PUNE DISTRICT SUPERVISION CO OP SOCIETIES LIMITED,PUNE vs. INCOME TAX OFFICER WARD 6(3), PUNE

आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE

BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.178/PUN/2026 धििाारण वर्ा / Assessment Year : 2021-22 Pune District Supervision Co-Op. The Income Tax Officer, Societies Limited, Ward – 6(3), Pune 855 Budhwar Peth, PDCC Bank Vs. Building, Laxmi Road, Pune-411002 PAN : AAAAP8016C अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Sarang Gudhate Department by : Shri Gaurav K Singh Date of hearing : 30-03-2026 Date of 25-05-2026 Pronouncement : आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the assessee is directed against the order dated 23.12.2025 of the Ld. Additional/Joint Commissioner of Income Tax (Appeals)-1, Jaipur [“Addl./JCIT(A)”] pertaining to Assessment Year (“AY”) 2021-22.

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Co-operative Bank, namely PDCC Bank Ltd. and Rs.50,000/- u/s 80P(2)(c) was denied to the assessee. 3. On appeal, the Ld. CIT(A)/NFAC upheld the action of the Ld. AO/CPC in disallowing the deduction claimed by the assessee u/s 80P of the Act. During the appellate proceedings before the Ld. CIT(A)/NFAC, placing reliance on the various judicial precedents covering the impugned issue in favour of the assessee, the assessee contended that the interest income earned by the assessee during the relevant AY from investments with Co-operative Banks is eligible for deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act. The Ld. CIT(A)/NFAC, however, after considering the submissions of the assessee dismissed the appeal of the assessee. The relevant observations and findings of the Ld. CIT(A)/NFAC are reproduced below :

“6.4 Secondly, we adjudicate the ground raised by the appellant regarding disallowance of deduction u/s 80P(2)(d) of the I.T. Act for Rs. Rs. 2,71,18,788/-. The appellant's submission is considered carefully. The appellant earned interest of Rs. 2,71,18,788/- on fixed deposits from Pune District Central Co-operative Bank Ltd., Pune (PDCC Bank Ltd.) i.e. Co- operative bank and taxable under the head income from other sources. As per section 80P(2)(d) of the I.T. Act, deduction is allowed only when the interest earned from Co-operative Society. The aforesaid banks are not a Co- operative Society. Since, the above co-operative banks are not a co-operative society, as they are governed as per the banking companies Act, 1949. These co-operative banks are under the control of the RBI and function at par with commercial bank, hence, deduction u/s 80P(2)(d) is not allowable. For the sake of clarity section 80P reads as under: "80P. Deduction in respect of income of co-operative societies:- (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- UME TAX DEPART (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or

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(vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities: Provided that in the case of a co-operative society falling under sub- clause (vi), or sub clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely: - (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government; (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to— (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed, - (i) where such co-operative society is a consumers' co- operative society, one hundred thousand rupees; and (ii) in any other case, fifty thousand rupees. Explanation -In this clause, "consumers' co-operative society" means a society for the benefit of the consumers; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of go downs or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22.

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Explanation -For the purposes of this section, an "urban consumers' co- operative society" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction under section 80HH or section 80HHA or section 80HHB or section 80ННС or section 80HHD or section 80-1 or section 80-IA, the deduction under sub- section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80HH, section HHA, section 80HНВ, section HHC, section 80HHD, section 80-1, section 80-IA, section 80J and section 80JJ. (4) The provisions of this section shall not apply in relation to any co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation. For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities." .................................... .................................... 6.10 Further, it is observed that the appellant society had placed its surplus fund at the disposal of the Co-operative Banks, with sole motive to earn interest which brings in the commerciality of the element. Therefore, the interest so earned by it has to be treated as the Revenue Receipt, taxable under the I.T. Act for which reliance is placed on the decision of the Hon'ble Supreme Court in the case of The Totgars Co-operative Sale Society Ltd. Vs. ITO 322 ITR 283 (SC) wherein it was held that interest on deposits were not business income but income from other sources and the society was not entitled to special deduction u/s 80P(2). The finding of the Hon'ble Supreme Court reads as follows:- "The words 'the whole of the amount of profits and gains of business' in section 80P(2) of the Income tax Act, 1961, emphasis that the income in respect of which deduction is sought by a Co-operative Society must constitute the operational income and not the other income which accrues to the Society". .......................... .......................... 6.21 Further, in view of the aforesaid discussion and judicial pronouncements of the different Hon'ble High Courts, the Hon'ble Supreme Court and overall facts and circumstances of the case, I respectfully following the aforesaid decisions of the higher courts concur with the AO that the provisions of Sec. 80P(4) are found applicable in the case of the appellant and appellant is not entitled for deduction u/s 80P(2)(d). Thus, the assessing officer is found justified in not allowing deduction to the appellant u/s 80P(2)(d) on the interest income generated from Banks/ Co-operative Banks.

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Accordingly, the addition of Rs. 2,71,18,788/- made by the AO by disallowing the interest income earned from co-operative banks u/s 80P is sustained. In view of the above, the ground No. 1 to 4 are dismissed.”

