supreme Court in the case of Totgar’s Cooperative Sales Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC), Ld. CIT(A) dismissed the appeal filed by the assessee and confirmed the addition made by the Assessing Officer. 5. It is the above order against which the assessee is in appeal before this Tribunal. 6. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the Assessing Officer has disallowed the claim of deduction u/s 80P(2)(a)(i) of the IT Act on the ground that the assessee being a Souhard Credit Cooperative Society does not fall in the category of primary credit cooperative society, however, it is the contention of counsel of the assessee that Hon’ble High Court of Karnataka in WP No.48414 of 2018 (copy of order produced before the bench) has already held that the entities registered

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under the Karnataka Souhard Sahakari Act, 1997 fit into the definition of cooperative society as enacted in section 2(19) of the IT Act and therefore, subject to all just exceptions are entitled to stake their claim for the benefit of deduction u/s 80P of the IT Act. 7. Respectfully following the above judgement of Hon’ble Karnataka High Court (supra), we treat the assessee society as a primary credit cooperative society. 8. Further, with regard to claim of deduction u/s 80P(2)(a)(i) of the IT Act, we find that it is the claim of the counsel of the assessee that the assessee credit cooperative society has invested its funds with other banks including nationalized and cooperative banks and since the investment is attributable to banking business, the same deserves for deduction u/s 80P(2)(a)(i) as well as u/s 80P(2)(d) of the IT Act. In this regard, we find support from coordinate bench consolidate decision (pertaining to various credit cooperative societies) passed in the case of

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Marathwada Krishi Vidyapeeth Karmachari Sahkari Patsanstha vs. PCIT & others in ITA No.102/PUN2020 & others order dated 21.12.2022 wherein the Tribunal held that the assessee credit cooperative societies are entitled to claim deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the IT Act with regard to interest income arising from its investment with nationalized banks and from cooperative banks by observing as under :-

“All the above appeals have been preferred by different assessees in relation to the A.Yrs.2014-15, 2017-18 & 2018-19 agitating the passing of the order by the ld. Principal Commissioner of Income- tax (PCIT) u/s.263 of the Income-tax Act, 1961 holding that the grant of deduction u/s.80P by the Assessing Officer (AO) in respect of interest income earned from other credit cooperative societies or Nationalised banks led to the passing of erroneous assessment orders prejudicial to the interest of the Revenue. Because of the commonness of the issue, we are proceeding to dispose of all the appeals by the consolidated order for the sake of convenience. xxxxx 4. Succinctly, the facts common in all these cases are that the assesses filed returns claiming deduction u/s.80P in respect of interest income which was allowed by the respective AOs. The ld. PCIT(s) invoked the jurisdiction u/s 263 of the Act and disputed the allowability of the claim of deduction u/s.80P(2)(a)(i) in some cases and under 80P(2)(d) in others, thereby holding the assessment orders to be erroneous and prejudicial to the interest of the Revenue. Aggrieved thereby, the assessees have approached the Tribunal.

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as per section 2(19) of the Act, defining co-operative society to mean a cooperative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative society registered under the Act and hence qualify for the grant of the deduction. Similar view has been taken by the Pune Tribunal in several cases including The Sesa Goa Employees Coop. Credit Society Ltd. Vs. ACIT (ITA No.203/PUN/2019) vide order dated 16-11-2022). 7. In view of the foregoing, we hold that the impugned orders questioning the deduction u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, cannot be sustained. 8. In the result, all the appeals are allowed.”

“11.7 Thus, under the constitutional scheme and the doctrine of judicial discipline, the decision of the Hon'ble jurisdictional High Court is binding on the Tribunal, while decisions of other Hon'ble High Courts carry persuasive value and may be followed in the absence of a contrary jurisdictional precedent. Hence in our considered view, while deciding the issue of deductibility of interest

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income from deposit of surplus/idle fund by the cooperative societies engaged in providing credit facilities, we are bound to follow the principles laid down in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra), unless material brought on record that the said principle/finding has been overruled by the Hon'ble Supreme Court or the larger bench of the Hon'ble Karnataka High Court or disturbed by the Hon'ble Karnataka High Court in subsequent case. 11.8 Coming to facts of the case on the hand, the assessee is engaged solely in the business of providing credit facilities to its members. The interest income of Rs. 6,25,661/- has been earned on deposits made out of funds arising from business operations, which were not immediately required for lending. Such deposits are part of normal business activity and cannot be treated as independent investment activity. 11.9 Before parting, it is equally important to note that in several earlier decisions, this Tribunal had taken a view that interest income earned by a co-operative society from deposits placed with banks would not qualify for deduction under section 80P(2)(a)(i) of the Act and the same was liable to be taxed under the head "Income from other sources". Accordingly, the claim of deduction under section 80P(2)(a)(i) in respect of such interest income was rejected in those cases. However, the legal position now stands clarified by the judgment of the Hon'ble jurisdictional High Court of Karnataka in Tumkur Merchants Souharda Credit Cooperative Ltd. (supra), and other case laws as discussed in preceding paragraphs wherein it has been held that where a cooperative society, engaged in the business of providing credit facilities to its members, temporarily parks its surplus funds with banks, the interest earned therefrom is attributable to the business of the society and is therefore eligible for deduction under section 80P(2)(a)(i) of the Act. 12. Since the decision of the Hon'ble Jurisdictional High Court is binding on this Tribunal, judicial discipline requires that the same be followed. Therefore, to the extent of our earlier decisions where we have taken a contrary view, we respectfully depart from the earlier stand and follow the ratio laid down by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda

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Credit Cooperative Ltd. (supra). Accordingly, the issue is now decided in favour of the assessee by granting deduction under section 80P(2)(a)(i) of the Act in respect of the interest income in question. Hence, the ground of appeal of the assessee is allowed. 13. In the result, the appeal of assessee is hereby allowed.”

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the deduction u/s 80P(2)(a)(i) of the IT Act regarding interest income earned by the assessee credit cooperative society from its investments from scheduled/ commercial/ cooperative banks, since the same is attributable to banking business. Alternatively, in the light of Marathwada Krishi Vidyapeeth Karmachari Sahkari Patsanstha vs. PCIT & others in ITA No.102/PUN2020 order dated 21.12.2022, the assessee credit cooperative society is also entitled to claim deduction u/s 80P(2)(d) of the IT Act with regard to interest income earned from its investments with other cooperative banks, which are also cooperative societies. Thus, the grounds of appeal raised by the assessee are allowed. 11. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 19th day of August, 2026.

Sd/- Sd/- (MANISH BORAD) (VINAY BHAMORE) ACCOUNTANT MEMBER JUDICIAL MEMBER Panaji / Dated : 19th August, 2026. Sujeet/DOC Sujeet Kumar Digitally signed by Sujeet Kumar Sharma Sharma Date: 2026.08.19 11:00:10 +05'30'

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आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The Addl./JCIT(A)-2, Pune. 4. The Pr. CIT/CIT concerned. 5. DR, ITAT, Panaji. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Assistant Registrar/Sr.PS ITAT, Panaji.