NIMDASBAR S K U S LIMITED,PURBA MEDINIPUR vs. ITO, WARD 27(1),, HALDIA

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ITA 1905/KOL/2025Status: DisposedITAT Kolkata25 June 2026AY 2018-20196 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest income earned by a credit co-operative society from surplus funds deposited in banks is eligible for deduction under Section 80P(2)(a)(i). The Tribunal relied on various High Court decisions and noted that the revenue had accepted similar claims in prior assessment years.

What were the facts?

The assessee, a credit co-operative society, claimed deduction under Section 80P for interest income earned from deposits in banks. The Assessing Officer treated this interest as income from other sources, denying the deduction. The CIT(A) confirmed the AO's action.

What were the issues?

Whether interest income earned by a credit co-operative society on its surplus funds deposited in banks is eligible for deduction under Section 80P, and if it should be treated as income from other sources.

Which sections of the Income-tax Act were involved?

Section 80P,Section 56

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Siddharth Agarwal, AR
For Respondent: Shri Sandip Sarkar, DR
Hearing: 16.06.2026Pronounced: 25.06.2026

Per Rajesh Kumar, AM:

These are appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 26.06.2025 for the AYs2020-21, 2018-19.

ITA No. 1905/KOL/2025 2. The only issue raised by the assessee in the grounds of appeal is against the confirmation of action of the ld. AO in treating the interest income of ₹92,82,955/- received from the banks as income from other sources denying the benefit of

3.

The facts in brief are that the assessee is a credit co-operative society, engaged in the business of giving credit facility to its members and has filed the return of income on 09.10.2018, declaring the return of income as NIL, after claiming the deduction u/s 80P(2)(a)(i) of the Act amounting to ₹92,82,955/-. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and the statutory notices along with questionnaire were duly issued and served upon the assessee. the ld. AO noted on the verification of details filed by the assessee that the assessee has made investment/ deposits in the co-operative banks/ commercial banks out of surplus funds of the society. Therefore, the interest of income arising from the deposits/ investment from the funds in the banks are in the nature of income from other sources taxable u/s 56 of the Act and cannot be characterized as income from business and profession. Therefore deduction u/s 80P of the Act is not available. Accordingly, a show cause notice was issued to the assessee. The assessee replied the same, however, the reply of the assessee did not find favour and the ld. AO rejected the claim of the assessee u/s 80P(2)(a)(i) of the Act and assessed the income of the assessee at ₹92,82,955/- in the assessment

4.

In the appellate proceedings, the CIT (A) confirmed the order of the ld. AO and dismissed the appeal.

5.

After hearing the rival contentions and perusing the materials available on record, we note that the assessee is a credit co- operative society engaged in the business of advancing money to its members. During the year the surplus funds of the society were deposited into the co-operative banks/ scheduled banks and the interest received on the said investments were shown as business income and deduction u/s 80P(2)(a)(i) Act was claimed. According to the ld. AO, the said income his not a business income but income from other sources and therefore, deduction u/s 80P of the Act was denied. In our opinion, the assessee is engaged in the business of advancing credit facilities to its members being a credit co-operative society and accepting the deposits from its members only. Therefore, the income derived from the surplus funds kept in the co-operative bank / Scheduled banks, cannot be treated as income from other sources. The case of the assessee is squarely covered by the decision of Hon'ble Jurisdictional High Court in case of the West Bengal State co-operative Agriculture & rural Development Bank Ltd. Vs. DCIT in ITAT/36/2025, IA No. GA/1/2025 vide order dated 06.08.2025, in which similar issue be decided in favor of the assessee, wherein it has held as under:-

13.

In Vavveru Co-operative Rural Bank Ltd. vs. Chief Commissioner of Income Tax (2017) 88 taxmann.com 728 (Telangana and Andhra Pradesh), the Hon'ble Division Bench was considering a writ petition challenging order of assessment passed under Section 143(3) of the Act and the question arose whether the denial by the Assessing Officer of the benefit of deduction under Section 80P(2)(a)(i) to the petitioner's society therein, is correct or not. The Court considered the expression 'attributable to' and held that since the statute does 2025:CHC-OS:145-DB not use the expression 'derived from', but uses the expression 'attributable to', accepted the contention of the petitioner therein that clause (a) should receive a wider interpretation. It was pointed out that the decision of the Hon'ble Supreme Court in Vavveru Co-operative (supra) can be relied upon by the revenue in cases where the amount payable to the members was retained for a short duration and invested by the society, as a consequence of which the amount so retained would be a liability for the society. The facts of the case on hand is entirely different as was the case in Vavveru Co-operative Rural Bank Ltd. Furthermore, it was pointed out that in Tumkur Merchants Souharda Credit Cooperative Ltd.[supra], the said society was carrying on business activity other than marketing of agricultural produce actually resulted in net loss to the society and it appears that the assessee in Tumkur Merchants Souharda Credit Cooperative Ltd.[supra] was carrying on some of the activities listed in clause [a] along with other activities. Further, it was held that the investment made by the petitioner-Society [Vavveru Co-operative Rural Bank Ltd.] had invested those amount in fixed deposits in other Co-operative societies or in the construction of godown and warehouses, the department would have granted the benefit of deduction under clauses [d] or [e], as the case may be. Furthermore, the original source of investment made by the petitioner- Society in nationalised banks is admittedly the income of the petitioner derived from the activities listed in sub-clauses (i) to (vii) of clause [a] and the character of such income may not be lost, especially when the statue uses the expression 'attributable to' and not any one of the two expressions, namely 'derived from' or 'directly attributable to'. In Principal Commissioner of Income Tax vs. Gunja Samabay 2025:CHC-OS:145-DB Krishi Unnayan

ITA No. 1906/KOL/2025 6. The issue raised in this appeal is similar to one as decided by us in ITA No. 1905/KOL/2025. Accordingly, our decision would, mutatis mutandis, apply to this appeal of assessee in ITA No. 1906/KOL/2025. Hence, the appeal of assessee in ITA No. 1906/KOL/2025 is allowed.

7.

In the result, the appeals of the assessee are allowed.

Order pronounced on 25.06.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 25.06.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata

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