KALPATARU COOP CREDIT SOCIETY LTD,THANE vs. ACIT, CIRCLE-1, KALYAN, KALYAN

आदेश / ORDER PER BEENA PILLAI, JUDICIAL MEMBER: Present appeal filed by assessee is directed against the order passed by NFAC, Delhi [hereinafter referred to as “Ld.CIT(A)”] dated 30/12/2025 for A.Y. 2018-19, on the following grounds of appeal:-

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD “1) The learned CITA erred in confirming the additions made by the AO by way of disallowance of deduction us 80P2 in respect of interest of Rs948787earned from FDRs placed with three Cooperative Banks and interest of Rs25574 earned from Savings Bank Ac with Cooperative Bank without appreciating that the said disallowance was not justified on facts of the case and in law

2) The learned CITA failed to appreciate that the entire interest income of Rs974361earned on investments made with Cooperative Banks was deductible us 80P2d of the Act as per the consistent view expressed by Honble Jurisdictional ITAT Mumbai in various cases and hence the addition made by the AO was not justified

3) Without prejudice to ground no 2 the learned CITA erred in not appreciating that the entire interest income of Rs974361earned on FDRs and Saving Ac was deductible us 80P2ai as per the consistent view expressed by Honble Jurisdictional ITAT Mumbai in various cases and hence the addition made by the AO was not justified

4) Without prejudice to the above grounds the appellant submits that the AO may be directed to only tax the net surplus on gross interest income of Rs974361 after allowing deduction in respect of interest expenditure incurred on funds borrowed for making the above FDRs Investment

5) The appellant craves leave to add alter amend any of the grounds of appeal.”

The assessee is a co-operative credit society engaged in providing credit facilities to its members. During the year under consideration, the assessee had invested surplus funds in fixed deposits with The Saraswat Co-operative Bank, The KJ Sahakari Bank and Thane Janata Sahakari Bank aggregating to Rs.1,40,41,737/- and earned interest income of Rs.9,48,787/- on FDRs and Rs.25,574/- on savings bank account aggregating to Rs.9,74,361/-. The assessee claimed deduction u/s 80P(2) of the Act in respect of the said interest income. The Ld.AO, relying

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD upon the decision of the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd. vs. ITO reported in 322 ITR 283 (SC), treated the said interest income as taxable under the head “Income from Other Sources” u/s 56 of the Act and disallowed deduction claimed u/s 80P amounting to Rs.9,74,361/-.

Aggrieved by the order passed by Ld.AO assessee preferred appeal before Ld.CIT(A).

2.1. The Ld.CIT(A) upheld the disallowance made by the AO by holding that deduction u/s 80P(2)(a)(i) is available only in respect of profits attributable to activities of providing credit facilities to members and not in respect of interest income earned from investments/deposits made with co-operative banks. The Ld.CIT(A), relying upon the decision of the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd. (supra), held that the interest earned on fixed deposits and savings bank accounts maintained with Saraswat Co-operative Bank, KJ Sahakari Bank and Thane Janata Sahakari Bank constituted income assessable under the head “Income from Other Sources” u/s 56 of the Act. The Ld.CIT(A) further rejected the assessee’s alternative claim u/s 80P(2)(d) by observing that the deposits represented passive investments and not mutual dealings with members. Accordingly, the Ld.CIT(A) confirmed the addition of Rs.9,74,361/- made by the AO.

Aggrieved by the order passed by Ld.CIT(A) assessee is in appeal before this Tribunal.

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD 3. The Ld.AR submitted that the assessee is a co-operative credit society engaged in the business of providing credit facilities to its members and the interest income earned from deposits placed with co-operative banks is attributable to the business activities of the assessee and therefore eligible for deduction u/s 80P(2)(a)(i) of the Act. He submitted that the decision of the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd. (supra) is distinguishable on facts as the assessee therein was engaged in marketing agricultural produce and not in the business of banking/credit facilities.

3.1. The Ld.AR further submitted that the deposits were made with co-operative banks namely The Saraswat Co-operative Bank Ltd., The KJ Sahakari Bank Ltd. and Thane Janata Sahakari Bank Ltd., which are co-operative societies registered under the Co-operative Societies Act and, therefore, the interest income earned therefrom is independently eligible for deduction u/s 80P(2)(d) of the Act.

