SISODARA VIBHAG VIVIDH KARYAKARI SAHAKARI MANDLI LTD.,NA vs. ARIVS.ITO, WARD 5, NAVSARI

This is an appeal filed by the assessee against the order of the Addl/JCIT(A), Thane [In short, ‘the ld. CIT(A)’] dated 27/11/2025 for the assessment year (AY) 2011-12 wherein the assessee has raised following grounds of appeal:

In Finance Act 2006, The insertion of Section 80P(4) to the Act as explained by the then Honorable finance minister in his budget speech is to withdrawal of exemption given to the co-op. Bank and not to levy the tax on interest and Dividend earned by the primary co-op. Credit society,

The authorities below erred in treating the interest/dividend income as received from "scheduled banks". On the contrary, all such income was received from Valsad District Central Co-operative Bank Ltd, which is a Co-operative Society, duly eligible for deduction u/s 80P(2)(d). The disallowance is factually incorrect, perverse and unsustainable.

On facts and in law, the AO and CII(A) erred in denying deduction u/s 80P(2)(d) on interest/dividend received from a Co-operative Bank, even though:  Co-operative Bank is legally a Co-operative Society,  Section 80P(2)(d) provides unconditional deduction, and  The Appellant is not hit by section 80P(4). The lower authorities grossly erred in ignoring the binding judgment of Hon'ble Gujarat High Court (24-09-2024) Ashwinkumar Arban Co- operative Society Ltd herein it is conclusively held that:  Interest earned by a Co-operative Society from District Co- operative Bank is fully deductible u/s 80P(2)(d).  Section 80P(4) does not restrict deduction to societies investing with Co-operative Banks; it only excludes Co-operative Banks themselves from claiming 80P deduction. The impugned order is therefore contrary to juri ictional law and void.

On facts and circumstances of the case as also law on the subject, the learned AO as well as CIT(A)/NFAC has made an the addition made the basis of various judgment made by Apex Court but the CIT(A)/NFAC has grossly ignored the judgement given by Honorable ITAT Ahmedabad and Honorable ITAT Surat in the case of Uttar Gujarat Uma Co-op Credit Society Ltd and Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd respectively hence, making addition of Interest and dividend earned form co-op. Bank is void ab initio required to be deleted.

The authorities erred in clubbing income from eligible activities and denying the entire deduction, though:  Member Credit Facility income is fully deductible u/s 80P(2)(a)(i),  Interest/Dividend from Co-operative Bank is fully deductible u/s 80P(2)(d). The impugned addition is based on incorrect facts, misapplication of law and non-consideration of binding judicial precedents. The same deserves to be deleted in full.

The Appellant craved leave to add, alter, delete, amend or rescind any of the above grounds of appeal as and when necessary, with the permission of ITAT." 2. 3

Facts of the case, in brief, are that the assessee filed its original return of income for the assessment year under consideration on 29/09/2011 by showing a total income of ₹ 6,397/- after claiming deduction under Section 80P of the Income Tax Act, 1961 (in short, the Act) at ₹ 4,17,049/-. Subsequently, Assessing Officer received information from the I&CI Wing of the department at Surat showing that during the year, the assessee has earned interest and dividend income from the deposit made with Valsad district Central Co- operative Bank, Sisodara Branch. As such, the Assessing Officer after recording the reasons, issued notice under Section 148 of the Act on 23/03/2018. In response to the notice under Section 148 of the Act, the assessee filed his return of income for the A.Y. 2011-12 on 10/12/2018 declaring a total income of ₹ 14,960/- and again claimed deduction under Section 80P of the Act at ₹ 4,08,482/-. Thereafter, various notices under Section 143(2) and 142(1) of the Act were issued to the assessee and submissions received were duly considered by the Assessing Officer. The Assessing Officer, however, disallowed the claim of the assessee as deduction under Section 80P(2) of the Act on the ground that the interest income earned by the assessee cooperative society on the investments made in the cooperative banks are not eligible for deduction under Section 80P(2) of the Act and this is to be taxed as income from other sources under Section 56 of the Act. The Assessing Officer further noted that the Hon'ble Gujarat High Court in the case of State Bank of India Vs CIT (2016) 72 taxmann.com 64 (Guj) has decided against the deduction allowable in respect of the interest from the cooperative banks and the landmark judgment in the case of PCIT, Hubbali Vs Totgars Co-operative Sale Society (2017) 83 taxmann.com 140 (Karnataka) held that the interest earned by the assessee cooperative society, marketing members agricultural produce, from surplus deposits kept with a cooperative bank was not eligible for deduction under Section 80P(2)(d) of the Act, this case is identical to the instance case. The judgment of the Hon'ble Karnataka High Court has not propounded in new law. Rather it drew support of the decision of the Hon'ble Supreme Court in the case of Totgars Cooperative Sales Society Ltd. Vs. ITO (2010) 322 ITR 283/188 Taxman 282 and dismissed the appeals. The Assessing Officer, therefore, disallowed the claim of the assessee under Section 80P(2) of the Act stated as above.

Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. CIT(A), who vide the impugned order dated 27/11/2025, confirmed the order of the Assessing Officer.

Further aggrieved by the order of the ld. CIT(A), the present appeal has been filed by the assessee before this Tribunal.

During the course of hearing, the ld. Counsel of the assessee has submitted as under: "During the course of hearing, the Hon'ble Bench was pleased to direct/request the assessee to submit copies/details of the relevant judgments of the Hon'ble Gujarat High Court relied upon by the assessee in support of its claim. Accordingly, as directed by the Hon'ble Bench, the assessee most respectfully submits the following judgments of the Hon'ble Gujarat High Court, which are in favour of the assessee society:

The ld. Sr.DR, on the other hand, supported the orders of the lower authorities.

We have carefully considered the rival submissions. It is found that the Hon'ble Gujarat High Court in the case of PCIT Vs Ashwinkumar Arban Co Operative Society Ltd. (supra) has held that "therefore, the exclusion of applicability of Section 80P to cooperative banks by Section 80P(4) would not disentitle the assessee from claiming deduction under Section 80P(2)(d) in absence of any amendment in the said Section and that could not be sufficient to deny the claim of the assessee for deduction of interest earned from investment made in a cooperative bank which is also a cooperative society from the total income." In view of the decision of the Hon'ble Juri ictional High Court, the interest income earned on the deposits kept in the cooperative banks by the assessee cannot be disallowed and therefore, the addition made on this count is deleted.

In the result, this appeal of the assessee is allowed. Order is pronounced under the provisions of Rule 34 of IT(AT) Rules, 1963 on 21/07/2026. (T. R. SENTHIL KUMAR) ACCOUNTANT MEMBER Surat Dated 21/07/2026 *Ranjan आदेश"ȧĤǓ"ͧ "ͪ "\ Ē ȯͪ""/ Copy of Order Forwarded to:-