PAHALAMPUR SAMABAY KRISHI UNNAYAN SAMITY LTD.,HOOGHLY vs. I.T.O., WARD - 23(1),, HOOGHLY

आदेश / O R D E R Per George Mathan, JM: Both the appeals have been filed by the assessee against the orders of the ADDL/JCIT(A)-1, VIAKHAPATNAM [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) in appeal Nos.CIT(A), Kolkata- 6/10611/2018-19 and CIT(A), Kolkata-6/10444/2019-20 common dated 18.11.2025 respectively. Since issues are involved in the appeals are identical, therefore, these have been heard together and are being disposed of by the common order. ITA No.5/Kol/2026 is taken as lead

2 ITANo.5&6/Kol/2026 case and the decision of this order will mutatis mutandis apply to another appeal in ITA No.6/Kol/2026 also. 2. Shri Somnath Ghosh, Advocate represented on behalf of the assessee and Shri Kallol Mistry, Sr. DR, Sr. DR represented on behalf of the revenue.

“10. After hearing the rival contentions and perusing the materials available on record, we find the income earned by the society by way of interest on deposits held with co-operative banks which is the income of the society and therefore, in our opinion the assessee is entitled for claiming deduction u/s 80(1) of the Act. The case of the

3 ITANo.5&6/Kol/2026 assessee find support from the decision of co-ordinate Bench in the case of Gour Gamin Bank (Presently merged with Bangiya Gramin Vikash Bank) Vs. DCIT in ITA Nos. 305/Kol/2012 & 320/KOL/2012 for A.Y. 2004-05 vide order dated 31.03.2014, Sagar Gamin Bank (presently merged with Bangiya Gramin Vikash Bank) Vs. DCIT vide order dated 31.03.2014 in ITA No.304/KOL/2012 for A.Y. 2002-03. The operative part in ITA No. 305 & 320/KOL/2012 is extracted below for the sake of ready reference:- “3. We have heard rival contentions and gone through facts and circumstances of the case. We find that the assessee is eligible for deduction u/s. 80P of the act and payment of gratuity, payment of leave encashment and provision for doubtful debts is also out of eligible income and that also gross total income of the Co-operative Society. As pointed out by CIT. Counsel for the assessee to the provisions of section 80P(1) of the Act that the gross total income includes any income referred to in sub-section (2) means the deduction will be allowed from gross total income. The relevant provision of section 80P(1) reads as under: “(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.” It means the addition made by CIT on account of provision for gratuity, provision for leave encashment eventually which was paid before filing of return of income u/s. 139(1) of the Act and provision for bad and doubtful debts, is eligible for deduction u/s. 80P of the Act in view of the fact that deduction is to be allowed out of gross total income. Accordingly, this disallowance in any way will not affect on income for the reason that this will also be part of gross total income and will be eligible for deduction u/s. 80P of the Act. These three common issues of assessee’s appeal are allowed. 4. The only issue in this appeal of revenue is against the order of CIT(A) deleting the disallowance of deduction u/s. 80P of the Act in respect of receipts of interest on non-SLR funds For this, revenue has raised following grounds: “1.On the facts and circumstances of the case, the CIT. CIT(A) has erred in ignoring the aims and objectives enshrined in the Preamble of the RRB Act, 1976, in terms of the principle laid down in Keshavanand Bhartis case. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in not taking cognizance of the fact that the assessee, a creation of RRB Act, in view of violation of section 3(1) of the RRB Act cannot be granted tax benefits u/s. 80P(2)(a)(i) on the plea that Regulatory Bodies have not acted

