THE VIJAPUR MARKET YARD CO-OP. CREDIT SOCIETY LTD.,MEHSANA vs. THE ACIT, CIRCLE-PATAN, MEHSANA

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ITA 457/AHD/2026Status: DisposedITAT Ahmedabad14 July 2026AY 2017-186 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that interest income received from co-operative banks is eligible for deduction under Section 80P(2)(d), following the jurisdictional High Court's decision. The Assessing Officer's disallowance was deemed incorrect.

What were the facts?

The assessee, a Co-operative Credit Society, claimed deduction under Section 80P(2)(d) for interest income received from co-operative banks. The Assessing Officer disallowed the entire interest income, treating it as ineligible for deduction.

What were the issues?

Whether interest income earned by a co-operative credit society from co-operative banks 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(2)(d),Section 57,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: MS SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Shailesh Gandhi, CA
For Respondent: Shri Rajeev Garg, SR-DR
Hearing: 21.05.2026Pronounced: 14.07.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 19.12.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding u/s 143(3) of the Income Tax Act [hereinafter referred as “the Act”].

2.

The brief facts of the case are that the assessee had filed its return of income for A.Y. 2017-18 on 05.09.2017 declaring total income of Rs.78,100/- after claiming deduction of Rs.1,22,83,349/- u/s. 80P of the Act. The case was selected for limited scrutiny under CASS to examine

ITA No. 457/Ahd/2026 The Vijapur Market Yard Co-Op. Credit Society Ltd. Vs ACIT, AY- 2017-18 2

the deduction claimed us/. 80P(2)(d) of the Act. The assessee is a Co- operative Credit Society engaged in providing credit facilities to its members. The AO noticed that the assessee had received interest of Rs.1,67,82,071/- from Co-operative banks which was not eligible for deduction us/. 80P(2)(d) of the Act. Therefore, the entire interest of Rs.1,67,82,071/- received from Co-operative banks was disallowed u/s. 80P(2)(d) of the Act and the assessment was completed u/s. 143(3) of the Act on 09.12.2019 at total income of Rs.1,68,60,170/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

4.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

1.

The Ld. CIT(A) erred in law and on facts in not allowing deduction of Rs. 1,22,83,349/- us/. 80P(2)(d) of the Income Tax Act 1961 for the interest received by the appellant from the Co-operative Societies/Banks as claimed in return of income and also erred in law and on facts in making addition of Rs. 1,67,82,071/- as against actual deduction of Rs. 1,22,83,349/- claimed by the appellant in its Return of Income. 2 The Ld. CIT(A) erred in law and on facts in not allowing deduction u/s. 57 of IT Act of Rs. 1,05,24,036/-. This ground is in addition to and without prejudice to the ground No. 1 i.e, alternative ground to Ground No. 1. In view of the above the appellant prays to cancel the addition of Rs. 1,67,82,071/- and allow the deduction of Rs. 1,22,83,349/- us/. 80P(2)(d) of the Act, 1961 as claimed in the Return of Income. Alternatively allow the deduction of Rs. 1,05,24,036 u/s. 57 of the IT Act, and u/s. 57 of the IT Act, 1961. Also, the appellant prays for leave to add, alter and/or to amend all or any of the grounds of appeal on or before the final date of hearing of the appeal.

ITA No. 457/Ahd/2026 The Vijapur Market Yard Co-Op. Credit Society Ltd. Vs ACIT, AY- 2017-18 3 5. Ground No. 1 pertains to not allowing deduction of Rs.1,22,83,349/- u/s. 80P(2)(d) of the Act, in respect of interest received from Co-operative societies/banks. Shri Shailesh Gandhi, the Ld. AR of the assessee explained that though the assessee had claimed deduction of Rs.1,22,83,349/- only u/s. 80P(2)(d) of the Act in its ITR, the AO had disallowed the gross interest of Rs.1,67,82,071/- received from three Co- operative banks in the assessment order. He submitted that the Co- operative Societies and Co-operative banks are not separate and distinct legal entity but both have the same legal personality as the Co-operative Society. Therefore, the AO was not correct in denying the deduction u/s. 80P(2)(d) of the Act, in respect of the interest received from Co-operative banks. He submitted that the issue of deduction u/s. 80P(2)(d) of the Act in respect of interest received from the Co-operative banks is now settled by the decision of Hon’ble Gujarat High Court in the case of PCIT Vs. Ashwinkumar Arban Co-operative Society Ltd in R/Tax Appeal No. 538 of 2024 dated 24.09.2024

6.

Per Contra Shri Rajeev Garg, the Ld. SR-DR supported the order of the lower authorities.

7.

We have considered the submissions of the assessee and the materials brought on record. The assessee had claimed deduction of Rs.1,22,83,349/- only u/s. 80P(2)(d) of the Act, which was in respect of net interest received from the Co-operative banks. The AO had disallowed the gross interest of Rs.1,67,82,071/- received from the following three Co-operative banks.

ITA No. 457/Ahd/2026 The Vijapur Market Yard Co-Op. Credit Society Ltd. Vs ACIT, AY- 2017-18 4

Sr. No. Name of Bank Interest receipt (Rs.)

1.

The Kukarwada Nagarik Sahkari 5,33,098/- Bank Ltd

2.

The Mehsana Urban Co-Op bank 1,62,35,239/- Ltd

3.

The Co-operative Bank of 13,734/- Mehsana Ltd

Rs. 1,67,82,071/-

8.

The AO had primarily made the disallowance following the decision of Hon’ble Karnataka High Court in the case Totagars Co. Op. Sale Society (2017) [83 taxmann.com 140], wherein it was held that the interest income earned from deposits with Co-operative banks is not allowable for deduction u/s. 80P(2)(d) of the Act. This issue has since been adjudicated by the Hon’ble Jurisdictional High Court. The Hon’ble Gujarat High Court in the case of Ashwinkumar Arban Co-operative Society Limited (supra) has held that the Co-operative Bank is a Co-operative Society registered under Gujarat State Co-operative Societies Act and accordingly deduction under Section 80P(2)(d) of the Act was admissible to the interest derived

ITA No. 457/Ahd/2026 The Vijapur Market Yard Co-Op. Credit Society Ltd. Vs ACIT, AY- 2017-18 5 from Co-operative Banks. Therefore, the Assessing Officer was not correct in denying the deduction under Section 80P(2)(d) of the Act in respect of interest income received from other Co-operative Banks. From the details available on record, it is found that the entire FDR interest of Rs.1,67,82,071/- was received from three Co-operative Banks only. Therefore, the assessee was entitled for deduction u/s 80P(2)(d) in respect of the entire FD interest of Rs. 1,67,82,071/-. The assessee had claimed deduction u/s 80P(2)(d) in respect of net interest of Rs.1,22,83,349/- only. The Assessing Officer is directed to allow deduction under Section 80P(2)(d) of the Act in respect of interest received from three Co-operative banks, as claimed by the assessee. Accordingly, the ground taken by the assessee is allowed.

9.

Shri Shailesh Gandhi, the Ld. AR of the assessee, did not press the Ground No 2. Hence, this ground is dismissed.

10.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the Court on 14/07/2026 at Ahmedabad.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 14th July, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT,

ITA No. 457/Ahd/2026 The Vijapur Market Yard Co-Op. Credit Society Ltd. Vs ACIT, AY- 2017-18

6.

गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप/सहायक उप सहायक पंजीकार उप उप सहायक सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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