5.1 He further relied on the following decisions : i. ITO Vs. Cooperative Cane Development Union Ltd. & Ors., (2025) 236 TTJ (Lucknow) 108; ii. Annapurna Nagari Sahkari, Pathsanstha Maryadit Yawal Vs. ITO, ITA No. 2471/PUN/2024;

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iii. Shree Vishweswar Nagari Sahakari Path Sanstha Maryadit Vs. The Income Tax Officer, ITA No. 342/PUN/2024; iv. PMT Kamgar Sevakanchi Sahakari Pat Sanstha Maryadit Vs. The Income Tax Officer, ITA No. 334/PUN/2024; v. The Income Tax Officer Vs. Ashokrao Anna Yashwant Gram Bigar Sheti Sah Patsanstha Limited, ITA No. 1138/PUN/2023 and vi. CEAT Limited (Tyre division) Employees Coop. Credit Society Limited Vs. ITO, ITA No. 633/PUN/2024.

5.2 The Ld. AR further submitted the following details and contended that in assessee’s case, deduction u/s 80P has been consistently allowed in its own case across multiple assessment years as under : a. Assessment Year 2018-19 ➤ In the Assessment Proceedings no disallowance is made. (Refer Page No. 80 to 82 of Paper Book) ➤ Subsequently, The Ld. PCIT had passed a revision Order u/s 263 holding that assessee is not eligible for deduction u/s 80P the assessment order was erroneous and prejudicial to the interest of revenue, and directed the Assessing Officer to re- examine the assessee's claim of deduction under section 80P. (Refer Page No. 83 to 93 of Paper Book) ➤ However, the Hon'ble ITAT, Pune in ITA No 428/PUN/2023 reversed the revision order passed by the PCIT and restored the assessment order, thereby affirming that the appellant is entitled to deduction under section 80P. Copy of ITAT Order is attached herewith. (Refer Page No. 94 to 105 of Paper Book) b. Assessment Year 2019-20 There was no Scrutiny Assessment for Assessment Year 2019-20, Deduction u/s 80P(2)(d) is allowed in Intimation u/s 143(1). Copy of Intimation u/s 143(1) is attached herewith. (Refer Page No. 106 to 116 of Paper Book) c. Assessment Year 2020-21 In the Assessment Order, Deduction u/s 80P is disallowed and Appeal is Pending before Ld CIT(A). Copy of Assessment Order is attached herewith. (Refer Page No. 117 to 130 of Paper Book) d. Assessment Year 2022-23 There was no Scrutiny Assessment for Assessment Year 2022-23, Deduction u/s 80P is allowed in Intimation u/s 143(1). Copy of Intimation u/s 143(1) is attached herewith. (Refer Page No. 131 to 138 of Paper Book) e. Assessment Year 2023-24 There was no Scrutiny Assessment for Assessment Year 2023-24, Deduction u/s 80P is allowed in Intimation u/s 143(1). Copy of Intimation u/s 143(1) is attached herewith. (Refer Page No. 139 to 146 of Paper Book)

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f. Assessment Year 2024-25 There was no Scrutiny Assessment for Assessment Year 2024-25, Deduction u/s 80P is allowed in Intimation u/s 143(1). Copy of Intimation u/s 143(1) is attached herewith. (Refer Page No. 147 to 154 of Paper Book) g. Assessment Year 2025-26 There was no Scrutiny Assessment for Assessment Year 2025-26, Deduction u/s 80P is allowed in Intimation u/s 143(1). Copy of Intimation u/s 143(1) is attached herewith. (Refer Page No. 155 to 162 of Paper Book).”

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Banks. The relevant observations and findings of the Tribunal re reproduced below:

“3. In this appeal, the Revenue is aggrieved by the granting of deduction u/s.80P in respect of interest and dividend income on the funds invested in scheduled banks/financial institutions. The facts of this case are that the assessee, a co-operative society, filed its return declaring total income at Rs.3,94,980/-. Deduction was claimed u/s 80P of the Act in respect of interest income derived from deposits with cooperative banks, post office, scheduled banks and dividend from mutual funds/SIP investments, which was denied by the AO. The ld. CIT(A) reversed the assessment order on this score by granting the deduction. Aggrieved thereby, the Revenue has approached the Tribunal. 4. We have heard the learned DR and gone through the material on record. There is no appearance from the side of the assessees despite notice. We are, therefore, proceeding to this dispose of the appeals ex parte qua the assessees. 5. The assessees claimed deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act, which was denied by the AO but restored in the first appeal. Insofar as the allowability of deduction u/s.8P(2)(a)(i) is concerned, we find that the Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016) has decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). The position continues to remain the same before this Tribunal also. 6. Coming to the eligibility of deduction u/s.80P(2)(d) and after considering the language of the section, it is observed that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co- operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. The assessees are also Co-operative societies registered under the Act, thereby making them eligible for claim of the deduction. Similar view has been taken in several cases including The Sesa Goa Employees Coop. Credit Society Ltd. Vs. ACIT (ITA No.203/PUN/2019) vide order dated 16-11-2022. 7. In view of the fact that the Pune Benches of the Tribunal in series of decisions have held that the co-operative societies are entitled to deduction

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u/s.80P(2)(a)(i)/80P(2)(d) in respect of interest income, we hold that the impugned orders do not require any interference.”

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we set aside the impugned order of the Ld. CIT(A)/NFAC. The grounds raised by the assessee are accordingly allowed.

Order pronounced in the open court on 25th May, 2026.

Sd/- Sd/- (R.K. Panda) (Astha Chandra) JUDICIAL MEMBER VICE PRESIDENT पुणे / Pune; दिन ांक / Dated : 25th May, 2026. रदि Digitally signed by Ravi Kumar Ravi Kumar Date: 2026.05.27 12:46:29 +05'30' आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The Pr. CIT concerned. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, 4. पुणे / DR, ITAT, “B” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER,

सहायक पंजीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune