CREATIVE CREDIT CO-OPERATIVE LIMITED,BENGALURU vs. INCOME TAX OFFICER, WARD-3(2)(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER

ITA Nos. 3114 & 3115/Bang/2025 Assessment Years: 2016-17 & 2018-19

M/s. Creative Credit Co-operative Society Limited, No. 32, 1st Floor, The Income Tax Officer, 1st Main Road, M.P.M. Layout, Ward – 3(2)(1), Vs. Opposite to M.P.M.Park, Mallathhalli, Bengaluru. Bengaluru – 560 056. PAN: AABAC0713G APPELLANT RESPONDENT

Assessee by : Shri Ganesh, C Revenue by : Shri Balusamy N – JCIT DR

Date of Hearing : 17-03-2026 Date of Pronouncement : 29-05-2026

ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. These are the above 2 captioned appeals filed by creative credit cooperative society Ltd (the assessee/appellant) against the appellate order passed by National faceless appeal Centre Delhi (the learned CIT – A) dated 29 October 2025 for assessment year 2018 – 19 and 2016 – 17 wherein the appeals filed by the assessee were dismissed. 2. First, we take up the appeal for assessment year 2016 – 17 wherein the fact shows that that assessee is a primary agricultural credit cooperative society registered under the Karnataka Cooperative Societies Act, 1959 engaged in the business of accepting deposits from members and lending to its members under the societies act. Assessee filed its return of income on 9 September 2017 at the gross total income of ₹ 1,874,805 and claimed deduction under

ITA Nos. 3114 & 3115/Bang/2025 Page 2 of 10 section 80 P (2) with regard to the profits and gains earned on advances to its members and other income earned by the cooperative society declaring Rs. Nil as total income. The case of the assessee was selected for scrutiny. The learned assessing officer disallowed the deduction under section 80 P of the act stating that there are no restrictions on the assessee society about acceptance of deposits only from its members and further the membership of the society has been classified as nominal and permanent members. Further the assessee has earned the interest on deposits with other cooperative banks and cooperative societies which is not eligible for deduction in view of the decision of the honourable Supreme Court in case of Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC), and in Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka)/[2017] 395 ITR 611 (Karnataka)/[2017] 297 CTR 158 (Karnataka)[16-06-2017]. Thus, the learned that assessing officer passed an assessment order under section 143 (3) of the act on 11 December 2018 denying the deduction under section 80 P of the act. 3. The assessee aggrieved with the same preferred an appeal before the Commissioner of income tax (appeals) who passed an order on 5 September 2019 upholding the order of the assessing officer. 4. The assessee approached the coordinate bench wherein the appeal of the assessee was restored to the file of the assessing Officer for fresh consideration. 5. According to the direction of the coordinate bench the learned assessing officer examined the issue however the learned AO disallowed the deduction claimed by the assessee under section 80 P amounting to ₹ 1,874,805. Aggrieved with the same assessee preferred an appeal before the learned CIT – A who dismissed the appeal of the assessee in limine as there was a delay of 126 days in filing of the appeal for which assessee failed to show the sufficient cause. 6. For assessment year 2018 – 19 in the second appeal the assessee filed its return of income on 1 October 2018 at a total income of ₹ 76,010/–. The case was selected for scrutiny for verification of deduction. The assessment order was passed on 30 March 2021 wherein the total income of the assessee was

ITA Nos. 3114 & 3115/Bang/2025 Page 3 of 10 assessed at ₹ 2,586,246. The only dispute in that appeal is with respect to the availability of deduction to the assessee under section 80 P of the act of ₹ 2,510,236. The assessee preferred an appeal before the learned CIT – A wherein the learned CIT – A considering the decision of the honourable Supreme Court in case of Citizen cooperative Society Ltd 397 ITR 1 and when the learned CIT was shown that there were two conflicting decisions of honourable jurisdictional high court regarding the claim of deduction under section 80 P of the act namely Principal Commissioner of Income-tax, Hubli vs. Totagars Co-operative Sale Society [2017] 78 taxmann.com 169 (Karnataka)/[2017] 392 ITR 74 (Karnataka)[05-01-2017] and Tumkur Merchants Souharda Credit Cooperative Ltd. vs. Income-tax officer Word-V, Tumkur [2015] 55 taxmann.com 447 (Karnataka)/[2015] 230 Taxman 309 (Karnataka)[28-10-2014] against Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka)/[2017] 395 ITR 611 (Karnataka)/[2017] 297 CTR 158 (Karnataka)[16-06-2017] the learned CIT – A relying upon the decision of Commissioner of Customs Mumbai versus Dileep Kumar and Company (2018) 9 SCC (1) (FB) SC ) wherein it is held that any ambiguity in taxation provision, therefore is interpreted in favour of the assessee. But in a situation where the tax exemption must be interpreted, the benefit of doubt should go in favour of the revenue. He also rejected the argument of the assessee that the provisions of section 80 P is a beneficial section and should be liberally interpreted. Accordingly appeal of the assessee was dismissed. 7. Coming to the appeal of the assessee for assessment year 2016 – 17 the fact shows that the learned CIT – A has not condoned the delay of 126 days in filing of the appeal. The assessee has given a reason that authorised representative for the tax matter for compliance of various Acts including the income tax act was engaged, that representative has left the job few months back, so the petitioner took little more time than usual to collect and organise the information and documents. Therefore, there was a delay in filing of the appeal. The learned CIT – A held that the above explanation given by the assessee lacks credibility. And therefore, delay was not condoned. The learned authorised representative referred to clause 15 of form No. 35 stating that the delay is for

