THE TAMILNADU FOREST DEPT. STAFF CO-OP. THRIFT & CREDIT SOCIETY LTD.,CHENNAI vs. ITO, NCW-19(6), CHENNAI

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ITA 3112/CHNY/2026Status: DisposedITAT Chennai27 July 2026AY 2021-225 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the interest income earned by a co-operative society from deposits with co-operative banks is eligible for deduction under Section 80P(2)(d). The Supreme Court's decision in Totagars was distinguished as it pertained to Section 80P(2)(a)(i) and not Section 80P(2)(d).

What were the facts?

The assessee, a co-operative thrift and credit society, claimed a deduction under Section 80P(2)(d) for interest income earned from deposits with co-operative banks. The Assessing Officer and CIT(A) disallowed this deduction, relying on the Supreme Court's decision in Totagars Co-operative Sale Society Ltd. vs. ITO.

What were the issues?

Whether interest income earned by a co-operative society from deposits with co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.

Which sections of the Income-tax Act were involved?

Section 80P(2)(d),Section 80P(2)(a)(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: HONOURABLE SHRI GAGAN GOYAL & SHRI MANU KUMAR GIRI

Hearing: 22.07.2026Pronounced: 27.07.2026

आयकर अपीलीय अधिकरण ए’ ’डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI माननीय श्री गगन गोयल लेखा सदस्य के समक्ष एवं श्री मनु कुमार धगरर, न्याययक सदस्य BEFORE HONOURABLE SHRI GAGAN GOYAL, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER

आयकर अपील सं./ITA No. 3112/Chny/2026 यनिाारण वर्ा /Assessment Years: 2021-22 The Tamil Nadu Forest Dept. Staff Co- v. Income Tax Officer, Op. Thrift & Credit Society Ltd. Non-Corp Ward-19(6), O/o. Principal Chief Conservator of Forest Chennai. Head Quarters Building, 3rd Floor, Velachery Main Road, Guindy, Chennai-600 032. [PAN: AALFT1347C] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. Anand Krishna C.A, Ld. AR प्रत्यर्थी की ओर से /Revenue by : Ms. Sita Krishnamoorthy, JCIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 22.07.2026 घोषणाकीतारीख /Date of Pronouncement : 27.07.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Commissioner of Income Tax (A) / NFAC, Delhi (hereinafter referred as the ‘Ld. CIT (A)’) dated 10.03.2026 for the Assessment Year (hereinafter referred as the ‘AY’) 2021-22.

GROUDS OF APPEAL 1. Order contrary to law and facts: The order passed by the Learned Assessing Officer (Ld. AO) and confirmed by the Learned Commissioner of Income Tax (Appeals) [Ld. CIT (A)] is contrary to the law, facts, and principles of natural justice, and is therefore liable to be quashed in its entirety.

ITA No.3112/Chny/2026 (2021-22) The Tamil Nadu Forest Dept. Staff Co-Op. Thrift & Credit Society Ltd 2. Erroneous denial of deduction under Section 80P (2) (d): The Ld. AO has erred in law and on facts in disallowing the deduction claimed under Section 80P(2) (d) of the Income-tax Act, 1961, amounting to 10,50,580/-, merely on the ground of being interest income received from Chennai Central Co-operative Bank and LIC Coop Bank. 3. Failure to appreciate nature of payer as a co-operative society: The Ld. AO failed to appreciate that Chennai Central Co-operative Bank is itself a Co- operative Society registered under the Tamil Nadu Co-operative Societies Act and carrying on banking activities, whose audit is conducted by the Co-operative Department auditors. Accordingly, the interest earned from such deposits qualifies as income from business with another Co-operative Society, fully eligible for deduction under section 80P (2) (d) and, alternatively, under section 80P (2) (a) (i). 4. Incorrect distinction between co-operative banks and societies: The Ld. AO has erred in holding that interest received from a Co-operative Bank is not eligible for deduction under section 80P, ignoring the settled legal position (The Karnataka High Court, in the landmark case of Principal Commissioner of Income-tax vs. Hubli vs. Totagars Co-operative Sale Society [2017]) that when both the recipient and payer are Co-operative Societies, deduction cannot be denied merely because one of them carries on banking business. 5. Failure to consider statutory investment obligations: The Ld. AO failed to appreciate that the appellant is statutorily required to maintain deposits with Co-operative Banks, and the interest income therefrom arises in the ordinary course of the appellant's regular business activities of providing credit facilities to its members. 6. Non-consideration of submissions, evidence, and binding judicial precedents: The Ld. Assessing Officer and the Ld. Commissioner of Income-tax (Appeals) have erred in law and on facts in not considering the detailed written submissions, statutory explanations, and documentary evidences filed by the appellant, and in ignoring binding judicial precedents of the Hon'ble Supreme Court and various High Courts, which have consistently held that interest income earned from investments with co-operative banks is eligible for deduction under Section 80P(2) of the Income-tax Act, 1961. The impugned orders are therefore unsustainable in law. 7. Leave to amend grounds: The appellant craves leave to add, alter, amend, modify, or withdraw any of the above grounds of appeal at the time of hearing.

2.

The Brief facts of the case are that the assessee society filed its return of income on 10.02.2022 declaring income at Rs. NIL, case of the assessee was processed u/s. 143(1) of the Act and an adjustment of Rs. 10,50,580/- was made after disallowance u/s. 80P (2) (d) of the Act vide intimation dated: 19.10.2022. The Page 2 of 5

ITA No.3112/Chny/2026 (2021-22) The Tamil Nadu Forest Dept. Staff Co-Op. Thrift & Credit Society Ltd case was selected for regular scrutiny. Ultimately, the case was assessed u/s. 143(3) r.w.s. 144B of the Act after confirming the adjustment made u/s. 143(1) of the Act amounting to Rs. 10,50,580/-. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A), who in turn dismissed the appeal of the assessee. The assessee, being further aggrieved with the same, preferred the present appeal before us.

3.

We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee along with the grounds taken before us. It is observed that the issue under consideration has been dealt with so many times in numerous appeals by this Tribunal and other coordinate benches also. It is observed that assessee filed its return of income well within the time and confirmed by CPC, Bengaluru also on its intimation order. We observed that AO and Ld. CIT(A) has relied on the decision of Totagar Cooperative Sales Society Ltd. vs. ITO, (2010) 322 ITR 283 (SC). Wherein, the Hon'ble Apex Court had dealt with section 80P (2) (a) (i) of the Act and not in the context of claim u/s. 80P (2) (d) of the Act. Time and again it's a consistent view of ITAT that cooperative bank is also a type of cooperative society under the Cooperative Societies Act, 1912 or under any other law for the time being in force in any state for the registration of cooperative societies. Secondly, the decision of Hon'ble Apex Court in the case of Totagar was rendered with reference to business income vs. Income from other sources for the purposes of claiming deduction u/s. 80P (2)(a) (i) vis-a-vis section 80P (2) (d) of the Act. We have gone through the findings of the Ld. CIT (A) also, but found the same to be non-aligned with the provisions of the section 80P of the Act.

4.

The issue involved under consideration is purely a legal issue and no substantial question of fact is involved into it. Further it is also observed that the objections raised by the Revenue on the case are not acceptable and tenable in purview of judgments of various authorities wherein it has been held that interest received from the Co-op. banks by the Coop. Credit Societies partakes the character of the "interest received from a Credit Co-op. Society" and the Courts have allowed the deduction of 80P (2) (d) of the Act. Similar view has also been taken by the Hon'ble

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ITA No.3112/Chny/2026 (2021-22) The Tamil Nadu Forest Dept. Staff Co-Op. Thrift & Credit Society Ltd ITAT Mumbai 'SMC' Bench in the case of Kaliandas Udyog Bhavan Premises Co- Op. Society Ltd. Vs. Income Tax Officer- 21(2)(1), Mumbai (2018) 94 taxmann.com 15 (Mumbai-Trib.). The decision of Hon'ble Supreme Court in the case of Totagars Co-op, Sales Society Ltd. Vs. ITO (210) 322 ITR 283 (SC) relied/quoted by the Revenue is having distinguishable facts, thus, it has been wrongly been relied upon. The adjudication by the Hon'ble Apex Court in the aforesaid case was in the context of section 80P (2) (a) (i) of the Act and not on the entitlement of a co-operative societies towards deduction u/s. 80(P) (2) (d) of the Act. Further in the judgment of State Bank of India vs. CIT (2016) 309 ITR 578 (Guj.), it has been held that the interest income earned by co- operative society on its investment with co-op., banks would be eligible for claim of deduction u/s. 80P (2) (d) of the Act. In a recent judgment in the case of Rena Sahakari Sakhar Karkhana Ltd. vs. Pr. Commissioner of Income Tax-2, Aurangabad being ITA No. the Hon'ble ITAT Pune vide its order pronounced on 07.01.2022 has decided the identical issue in the favour of the assessee and against the Department. In that case, the Ld. PCIT-2, Aurangabad vide order dated 27.03.2018 u/s. 263 of the Act set aside the order of AO dated 07.03.2016 wherein the AO had allowed the interest income amounting to Rs. 75,38,534/- received from FDs with Co-operative Banks which was claimed by the assessee as deduction u/s. 80P (2) (d) of the Act. The Hon'ble Tribunal relying on the judgment of Hon'ble High Court of Gujarat in the case of State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj.) wherein the Hon'ble High Court observed that the interest income earned by a co- operative society on its investment held with a co- operative bank would be eligible for claim of deduction u/s. 80P (2) (d) of the Act.

5.

In conclusion, we hold that the judgment of the Hon'ble Supreme Court in the case of Totagars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC), rendered in the context of Section 80P (2) (a) (i) of the Act (wherein expression ""profits and gains of business" has been used), is distinguishable on facts. Aforesaid judgment is not applicable to the facts of the present case as deduction has been claimed under Section 80P (2) (d) of the Act (wherein expression "any income" has been used). Impact of insertion of Section 80P (4) of the Act is that a co-operative bank would no more be entitled for claim of deduction under Sec.

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ITA No.3112/Chny/2026 (2021-22) The Tamil Nadu Forest Dept. Staff Co-Op. Thrift & Credit Society Ltd 80P (2) (d) of the Act, however, the interest income derived by a co-operative society from a co-operative bank would continue to be eligible for deduction under Sec. 80P (2) (d) of the Act irrespective of the fact that such interest income is in the nature of "profits and gains of business" or "income from other sources" as Section 80P(2)(d) uses the expression "any income" and not "profits & gains of business".

6.

Accordingly, the Appellant is entitled to claim deduction under Section 80P (2) (d) of the Act in respect of interest received from co-operative banks amounting to Rs. 10,50,580/- derived from a co-operative bank. In view of above orders of authorities below are set aside and directed to allow the claim u/s. 80P of the Act to the assessee on interest earned on deposits with cooperative banks.

7.

In the result, appeal of the assessee is allowed in above terms.

Order pronounced on the 27th day of July-2026 in Chennai.

Sd/- Sd/- (मनु कुमार गिरर) (गगन गोयल) (MANU KUMAR GIRI) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 27th July-2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF

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