THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED,BANGALORE vs. DCIT, CIRCLE-1(1)(1), BANGALORE

PDF · subscribers
ITA 527/BANG/2026Status: DisposedITAT Bangalore22 July 2026AY 2020-216 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal considered the assessee's argument that the interest income was earned from another co-operative society and that the deposits were made due to statutory obligations. The Tribunal noted that the Hon'ble Supreme Court's decision in Totagars Co-operative Sales Society Ltd. vs. ITO was distinguishable.

What were the facts?

The assessee, a co-operative organization, claimed deduction under Section 80P for interest income earned from an Apex Bank. The Assessing Officer denied this deduction, stating that interest income from banks is not eligible for deduction under Section 80P(2)(d). The CIT(A) upheld the AO's decision.

What were the issues?

Whether interest income earned by a co-operative society from deposits made with another co-operative bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80P,Section 148,Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.

आयकर अपीलीय अधिकरण, बेंगलुरू पीठें, बेंगलुरू INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE BENCH: A BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA Nos. 524 to 529/BANG/2026 नििधारण वर्ा/Assessment Years: 2016-17, 2018-19 to 2022-23) THE KARNATAKA STATE CO- OPERATIVE MARKETING DCIT, CIRCLE-1(1)(1) FEDERATION LIMITED DCIT, CIRCLE 1(1)(1) NO.8, KARNATAKA SAHAKARA KORAMANGALA.BENGALURU MATA, CUNNINGHAM ROAD, Vs. BENGALURU-560034, VASANTHNAGAR, BANGALORE, KARNATAKA BENGALURU-560052, KARNATAKA प्रत्यर्थी Respondent अपीलधर्थी Appellant

Permanent Account Number of Assessee: AAAAT3829K

अपीलधर्थी द्वारा/Appellant represented by: Dr. Sheetal Borkar, Advocate प्रत्यर्थी द्वारा/Respondent represented by: Sri. N. Balusamy, JCIT-DR सुनवाई की तारीख / Date of conclusion of hearing: 07-05-2026 घोषणा की तारीख / Date of pronouncement: 22-07-2026 आदेश / ORDER PER BENCH: These are the appeals filed by the assessee challenging the orders of the NFAC, Delhi dated 19/12/2025, 17/12/2025 and 22/12/2025 in respect of the A.Ys. 2016-17, 2018-19 to 2022-23.

2.

All these appeals are heard together and are being disposed of by way of this common order for the sake of convenience. We will take up the appeal in ITA No. 524/Bang/2026 for A.Y. 2016-17 as the lead case and the result arrived in the said appeal will apply mutatis mutandis to the appeals in ITA Nos. 525 to 529/Bang/2026 for A.Ys. 2018-19 to 2022-23.

ITA Nos. 524 to 529/BANG/2026 THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED

3.

The brief facts of the case are that the assessee is co-operative organization registered under the provisions of the Karnataka Co-operative Societies Act. The assessee filed their return of income and claimed the interest income earned from the Apex Bank as eligible for deduction u/s. 80P of the Act. Subsequently, the assessing officer had noticed that the assessee had received the interest income from the banks and therefore they are not entitled for deduction u/s. 80P(2)(d) of the Act. Therefore, notice u/s. 148 was issued. The assessee also filed the return of income pursuant to the notice issued u/s. 148 of the Act. Thereafter, notices u/s. 143(2) as well as u/s. 142(1) were issued. The assessee also filed their objections and the details before the AO. The AO had proposed to deny the said claim of deduction. The assessee also explained that the Apex Bank is also a society registered under the provisions of the Karnataka Co-operative Societies Act, 1959 and therefore the income is eligible for deduction under the provisions. In spite of the reply, the AO had confirmed the disallowance and made the assessment accordingly.

4.