3.2. The Ld.AR relied upon various decisions of the co-ordinate benches of the Tribunal including the decision of the Hon’ble Jurisdictional ITAT Mumbai holding that interest income earned from investments/deposits with co-operative banks is eligible for deduction u/s 80P(2)(d) of the Act. It was thus submitted that the authorities below erred in denying the deduction claimed by the assessee.

3.3. The Ld.DR strongly relied upon the orders of the lower authorities. He submitted that the interest income earned on deposits placed with co-operative banks is not operational income

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD arising from the business activities carried on by the assessee with its members and therefore the same cannot be allowed as deduction u/s 80P(2)(a)(i) of the Act.

3.4. The Ld.DR further submitted that the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd. (supra) has clearly held that interest income earned on surplus funds invested in deposits is assessable under the head “Income from Other Sources” and not eligible for deduction u/s 80P of the Act. He thus submitted that the Ld.CIT(A) was justified in confirming the disallowance made by the AO.

We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.

4.1. We note that the co-operative banks with whom the deposits were maintained are admittedly co-operative societies registered under the relevant Co-operative Societies Act. Section 80P(2)(d) specifically provides deduction in respect of income by way of interest or dividend derived by a co-operative society from its investments with any other co-operative society. The Hon’ble Jurisdictional Bombay High Court in the case of Quepem Urban Co-operative Credit Society Ltd. vs. ACIT reported in (2015) 58

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD taxmann.com 113 (Bom) and various decisions of the co-ordinate benches of the Tribunal have consistently held that interest earned from investments made with co-operative banks qualifies for deduction u/s 80P(2)(d) of the Act.

4.2. We further note that the reliance placed by the authorities below on the decision of the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd. (supra) is misplaced in the facts of the present case. In the said decision, the Hon’ble Supreme Court was dealing with deduction claimed u/s 80P(2)(a)(i) in respect of surplus funds invested in short term deposits by a co-operative sale society engaged in marketing agricultural produce. The issue relating to deduction u/s 80P(2)(d) in respect of investments made with co-operative societies/co-operative banks was not under consideration before the Hon’ble Apex Court.

4.3. The issue is no longer res integra in view of the consistent decisions of the co-ordinate benches of the Tribunal including Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs. ITO (ITA No.6547/Mum/2017), Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO reported in 202 ITD 464 (Mum), and Marvwanjee Cama Park Co-operative Housing Society Ltd. vs. ITO reported in 145 taxmann.com 415 (Mum), wherein it has been held that interest income earned by a co-operative society from investments/deposits with co-operative banks is eligible for deduction u/s 80P(2)(d) of the Act.”

4.4. Respectfully following the consistent view taken by the Hon’ble Jurisdictional ITAT Mumbai and considering the fact that

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD the investments were made with co-operative banks which are co- operative societies, we hold that the interest income of Rs.9,74,361/- earned by the assessee from such co-operative banks is eligible for deduction u/s 80P(2)(d) of the Act. Accordingly, the disallowance made by the AO and sustained by the Ld.CIT(A) is directed to be deleted.

Since we have allowed the claim of the assessee u/s 80P(2)(d) of the Act, the alternative grounds raised by the assessee become academic and therefore require no adjudication. Accordingly, grounds raised by the assessee are allowed.

In the result, appeal filed by assessee stands allowed.

Order pronounced in the open court on 14/05/2026.

Sd/- Sd/-

ARUN KHODPIA BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 14/05/2026 SC. Sr. P.S.

ITA 2206/MUM/2026 KALPATARU COOP CREDIT SOCIETY LTD Copy to:

KALPATARU COOP CREDIT SOCIETY LTD, 1ST FLOOR, RADHA CORNER, STATION 1 ROAD UNR-3 S.O, KALYAN, THANE,, THANE-421002, MAHARASHTRA

ACIT, CIRCLE-1, KALYAN, 2 MOHAN PLAZA, KALYAN-DOMBIVALI- 421301, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE