LUCKNOW UNIVERSITY TEACHER COOPERATIVE SOCIETY LIMITED,LUCKNOW vs. DCIT / ACIT-1, LUCKNOW NEW, LUCKNOW

PER ANADEE NATH MISSHRA:A.M.

(A) This appeal has been filed by the assessee against the impugned appellate order of learned CIT(A)/ NFAC, Delhi, dated 28.11.2025, for the AY 2022-23. The assessee has raised the following grounds of appeal:

“1. That the Ld. CIT (A) erred in confirming the action of the Assessing Officer in assessing the interest income of Rs. Rs. 24.21,660 under the head "Income from Other Sources" instead of "Profits and Gains of Business". 2. That the Ld. CIT (A) erred in holding that the appellant is not entitled to deduction under Section 80P(2)(a)(i) in respect of interest income derived from deposits made out of operational and circulating fund.

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business of providing credit facilities to members. The expression "attributable to" is wider than "derived from" and includes income having proximate nexus with business activity. In the present case: a. Deposits were made out of business funds. b. Funds were temporarily parked pending utilization for lending activities. c. The interest income is incidental and integral to the business of providing credit facilities. Therefore, such income is business income eligible for deduction. 9. That the Section 80P(2)(d) allows deduction of Interest or dividend income derived by a co-operative society from investments with any other co-operative society. If the bank in question is a co-operative bank registered as a co-operative society, deduction is allowable. Even otherwise, denial under 80P(2)(d) does not automatically defeat claim under 80P(2)(a)(i). 10. That the S.C of India, in the several recent rulings (notably in Mavilayi Service Co-operative Bank Ltd. CIT (2021) 431 ITR 1(SC)) has affirmed that co-operative societies-including more corporative like Janta Sehkari Samiti - that are not licensed by the RBI as Co-operative bank are entitled to tax exemption under section 80P(2)(a)(i) of the IT Act 1961. � The court clarified that a co-operative society providing credit facilities to its members does not engage in "banking" as defined in Banking Regulation Act 1949 and therefore is not excluded by section 80P(4). � Eligibility for the section 80P(2)(a)(i) deduction hinges only on the society providing credit facility to its member, regardless of whether these loans are solely for agricultural purpose. � Loans extended to nominal member by co-operative credit societies also qualifies for the deduction under section 80P(2)(a)(i). � The section 80P(4) exclusion applies specifically to "co-operative banks" licensed by RBI meaning credit societies not operating as licensed bank remains eligible for the exemption.

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The court distinguished Torgars Cooperative Sales Society Ltd. v. ITO (2010) 188 Taxman 282 (SC), where deposits were from retained sale proceeds owed to members (a liability). unlike here, where surpluses were from credit operations. Similar distinctions appeared in Tumkur Merchants Souharda Credit Cooperative Ltd. v. ITO (2015) 55 taxmann.com 447 (Karnataka) and Vavveru Co-operative Rural Bank Ltd. v. Chief Commissioner of Income Tax (2017) 88 taxmann.com 728 (Telangana & Andhra Pradesh), affirming deductions for non-liability surpluses. Key Observations • "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." • "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.”

(B) The assessee has filed application for condonation of delay in filing of the present appeal. The learned Departmental Representative expressed no objection to condonation of delay, as requested by the appellant assessee. In view of the reasons stated in the application, the delay in filing of the appeal is condoned under section 253(5) of the Act and the appeal is admitted.

(C) In this case, assessment order dated 12.03.2024 was passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (the Act), making an addition of Rs. 24,21,660/- by way of disallowing the assessee’s claim of deduction under section 80P of the Act; thereby determining the assessee’s total income at Rs. 25,60,520/- as against the returned income of Rs. 1,38,520/- . The Assessing Officer placed reliance on the order of Hon'ble Supreme Court in the case of Totgar’s Cooperative Sale Society Ltd. vs. Income Tax Officer [2010] 322 ITR 0283 (SC). The assessee’s appeal against

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the assessment order was dismissed by the learned CIT(A) vide impugned appellate order dated 28.11.2025.

(D) The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 28.11.2025. Although several grounds have been taken in this appeal, they are all related to the assessee’s claim of deduction under section 80P of the Act. Therefore, all the grounds of appeal are hereby disposed of together.

(E) At the time of hearing, the learned Counsel for the assessee submitted that the assessee’s case was distinguishable from the aforesaid case of Totgar’s Cooperative Sale Society Ltd. (supra) on facts of the case having regard to the applicable law. He further submitted that the assessee did not get reasonable opportunity before the Assessing Officer during the assessment proceedings; and before the learned CIT(A) during appellate proceedings before him; to establish that the assessee’s case is distinguishable from the aforesaid case of Totgar’s Cooperative Sale Society Ltd. (supra). He submitted that issues in dispute regarding assessee’s claim of deduction under section 80P of the Act should be restored back to the file of Assessing Officer with the direction to pass denovo order on this issue, in accordance with law, after providing reasonable opportunity to the assessee. The learned Departmental Representative for revenue expressed no objection to this. In view of the foregoing, the impugned appellate order of learned CIT(A) is set- aside and the issues in dispute regarding assessee’s claim for deduction under section 80P of the Act are restored back to the file of Assessing Officer with the direction to pass denovo order on this issue, in accordance with law after providing reasonable opportunity to the assessee.

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(F) All the grounds of appeal in the present appeal are treated as disposed off in accordance with the aforesaid directions. For statistical purposes, the appeal is partly allowed.

(Order was pronounced in the open court on 08/05/2026)

Sd/- (ANADEE NATH MISSHRA) Accountant Member Date: 08/05/2026 SK, Sr.PS

Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. D.R., I.T.A.T., 5. CIT(A)

Senior Private Secretary Income Tax Appellate Tribunal Lucknow