BHOJIPURA GANNA SAMITI LIMITED,LAKHIMPUR KHERI vs. ASSESSMENT UNIT, INCOME TAX DEPARTMENT/ITO-1(1), BAREILLY

ITA 813/LKW/2025Status: DisposedITAT Lucknow08 May 2026AY 2020-2121 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Bhojipura Ganna Samiti Limited, a Co-operative Society Trust, filed returns for Assessment Years 2018-19 and 2020-21 declaring Nil income and claiming deduction under Section 80P of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed a deduction of Rs. 9,72,263/- for AY 2018-19, representing interest earned on bank investments, citing the Karnataka High Court's decision in Principal Commissioner of Income-tax vs. Totagars Co-operative Sale Society. The AO completed the assessment at Rs. 9,72,263/-. The National Faceless Appeal Centre (NFAC) partly allowed the assessee's appeal, holding that the society was eligible for deduction under Section 80P(2)(d) on interest from co-operative banks, but not from scheduled banks, and directed the AO to ensure this distinction. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT).

What did the Tribunal hold?

The Tribunal, while dealing with the appeals for Assessment Years 2018-19 and 2020-21, noted that the issue of deduction under Section 80P concerning interest earned by co-operative societies on investments, particularly those statutorily required to be kept in bank deposits or government securities, had been a subject of judicial scrutiny. The Tribunal referred to the Supreme Court's decision in Mavilayi Service Cooperative and other High Court and ITAT judgments which held that interest earned by a Co-operative Society on deposits, which are statutorily required to be kept, are attributable to the business of an assessee. However, the Tribunal found that the figures regarding interest attributable to statutory reserves and the examination of the assessee's bye-laws required further scrutiny by the Assessing Officer. Therefore, the Tribunal remitted the issue of deduction under Section 80P for readjudication by the Assessing Officer. The AO, after remand, accepted the principle that interest income arising from investments in statutory reserve funds and other funds as per Sections 58 and 59 of the U.P. Cooperative Societies Act is "attributable" to the main activities of the Society. Consequently, the Tribunal allowed the grounds of appeal related to the eligibility for deduction under Section 80P and restored the matter to the AO for re-computing the admissible deduction with reference to interest earned on investments made in accordance with the relevant provisions of the U.P. Co-operative Societies Act and Rules. The issue of penalty proceedings under Section 270A was not discussed in the provided excerpt.

What were the issues?

1. Whether the assessee is eligible for deduction under Section 80P(2)(a)(iii) and 80P(2)(i) of the Income Tax Act on interest received on investments held with Banks in the form of FDRs and interest on Savings Bank Accounts (Rs. 9,72,263/-) for AY 2018-19. 2. Whether the assessee is eligible for deduction on interest income from Co-operative Societies being a co-operative bank under Section 80P(2)(d). Assessee's Contentions: - The society is a Cooperative Society and its income is fully covered by deduction under Chapter VI-A of Section 80P(2)(a)(iii) by virtue of its registration and adherence to cooperative laws. - The law uses the word "attributable" and not "derived" in Section 80P, thus including income from sources other than the actual conduct of business, and interest income on FDRs and SBA from nationalized banks is attributable to the business of providing credit facilities. - Funds in the form of Share Capital and Reserve Funds, statutorily required to be maintained, cannot be said to be made out of surplus funds. - PF Balance of seasonal employees held in deposits are not the society's investments, and interest thereon is not the society's income. - Proportionate deduction for management expenses and interest paid should be allowed from gross interest. - Only real income/profit can be taxed, requiring deduction of expenses incurred. - Reliance on the Hon'ble Apex Court judgment in Totgar's Co-operative Sale Society Ltd. is misplaced as it is distinguishable and has been distinguished by other ITAT benches. Revenue's Contentions: - The judgment records no specific contentions for the revenue before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(2)(a)(iii),Section 80P(2)(d),Section 80P(4),Section 270A,Section 143(3),Section 144B,Section 58,Section 59

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW

Before: SHRI. SUDHANSHU SRIVASTAVA

These appeals have been preferred by the Assessee against the respective orders, both dated 15.09.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Years 2018-19 and 2020-21. 2.1 Since the facts and the issues involved in the above captioned appeals are almost identical, therefore, they were taken up together for hearing and are being disposed of through this common order for the sake of convenience.

2.

2 First, we will deal with the issues involved in the case of the assessee in ITA No.812/LKW/2025 for assessment year

2018-19. ITA Nos.812 & 813/LKW/2025 2.3 The brief facts are that the assessee, a Co-operative Society Trust filed its return of income for the year under consideration declaring Nil income and claiming dedu

The order continues below.

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