As against the said order, the assessee filed an appeal before the Ld.CIT(A). The assessee relied on the judgment of the Hon’ble Karnataka High Court in the case of PCIT vs. Totagars Co-operative Sales society reported in (2017) 78 taxmann.com 169 wherein it was held that the interest income earned by the assessee on its investments with co-operative banks would be eligible for claim of deduction u/s. 80P(2)(d) of the Act. The assessee had also relied on another judgment of the Hon’ble Gujarat High Court in the case of State Bank of India vs. CIT reported in (2016) 389 ITR 578 wherein similar view was taken by the Hon’ble Gujarat High Court. The assessee also relied on several orders of the Coordinated Benches of this Tribunal and prayed to allow the appeals. The Ld.CIT(A) had relied on the other judgments and confirmed the disallowance made by the AO.

5.

As against the said order, the assessee is in appeals before this Tribunal.

6.

At the time of hearing, the Ld.AR submitted that the judgment of the Hon’ble Supreme Court reported in 322 ITR 283 in the case of Totagars Co-operative Sales Society Ltd. vs. ITO could not be cited as a precedent to the facts of the present case since in the above judgment, the Hon’ble Supreme Court had given a finding that the assessee society had deposited the member’s money got from the sale of agricultural produce and therefore the Hon’ble Supreme Court had denied the deduction claimed by the assessee as not in the course

ITA Nos. 524 to 529/BANG/2026 THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED of its business and classified the same as income from other sources. The Ld.AR submitted that the deposits are made because of the obligation to invest the unutilized fund as per the Karnataka Co-operative Societies Act and therefore the society being controlled by the Registrar of Co-operative Societies, has no other option except to park the idle funds in any of the banks and in the result, the assessee is automatically received the interest and therefore it is a business income eligible for deduction under the provisions of the Act. The Ld.AR also relied on the Hon’ble Jurisdictional High Court judgment reported in (2017) 78 taxmann.com 169 / 392 ITR 74 in the case of PCIT vs. Totagars Co-operative Sales society in which the Hon’ble Jurisdictional High Court had held that the assessee is entitled for deduction on the interest income earned from the investments made with the co-operative banks. The Ld.AR also relied on the another judgment of the Hon’ble Jurisdictional High Court reported in (2015) 55 taxmann.com 447 (Karnataka) in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. vs. ITO wherein the Hon’ble High Court had held that the interest income earned from the deposits made with the banks are the profits and gains of business of providing credit facilities to its members and therefore eligible for deduction. The Ld.AR also filed their written arguments in which it was submitted that the assessee had necessarily invested their funds in any of the institutions mentioned in section 58 of the Act and draw our attention to the said provision in which the societies may deposit its funds with any Co-operative Bank or any Scheduled Bank. The Ld.AR therefore submitted that the deposits are compulsory in nature and therefore the assessee is entitled for the deduction on the interest income earned from the said investments. The Ld.AR also relied on the judgment of the Hon’ble Jurisdictional High Court reported in 251 ITR 736 in the assessee’s own case wherein the Hon’ble High Court had granted the deduction u/s. 80P(2)(d) of the Act on the interest income earned from the deposits made with the co-operative banks and submitted that the facts are similar and therefore prayed to take a consistent view for the current year also. The Ld.AR also relied on the judgment of the Coordinate Bench of this Tribunal in ITA No. 1110/Bang/2025 dated 03/03/2026 wherein the similar claim was allowed and prayed to follow the said principles to the facts of the present case also.

7.

The Ld.DR mainly relied on the order of the Ld.CIT(A) and also relied on the judgment of the Hon’ble Jurisdictional High Court reported in 395 ITR 611 in the case of PCIT vs. Totagars Co-operative Sales Society Ltd. and prayed to dismiss the appeals.

ITA Nos. 524 to 529/BANG/2026 THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED 8. We have heard the arguments of both sides and perused the materials available on record. 9. From the submissions made by the assessee, it is not in dispute that the assessee had deposited their funds in a co-operative bank as stated in section 58 of the Karnataka Co- operative Societies Act. The Karnataka Co-operative Societies Act mandates that the funds of the society should be deposited either in a co-operative bank or in any of the Scheduled Banks and therefore it is the statutory obligation on the part of the assessee to deposit the funds in the modes mentioned in section 58. When the deposits are statutory deposits, the said income would be treated as profits and gains of business and therefore, the same is eligible for deduction u/s. 80P of the Act. Further, the another judgment of the Hon’ble Jurisdictional High Court reported in (2017) 78 taxmann.com 169 / 392 ITR 74 in the case of PCIT vs. Totagars Co-operative Sales society had also granted the relief on the interest income earned from the co-operative banks. We have also considered the another judgment of the Hon’ble Jurisdictional High Court reported in (2015) 55 taxmann.com 447 (Karnataka) in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. vs. ITO wherein the Hon’ble High Court had held that the interest income is eligible for deduction u/s. 80P(2)(a)(i) of the Act.

