THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337,SOBHANAPURAM vs. INCOME TAX OFFICER, WARD 3(1), VIJAYAWADA

आयकर अपीलीय अधिकरण, धिशाखापत्तनम पीठ, धिशाखापत्तनम INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM BENCH: SMC BEFORE SHRI UDAYAN DAS GUPTA, HON’BLE JUDICIAL MEMBER AND SHRI OMKARESHWAR CHIDARA, HON’BLE ACCOUNTANT MEMBER ITA 412/VIZ/2025 (निर्धारण वर्ा/Assmt. Year: 2016-17) THE SOBHANAPURAM INCOME TAX OFFICER, PRIMARY AGRICULTURAL WARD 3(1) COOPERATIVE CREDIT CR BUILDINGS, 1ST FLOOR ANNEX, SOCIETY LIMITED KR337 MG ROAD 5-54, MAIN ROAD, Vs. VIJAYAWADA-520002, SOBHANAPURAM, ANDHRA PRADESH VIJAYAWADA-521211, ANDHRA PRADESH (प्रत्यर्थी Respondent) (अपीलार्थी Appellant)

Permanent Account Number of Assessee: AACAT7714M

निर्धारिती द्वधिध/Assessee represented by: Shri ASRSS Sivaprasad, CA िधजस्‍व द्वधिध/Revenue represented by: Shri A.P.Babu, Sr.AR

सुिवधई की तधिीख / Date of conclusion of hearing: 18-Jun-2026 घोषणध की तधिीख / Date of pronouncement: 19-Jun-2026 आदेश / ORDER PER UDAYAN DAS GUPTA, JUDICIAL MEMBER: This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] passed under section 250 of Income Tax Act, 1961 [hereinafter in short

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 “the Act”] dated 11.03.2025 which has emanated from the order of the Ld. Assessing Officer [hereinafter in short “Ld.AO”] dated 15.03.2024 passed under section 147 r.w.s.144 r.w.s. 144B of the Act

“1. Both in law and in Facts of the case, the order made by the Ld.Commissioner of Income Tax (Appeals), NFAC, is bad in law, arbitrary, contrary to the provisions of law and against the principles of natural justice. 2. The Ld. CIT(A), NFAC Delhi erred in law in upholding the order made by AO making an addition of Rs. 18,76,963/- stating that interest earned would not qualify for deduction u/s 80P though the assessee society earned income through its operations of the society. 3. The Ld. CIT(A), NFAC Delhi failed to appraise that interest earned by the society on deposits constitute only operational income but not the other income u/s 56 of the Act that was accrued to the society and such interest is not earned on the funds which are not required for the business/surplus funds. 4. The order of the Ld. CIT(A), NFAC Delhi is bad in law in making the addition of Rs.18,76,963/- since the deposits made in KDCC Bank are only out of the deposits collected from the Members as part of its business operations as per the objects of

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 the society and again interest on deposits received from DCC Bank are used only for operations of the society. 5. On the facts and circumstances of case and in law interest earned by the society on deposits with KDCC Bank is eligible for deduction u/s.80P(2)(d) of the Act as KDCC Bank is also registered as co-operative society with Registrar of Co- operative societies, A.P. 6. The order passed by the Ld. CIT(A), NAC Delhi is against the principles of Law since cooperative banks are categorised as cooperative societies under Cooperative Societies Act and District Cooperative Banks are part of the cooperative Credit Structure. 7. The Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi is wrong in appraising that no valid return of income was filed by assessee when the return filed was accepted by the e-filing portal and there is NO WATERMARK OF "INVALID" on the acknowledgement issued. 8. The Ld. Commissioner of Income Tax (Appeals), NAC, Delhi ought to have taken into consideration that provisions of sec 80A(5) are applicable only when the assessee fails to make a claim for deduction u/s 80P in the return of income filed. 9. The Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi ought to have taken into consideration that filing of return within the due date as per provisions of Section 139(1) is mandatory w.e.f 01-04-2018 i.e. A.Y. 2018-19 as per Section 80AC of the Income Tax Act, 1961.”

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 5. The matter carried in appeal before the Ld. First Appellate Authority has been dismissed, by relying on the decision of the Hon’ble Apex court in the case of “ Totgars Cooperative sale Society ltd vs ITO [2010] 188 Taxman 282 ( SC )”

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 judgment of Hon’ble Gujrat High Court in the case of “Ashwin Kumar Urban Co- operative Society Ltd. 11 TMI 971 (Guj HC) and has observed as follows :