ITA Nos. 3114 & 3115/Bang/2025 Page 4 of 10 sufficient cause and therefore the learned CIT – A should have condoned the same for the above reason. 8. On the merits of the issue, it was submitted that assessee did not deal with non-members and therefore the issue is squarely covered in favour of the assessee by the decision of the honourable Supreme Court in case of Mavilayi Service Co-operative Bank Ltd. vs. Commissioner of Income Tax, Calicut [2021] 123 taxmann.com 161 (SC)/[2021] 279 Taxman 75 (SC)/[2021] 431 ITR 1 (SC)[12-01-2021] Mavilayi Service Cooperative Bank Ltd. vs. Commissioner of Income-tax [2020] 114 taxmann.com 85 (SC)/[2020] 269 Taxman 387 (SC)[16-09-2019]. Further with respect to the deduction claimed by the assessee under section 80 P of the act the decision of the honourable jurisdictional High Court clearly decided the issue in favour of the assessee that the income attributable to the business of the assessee should be granted as deduction under section 80 P of the act. 9. The learned departmental representative vehemently supported the learned CIT – A’s order for the assessment year 2016 – 17 in not condoning the delay stating it is appropriate and proper in the facts and circumstances of the case that the learned authorised representative of the assessee could not explain any sufficient cause for not filing an appeal within time specified. 10. On the issue of the deduction on the merits of the case, it was submitted that the honourable Karnataka High Court has squarely covered the issue against the assessee wherein the assessee is required to be denied deduction under section 80 P of the act on the interest income earned. However, on the issue of loan to non-members, he submitted that the honourable Supreme Court in case of Mavilayi Service Co-operative Bank Ltd. vs. Commissioner of Income Tax, Calicut [2021] 123 taxmann.com 161 (SC)/[2021] 279 Taxman 75 (SC)/[2021] 431 ITR 1 (SC)[12-01-2021] Mavilayi Service Cooperative Bank Ltd. vs. Commissioner of Income-tax [2020] 114 taxmann.com 85 (SC)/[2020] 269 Taxman 387 (SC)[16-09-2019] has referred to the provisions of the Kerala act whereas the provisions stated in the Karnataka cooperative societies act is different. 11. We have carefully considered the rival contention and perused the orders of the learned that lower authorities. Coming to the appeal for assessment year 2016

ITA Nos. 3114 & 3115/Bang/2025 Page 5 of 10 – 17 we find that that the appeal should have been filed before the learned CIT – A on or before 29th of April 2022 as the assessment order is passed on 30 March 2022 however the appeal was filed on 2 September 2022 whereby a delay of 126 days account. The reason for the delay was that assessee has one authorised representative who was providing the services of advice on the income tax matters. The representative has left the job few months back and it took the petitioner more time than the usual to collect and organise the information and documents. Therefore, there is a delay of 126 days. We find that the reason shown by the assessee is bona fides and resulted into unintentional delay. Absence of an authorised representative who was entrusted with the job, who has left the job and therefore to reorganise the claim of the assessee for filing appeal et cetera took some days. This is because the delay of 126 days. The delay cannot be said to be on a reasonable, unsubstantiated and in sufficient cause. Accordingly, we do not approve the order of the learned CIT – A in not condoning the delay in filing of the appeal for assessment year 2016 – 17. 12. As the issues on the merits of the case are covered in favour of the assessee by the decision of the honourable Supreme Court and honourable Karnataka High Court we do not find any reason to restore the matter back to the file of the learned CIT – A and therefore we proceed to decide the issue. 13. As the facts stated above clearly shows that the assessee is a cooperative society which is engaged in the business of borrowing and lending with the members. Income of such cooperative societies are covered under the provisions of section 80 P of the act wherein in the case of an assessee being a co-operative society the carrying on of the business of banking or providing credit facilities to its members, the whole of the amount of the profits and gains of business attributable to such activity are fact that assessee has not dealt with any non-members. No evidence was brought on record before us by the learned lower authorities are mentioned in the assessment and appellate order that assessee has ever dealt with non-members. 14. Honourable Supreme court in Mavilayi Service Co-operative Bank Ltd. vs. Commissioner of Income Tax, Calicut [2021] 123 taxmann.com 161 (SC)/ [2021] 279 Taxman 75 (SC)/ [2021] 431 ITR 1 (SC) [12-01-2021] has held that:-

