INCOME TAX OFFICER , KOLHAPUR vs. PIRAJIRAO PRATHAMIK SHIKSHAK SAHAKARI PATPEDHI MARYADIT KAGAL, KOLHAPUR

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ITA 2717/PUN/2025Status: DisposedITAT Pune09 July 2026AY 2020-214 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the interest income earned by the cooperative society from bank deposits, which were mandatory for statutory reserves and CRR, was attributable to its business of providing credit facilities. Therefore, it was eligible for deduction under Section 80P.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting the addition made on account of interest income earned by a cooperative society from bank deposits. The Assessing Officer disallowed this deduction, arguing it was 'other income' not eligible for Section 80P deduction.

What were the issues?

Whether interest income earned by a cooperative society on its bank deposits is eligible for deduction under Section 80P, especially in light of Section 80P(4) and the nature of the deposits.

Which sections of the Income-tax Act were involved?

Section 80P,Section 56,Section 80P(2)(a),Section 80P(2)(d),Section 80P(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI PAVAN KUMAR GADALE & SHRI Dr. DIPAK P. RIPOTE

For Respondent: Shri Himanshu Sharma, CIT

आदेश /ORDER

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2020-21 on 12.09.2025, emanating from the Assessment Order u/s 143(3) r.w.s. 144B of the Act, dated 29.09.2022.

2.

The Revenue has raised the following grounds of appeal : “i) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s 56 of the Act by the Assessing Officer on account of "other income" earned from deposits/investments held in the banks of Rs. 2,39,97,735/- without appreciating the fact that the deduction u/s 80P(2)(a) is available to only the 'operational income' from business, but not to the 'other income' which accrues to the assessee-society. ii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in not appreciating the fact that the assessee earned interest and dividend income on surplus funds invested in co-operative banks and similar other institutions which cannot be said to be attributable to the activity mentioned in Section

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80P(2)(a)(i) of the Act and therefore, the interest and dividend income are not eligible for deduction u/s 80P(2)(a)(i) of the Act?" iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in granting relief to the assessee Co- operative society without appreciating the facts that the above interest income does not satisfy the ingredients of mutuality having been earned by commercial activities carried out by the assessee with the non-member Co- operative banks and hence, such interest income needs to be charged as income from other sources under section 56 of the Income Tax Act, 1961? iv) Whether, on the facts and in circumstances of the case and in law, the Ld. CIT(A) is justified in holding that the cooperative banks are also another specie of a cooperative society and therefore, interest income earned on investments and on deposits made with other cooperative banks qualifies for deduction under section 80P(2)(d) of the Income Tax Act, 1961? v) Whether the Ld. CIT(A) is justified in allowing deduction under section 80P(2)(d) despite the fact that with effect from 01.04.2007, section 80P(4) has been inserted in the Income Tax Act which clearly states that provisions of section 80P shall not apply in relation to any Co- operative bank other than primary agricultural society or a co- operative primary agricultural and rural development bank? vi) The appellant craves to add, amend, alter or delete the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”

3.

None appeared for the assessee. We have heard the Ld. DR and perused the records. As per assessment order passed u/s 143(3) of the Act for AY 2020-21 on 29.09.2022, the assessee is a Credit Co-operative Society engaged in the business of providing credit facilities to its members. The assessee had filed return of income for AY 2020-21 on 26.11.2020 declaring total income at Rs.Nil. The assessee had claimed deduction u/s 80P(2)(a)(i) of the Act. The Ld. Assessing Officer (AO) disallowed the assessee’s claim for deduction of Rs.2,39,97,735/- which was interest earned from Co-operative Banks by the assessee. The Ld. AR relied on the decision of Hon’ble Supreme Court in the case of Totgars Co- operative Sale Society Ltd. Vs. Income-tax Officer, (2010) 188 Taxman 282 (SC). Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the assessee’s appeal following the decisions of the Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Cooperative Rural bank Ltd. Vs. Chief Commissioner of Income Tax and Another (2017) 396 ITR 0371 (AP) and

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various ITAT. The relevant paragraphs 8.17 to 8.18 of the Ld. CIT(A)’s order are as under : “8.17 Hon'ble tribunal in another case ITO Vs Dhansri Multi state Co Operative Ltd, ITA 463/PUNE/2024 has referred to decisions of Hon'ble AP high court decision in Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another [2017] 396 ITR 0371, Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.), Hon'ble Madras High Court in the case of Thorapadi Urban Co-operative Credit Society Ltd., Vs. ITO 296 Taxman 250 (Madras) vide order dated 10.10.2023 and plethora of other decisions of its own and held that interest income on investments made in co operative banks is eligible for deduction u/s 80P (2) (a). The Appellant company during the year has received interest of Rs 83,94,546/- from nationalised banks which is not eligible for deduction u/s 80P(2)(d) but Hon'ble AP high court in Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another [2017] 396 ITR 0371 (AP) vide para 35 and 36 reproduced above held that since amount deposited in nationalised banks is also deposited out of monies derived by conducting activities specified in section 80 P (a), the character of such income may not be lost, especially when the statute uses the expression attributable to and not anyone of the two expressions, namely, derived from or directly attributable to, holding that same is also entitled for deduction u/s 80 P(2)(a). Therefore, respectfully following jurisdictional ITAT decision and other decisions cited above, it is held that interest received from business funds used for deposits in banks is eligible for deduction 80P(2)(d)/ 80P(2)(a). Therefore, disallowance of deduction u/s 80P of Rs. 2,39,97,735/- in hands of appellant can't be sustained. Accordingly, Grounds of appeal relevant to the issue are Allowed. 8.18 Therefore, respectfully following jurisdictional ITAT decision, it is held that interest received from business funds used for deposits in bank is eligible for deduction 80P(2)(d)/ 80P(2)(a). Therefore, disallowance of deduction u/s 80P of Rs. 2,39,97,735/- in hands of appellant can't be sustained. Accordingly, Grounds of appeal relevant to the issue are Allowed.”

4.

The Ld. DR has not brought on record any decision to distinguish the case laws relied on by the assessee.

5.

In this case, admittedly, the assessee is a Credit Co-operative Society and claimed deduction u/s 80P(2)(a)(i) of the Act. The assessee had earned interest income from the Co-operative Banks from the deposits kept which was required as per Maharashtra Co-operative Societies Act to maintain statutory reserve and CRR. The Ld. CIT(A) has in depth discussion in the order on mandatory requirements of the deposits, in these facts, the interest income earned by the assessee is attributable to the business of providing credit facilities to its members. Therefore, we do

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not find any infirmity in the order of the Ld. CIT(A). Accordingly, the appeal of the Revenue is dismissed.

6.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open Court on 09th July, 2026

Sd/- Sd/- (PAVAN KUMAR GADALE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER

पुणे/Pune; दिन ांक/Dated :09-07-2026 Ravi Kumar Digitally signed by Ravi Kumar Ravi Kumar Date: 2026.07.10 10:36:10 +05'30' आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. The concerned Pr. CIT, Pune 4. DR, ITAT, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण,पुणे / ITAT, Pune

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