JANYUVAK KALYAN COOP CREDIT SOCIETY LTS,MUMBAI vs. ITO WARD 27(1)(5) MUMBAI, MUMBAI

PDF · subscribers
ITA 2736/MUM/2026Status: DisposedITAT Mumbai23 June 2026AY 2020-216 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest income earned by a cooperative society from short-term deposits, when not immediately required for lending to members, is attributable to its business of providing credit facilities. Therefore, such income is eligible for deduction under Section 80P(2)(a)(i).

What were the facts?

The assessee, a cooperative credit society, claimed deductions under Section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act. The Assessing Officer denied these deductions, and the Commissioner (Appeals) upheld the denial. The assessee appealed to the ITAT.

What were the issues?

Whether interest income earned by a cooperative credit society on short-term deposits is eligible for deduction under Section 80P(2)(a)(i) as income attributable to its business of providing credit facilities.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 80P(2)(d),Section 250,Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE NARENDER KUMAR CHOUDHRY & HON’BLE JAGADISH

For Respondent: Shri Amit Gurav, Ld. Sr. D.R
Pronounced: 23.06.2026

आदेश / ORDER

PER NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER: This appeal has been preferred by the Assessee against the order dated 08.01.2026, impugned herein, passed by the National Faceless Appeal Centre(NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2020-21.

2.

The Assessee had claimed deduction/exemption u/s 80P(2)(a)(i) and 80P(2)(d) of the Act, respectively, amounting to Rs. 27,81,722/- and Rs. 40,03,944/-, which were ultimately denied by the Assessing Officer vide assessment order dated 21.09.2022 passed u/s 143(3) r.w.s. 144B of the Act. The Assessing Officer held that the Assessee was not eligible to claim deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the Act.

3.

Thus, the Assessee, being aggrieved, challenged the aforesaid additions made in the assessment order, before the Ld. Commissioner by filing the first appeal. However, of no avail, as the Ld. Commissioner, vide the impugned order, dismissed the appeal filed by the Assessee and affirmed the aforesaid additions/disallowances and therefore the Assessee has preferred instant appeal.

4.

We have heard the parties and perused the material available on record. The additions under consideration, as made by the Assessing Officer and affirmed by the Ld. Commissioner, were subjected to scrutiny before various Benches of the Tribunal, including in the case of Pathare Prabhu Co-operative Housing Society Ltd. v. Income-Tax Officer [2023] 153 taxmann.com 714 (Mum. – Trib.), concerning the deduction u/s 80P(2)(d) of the Act by the Mumbai Bench and in the case of Vijaya Bank Cooperative Credit Society in ITA No. 1524/Bang/2025, decided on 15.12.2025, by Bangalore Bench, which dealt with deduction u/s 80P(2)(a)(i) of the Act and decided the issue in favour of the Assessee, by observing and holding as under:- “We have carefully considered the rival contention and perused the orders of the learned lower authorities. We find that the assessee is a member's credit cooperative society who has earned interest from the cooperative societies which was forming part of the business income arising to the assessee from the activities of the business was claimed as deduction under section 80 P (2) (a) (i) of the act. We have carefully considered the decision of the learned assessing officer we do not find any reason that why the interest income should not be considered as business income of the assessee. Merely because the assessee has received interest income from cooperative societies it cannot be said that such income should always be taxed under the head income from other sources only. The stand of the assessing officer is that such interest income is income from other sources, not income from business, therefore, not eligible for deduction under section 80 P (2) (d) of the act. Claim of the assessee is that such interest income is attributable to the business of the assessee of borrowing and lending with members and therefore it is eligible for deduction u/s 80 P (2) (a) (i) of the Act.”

5.

We further observe that the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. vs. Income Tax Officer, Ward-5, reported in (2025) 55 taxmann.com 447 (Karnataka), has also dealt with the issue qua deduction claimed u/s 80P(2)(a)(i) of the Act in detail and ultimately held the issue in favour of the Assessee and allowed the deduction claimed u/s 80P(2)(a)(i) of the Act by observing and holding as under:-

6.

From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of Rs. 1,77,305/- represents the interest earned from short-term deposits and from savings bank account. The assessee is a Cooperative Society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law i.e., Section 80P(2)(a)(i): "Deduction in respect of income of co-operative societies: 80P (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 co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) to (vii) xx xx xx

the whole of the amount of profits and gains of business attributable to any one or more of such activities.” 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) as under: 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature, has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression "derived from", as, for instance, in section-80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.' 8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act.

9.

In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee- Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com 66. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly, it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order:

6.

Thus, on the aforesaid analyzations, we are inclined to allow the claim of deduction u/s 80P(2)(d) and 80P(2)(a)(i) of the Act. Accordingly, the deductions claimed by the Assessee are allowed, however, subject to factual verification, by the Assessing Officer.

7.

In the result, Assessee’s appeal is allowed in the above terms.

Order pronounced in the open court on 23.06.2026.

Sd/- Sd/- JAGADISH NARENDER KUMAR CHOUDHRY ACCOUNTANT MEMBER JUDICIAL MEMBER (Tarun Kushwaha) Sr. Private Secretary

Copy to: JANYUVAK KALYAN COOP CREDIT SOCIETY LTS, F/A 1, MUKTI NAGAR GHATLA 1 WAMAN TUKARAM PATIL MARG CHEMBUR MUMBAI, MUMBAI-400071, MAHARASHTRA ITO WARD 27(1)(5) MUMBAI, INCOME TAX OFFICE VASI RAILWAY 2 STATION BUILDING NAVI MUMBAI, MUMBAI-400007, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., MUMBAI

More judgments on Section 80P(2)(a)(i)

All 2,347 judgments and leading authorities on Section 80P(2)(a)(i) →

Recent GST High Court judgments

Search GST case law →