ITA Nos. 3114 & 3115/Bang/2025 Page 6 of 10 21. An analysis of this judgment would show that the question of law that was reflected in paragraph 5 of the judgment was answered in favour of the assessee. The following propositions may be culled out from the judgment: (I) That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; (II) That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub-section (2) of section 80P must be given by way of deduction; (III) That this Court in Kerala State Cooperative Marketing Federation Ltd. (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; (IV) This is for the reason that when the legislature wanted to restrict the deduction to a particular type of co-operative society, such as is evident from section 80P(2)(b) qua milk co-operative societies, the legislature expressly says so - which is not the case with section 80P(2)(a)(i); (V) That section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2). This proviso specifically excludes only co-operative banks, which are cooperative societies who must possess a licence from the RBI to do banking business. Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the mischief of section 80P(4).

“34. Seventhly, section 80P(1)(c) also makes it clear that section 80P is concerned with the co-operative movement generally and, therefore, the moment a co-operative society is registered under the 1912 Act, or a State Act, and is engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). The reach of sub-clause (c) is extremely wide, and would include co-operative societies engaged in any activity, completely independent of the activities mentioned in sub-clauses (a) and (b), subject to the cap of INR 50,000/- to be found in sub-clause (c)(ii). This put paid to any argument that in order to avail itself of a benefit under section 80P, a cooperative society once classified as a particular type of society, must continue to fulfil those objects alone. If such objects are only partially carried

ITA Nos. 3114 & 3115/Bang/2025 Page 7 of 10 out, and society conducts any other legitimate type of activity, such co- operative society would only be entitled to a maximum deduction of Rs. 50,000/- under sub-clause (c).’ 45. To sum up, therefore, the ratio decidendi of Citizen Co-operative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word "agriculture" into section 80P(2)(a)(i) when it is not there. Further, section 80P (4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a license in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P (4) is out of harm's way, all the assesses in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.”

ITA Nos. 3114 & 3115/Bang/2025 Page 8 of 10 number of profits and gains of business is required to be granted as deduction. It is not the case that the interest income earned by the assessee society is not profit attributable to the business of the credit cooperative society. This issue is also squarely covered in favour of the assessee by the decision of the honourable Karnataka High Court in case of Principal Commissioner of Income- tax, Hubli vs. Totagars Co-operative Sale Society [2017] 78 taxmann.com 169 (Karnataka)/[2017] 392 ITR 74 (Karnataka)[05-01-2017] and Tumkur Merchants Souharda Credit Cooperative Ltd. vs. Income-tax officer Word-V, Tumkur [2015] 55 taxmann.com 447 (Karnataka)/[2015] 230 Taxman 309 (Karnataka)[28-10-2014] and Guttigedarara Credit Co-operative Society Ltd. vs. Income-tax Officer, Ward 2(2), Mysore [2015] 60 taxmann.com 215 (Karnataka)/[2015] 234 Taxman 476 (Karnataka)/[2015] 377 ITR 464 (Karnataka)[09-06-2015] [ all these three decisions considered and interpreted the decision of Honourable Supreme court in Totgars, Co-operative Sale Society Ltd. vs. Income-tax Officer, Karnataka [2010] 188 Taxman 282 (SC)/[2010] 322 ITR 283 (SC)/[2010] 229 CTR 209 (SC)[08-02-2010]] which was also referred to in the order of the coordinate bench for assessment year 2016 – 17. In view of this the assessee is entitled to deduction on the bank interest also and the claim is not covered by the decisions of the honourable Karnataka High Court as stated by the learned assessing officer in case of total are cooperative societies Ltd. 17. The Ld. DR has relied up on decision of Honourable Karnataka high court in case of 2025 (10) TMI 770 - KARNATAKA HIGH COURT M/s. Judicial Employees House Building Cooperative Society Limited Versus Income Tax Officer Ward -2 (2), Mysuru. and 2025 (6) TMI 2113 - ITAT BANGALORE ITO Ward-7 (2) (1) Bangalore Versus M/s. Bangalore Credit Co- operative Society Ltd. (Vice-Versa) the question before the court was

“1. Whether on facts and circumstances of the case, the Tribunal was justified in coming to the conclusion that the interest derived by the Co- operative society from its investments was not with any other co-operative Society as required under Section 80P2(d)?

ITA Nos. 3114 & 3115/Bang/2025 Page 9 of 10 2. Whether for the purpose of Section 80P(2)(d) a Co-operative Bank should be considered as a Co-operative Society or not. For, if a Co- operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Cooperative Bank would necessarily be deductible under Section 80P (1)?”

Order pronounced in the open court on 29th May, 2026.

Sd/- Sd/- (KESHAV DUBEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 29th May, 2026.

/TNTS/ Desai S Murthy /

ITA Nos. 3114 & 3115/Bang/2025 Page 10 of 10

Copy to:

Assistant Registrar, ITAT, Bangalore