10.

We have also considered the judgment of the Hon’ble Jurisdictional High Court reported in 251 ITR 736 in the assessee’s own case wherein the Hon’ble Jurisdictional High Court had accepted the claim made u/s. 80P(2)(d) of the Act. The Hon’ble High Court had observed that the income earned from the interest from co-operative banks are an allowable deduction u/s. 80P(2)(d) of the Act.

11.

The Ld.CIT(A) had relied on the judgment of the Hon’ble Supreme Court reported in 322 ITR 283 in the case of Totagars Co-operative Sales Society vs. ITO to disallow the deduction claimed u/s. 80P(2)(d) of the Act. The facts involved in the above said judgment is that the assessee had sold the agricultural produce of the members and retained the sale proceeds with them and invested the said amounts and earned interest and therefore the Hon’ble Supreme Court had held that the said interest income is not in the course of their business and treated the said income as income from other sources. The another judgment of the Hon’ble Jurisdictional High Court, which was also relied on by the Ld.CIT(A) reported in 395 ITR 611 in the case of PCIT vs. Totagars Co-operative Sales Society Ltd., had relied on the judgment of the Hon’ble Supreme Court reported in 322 ITR 283 which was considered

ITA Nos. 524 to 529/BANG/2026 THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED in the earlier paragraphs. Further, in the assessee’s own case, it was accepted by the revenue that the deduction is allowable u/s. 80P(2)(d) of the Act. This was also confirmed by the Hon’ble Jurisdictional High Court in the above said judgment reported in 251 ITR 736. When the issue was decided in favour of the assessee by the Hon’ble Jurisdictional High Court and the other two judgments of the Hon’ble Jurisdictional High Court also supports the view, we are also taking a view in consonance with the judgment reported in 251 ITR 736 and thereby granted the deduction u/s. 80P(2)(d) of the Act. Even though the revenue had relied on the judgment reported in 395 ITR 611, we are bound to follow the judgment of the very same Hon’ble Jurisdictional High Court, that too in the assessee’s own case. Even though there are several decisions on this issue, the one which favours the assessee has to be taken as and therefore, we are following the judgment of the Hon’ble Jurisdictional High Court reported in 251 ITR 736 in the assessee’s own case for granting the relief. Further, the judgments of the Hon’ble Jurisdictional High Court in the case of PCIT vs. Totagars Co- operative Sales society reported in (2017) 78 taxmann.com 169 and the judgment of Hon’ble Gujarat High Court in the case of State Bank of India vs. CIT reported in (2016) 389 ITR 578 also supports the view of the Hon’ble Jurisdictional High Court reported in 251 ITR 736.

12.

In view of the above said facts, we are setting aside the orders of the lower authorities and allow the appeals filed by the assessee.

13.

In the result, all the appeals filed by the assessee are allowed.

Order pronounced in the open court on 22nd July, 2026.

Sd/- Sd/- WASEEM AHMED SOUNDARARAJAN K. ACCOUNTANT MEMBER JUDICIAL MEMBER

Bangalore Dated: 22nd July, 2026.

ITA Nos. 524 to 529/BANG/2026 THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED Copy to: THE KARNATAKA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED, NO.8, KARNATAKA SAHAKARA MATA, 1 CUNNINGHAM ROAD, VASANTHNAGAR, BANGALORE, BENGALURU-560052, KARNATAKA

DCIT, CIRCLE-1(1)(1), DCIT, CIRCLE 1(1)(1) 2 KORAMANGALA.BENGALURU, BENGALURU-560034, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH

BY ORDER

ASSISTANT REGISTRAR I.T.A.T., BANGALORE

More judgments on Section 80P

All 5,069 judgments and leading authorities on Section 80P →

Recent GST High Court judgments

Search GST case law →