4 ITANo.5&6/Kol/2026 against it which would be contrary to the principle laid down in Bihari LaI Jaiswal & Ors 217 ITR 746 (SC). 3. On the facts and circumstances of the case Ld. CIT(A) has erred in not considering the prime issue that public policy laid down by the Parliament can not be overlooked and tax benefits be granted, despite objection of the Revenue, on the ground that regulatory body has not taken any action against the assessee for its violation. 4. On the facts and circumstances of the case Ld. CIT(A) has erred in not considering the fact that the legislature has not given deduction to all banks but only to RRB to promote target area and group for upliftment and in such a situation , all other banking activity of RRB not be given the benefit of deduction except the income which is in conformity with the aims and objects enshrined in sec. 3(1) and the preamble of the RRB Act. 5. On the facts and circumstances of the case Ld. CIT(A) has erred in concluding that expenses incurred in connection with or apportionable to activities in violation of the RRB Act or in violation of public policy can be allowed as a deduction. 6.On the facts and circumstances of the case Ld. CIT(A) has erred in not taking cognizance of the fact that section 18 of the RRB Act is simply an enabling provision and can neither act to the prejudice of provision laid down in section 3(1) of the said Act, nor can defeat the aims and objectives enshrined in the Preamble of the RRB Act.” 5. At the outset Ld. Counsel for the assessee filed copy of Tribunal’s order in assessee’s own case in ITA No. 1771/K/2008 for AY 2005-06 and submitted that the issue is squarely covered in favour of assessee. We find that the Tribunal in ITA No. 1771/K/2008 for AY 2005-06 in assessee’s own case has held as under: “11. We have heard rival contentions and gone through facts and circumstances of the case. We find that the assessee bank has deployed total deposits into three types of income earning instruments i.e. CRR, SLF funds and non-SLR funds. The investments of the above funds are made as per RRB Act, 1976 and violations of the Act have been determined as SLR fund and non-SLR fund. Income has been determined according to the funds deployed as per RRB Act. We have gone through the above case laws and find that whether income is attributable to SLR or non-SLR funds would not make any difference for the purpose of quantifying deduction on interest by Cooperative Bank u/s. 80P(2)(a)(i) of the Act as deposits of surplus idle money available from working capital i.e. reserves, excess collection of interest and other incomes all attributable to banking business. Therefore, the interest earned on non-SLR funds will also qualify for deduction u/s. 80P(2)(a)(i) of the Act.

5 ITANo.5&6/Kol/2026 Hon’ble Allahabad High Court in the case of CIT Vs. Muzaffarnagar District Co-operative Bank Ltd. (2013) 214 Taxman 498 (All) relying on the decision of Hon’ble Supreme Court in the case of Bihar State Cooperative Bank Ltd. Vs. CIT (1960) 39 ITR 114 (SC) and of Hon’ble Bombay High Court in the case of CIT Vs. Goa Urban Cooperative Bank Ltd., (Tax Appeal Nos. 6 & 8 of 2005, and in Tax Appeal No. 54 of 2008, decided on 15.07.2009) have held that interest earned out of deposits of surplus fund and interest earned on SLR or non- SLR funds will qualify for deduction u/s. 80P(2)(a)(i) of the Act. The relevant paras 8, 9 and 10 reads as under: “8. The Supreme Court in Bihar State Co-operative Bank Ltd. (supra) explained in para 12 and 13 that the interest earned out of deposits of surplus fund has to be treated as interest earned in the banking business. Paras 11.12 and 13 of the judgement are quoted as below. …………………………………………………… In view of the above, we are of the view that the issue is squarely covered in favour of assessee and assessee is eligible for deduction u/s. 80P(2)(a)(i) of the Act on interest earned on non-SLR funds. This issue of revenue’s appeal is dismissed. 6. In the result, appeal of assessee is allowed and that of revenue is dismissed.” 11. We therefore respectfully following the decision of the co-ordinate Bench in ITA Nos. 305 & 320/KOL/2012 hold that the interest earned from the co-operative banks is eligible for deduction u/s 80P(1) of the Act.” 4. In reply, the ld. Sr. DR vehemently supported the orders of the Assessing Officer and ld. CIT(A). 5. I have heard the rival submissions. It is noticed that the present issue of benefit of deduction 80P(2) is squarely covered by the decision of the Coordinate Bench of this Tribunal in the case of Mundukhola Baksagarh SKUS Ltd. vs. ITO (supra). Respectfully following the decision of the Coordinate Bench of this Tribunal, the Assessing Officer

6 ITANo.5&6/Kol/2026 is directed to grant the benefit of deduction u/s 80P(2) on the interest earned from nationalized banks. 6. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 06/05/2026.

Sd/- (GEORGE MATHAN) न्यधनयक सदस्य / JUDICIAL MEMBER Dated 06/05/2026 RS आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant- प्रत्यर्थी / The Respondent- 2. 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ड फाईल / Guard file.

सत्यापपत प्रतत //True Copy// आदेशधिुसधर/ BY ORDER,

(Assistant Registrar) Income Tax Appellate Tribunal, Kolkata