“9.2 The relevant part of the order is reproduced as under: 13. Now we must look at section 80P(2)(d), which reads as follows: - “……. (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; ……...” 14. It is a matter of record that SIMFED earned interest from investments made in two co-operative banks, namely, Sikkim State Cooperative Bank Limited and Citizens Urban Co-operative Bank Limited, both registered as co-operative societies under the Sikkim Co-operative Societies Act, 1978. As stated hereinbefore, these investments were made from the surplus funds and statutory reserves of SIMFED as required under sections under the relevant provisions of Sikkim Cooperative Societies Act, 1978, more specifically, sections 57 to 66, under Chapter V of the Sikkim Cooperative Societies Act, 1978, which mandates prudent management and investment of funds only in approved securities of co-operative banks approved by the Registrar. 15. In our view, a plain reading of the provisions of law quoted above, clearly reveals that the learned Tribunal misinterpreted the provision of section 80P(4) of the Income Tax Act, 1961, which specifically excludes co-operative banks (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) and erroneously applied it in respect of SIMFED, thereby disentitling it from claiming benefit under section 80P of the Income Tax Act, 1961. As such, the first substantial question of law is answered in favour of the assessee. 16. So far as the second substantial question of law as framed by us is concerned, we are of the view that the Hon’ble High Court of Gujarat in the case of PCIT vs. Ashwin Kumar Urban Cooperative Society Ltd. reported in (2024) 168 taxmann.com 314 (Gujarat), has squarely answered this question in favour of the assessee by observing inter alia that the Hon’ble Supreme Court’s decision rendered in Totgars’ Cooperative Sale Society Ltd. (supra) was not applicable in the facts of that case — which is identical to the instant case — as the eligibility of deduction of interest in the facts of the instant case has to be decided under section 80P(2)(d) and not under section 80P(2)(a)(i).

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 Totgars’ Cooperative Sale Society Ltd. (supra) was primarily concerned with section 80P(2)(a)(i) and retained members’ funds shown as liability to deny deductions under section 80P(2)(d). The facts of the Totagars’ Cooperative Sale Society Ltd (supra) — as well as the applicability of the statutory provisions insofar as in our case is concerned — are factually and materially different. As such, the second substantial question of law as framed by us is also answered in favour of the assessee. 17. Now, so far as the two judgments referred to by the learned Deputy Solicitor General of India are concerned, namely, Totgars’ Cooperative Sale Society Ltd. versus Income Tax Officer, Karnataka reported at (2010) 3 Supreme Court Cases 223 = (2010) 322 ITR 283 and the Principal Commissioner of Income- tax & Another vs. Totagars Co-operative Sale Society (and vice versa) by Karnataka High Court, reported at (2017) 395 ITR 611, we have already held earlier that the judgment of the Hon’ble Supreme Court’s judgment in Totgars’ Cooperative Sale Society Ltd (supra) is not applicable in the facts of our case. So far as judgment of the Karnataka High Court is concerned — which was relied upon by the learned Income Tax Appellate Tribunal, while rendering its impugned judgment and order dated 18th June, 2025 — the Gujarat High Court in Ashwin Kumar Urban Co-operative Society Ltd. (supra) has considered the said Karnataka High Court judgment and has clearly held the same to be distinguishable and not applicable in a similar fact situation as our present case. 18. We are, therefore, of the view that in the facts of the instant case, the assessee is entitled to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961. 19. For reasons stated above, the impugned judgment and order dated 18th June, 2025, passed by the learned Income Tax Appellate Tribunal in I.T.A. Nos.: 1582/KOL/2024 in respect of the Assessment Year: 2018-19, is liable to be set aside and is accordingly set aside. 20. Tax Appeal No. 02 of 2025 is accordingly allowed.”

As such, respectfully following the law laid down by the Hon’ble Sikkim High 10. Court (which is the most recent decision being delivered on December 10th, 2025, on the issue ) regarding claim of deduction u/s 80P(2)(d) of the Act, in the matter of interest earned by cooperative societies from investments made in cooperative banks , and also considering the decision of the Hon’ble Punjab and Haryana High court in the case of

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 CIT vs Doaba Cooperative Sugar Mills Ltd [1998] 230 ITR 774 and, and also considering the views of Hon’ble Chandigarh Bench in the case of the Jagraon Co-operative Marketing Cum Processing Society Ltd., order dated 25.9.2024, on identical issue, and the views expressed in the case of Mullanpur Garibdas Cooperative [2024] 163 taxmann.com 50 (Chandigarh) and in the case of Jagadhri Cooperative 159 taxmann.com 1253 ( Chandigarh ), we hold that the assessee cooperative Society is entitled to deduction u/s 80P(2)(d) of the Act on interest earned from deposits made in cooperative banks and as such, the deduction claimed by the assessee is to be allowed.

Order pronounced in the open court on 19th June, 2026.

Sd/- Sd/- OMKARESHWAR CHIDARA UDAYAN DAS GUPTA ACCOUNTANT MEMBER JUDICIAL MEMBER Visakhapatnam Dated:19.06.2026 Giridhar, Sr.PS

ITA 412/VIZ/2025 THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337 Copy to: THE SOBHANAPURAM PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY LIMITED KR337, 1 5-54, MAIN ROAD, SOBHANAPURAM, VIJAYAWADA-521211, ANDHRA PRADESH INCOME TAX OFFICER, WARD 3(1), CR BUILDINGS, 1ST FLOOR ANNEX, MG 2 ROAD, VIJAYAWADA-520002, ANDHRA PRADESH 3 THE PCIT / CIT, 4 THE D.R., ITAT, VISAKHAPATNAM BENCH 5 GUARD FILE