SHRI NA vs. ARI KHEDUT SAHKARI SOCIETY LTD,NAVSARIVS.ASSISTANT COMMISSIONER OF INCOME TAX, NAVSARI, NAVSARI CIRCLE, NAVSARI

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ITA 136/SRT/2026Status: DisposedITAT Surat19 June 2026AY 2015-20165 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest income earned by a cooperative society on its investments held with another cooperative bank is eligible for deduction under Section 80P(2)(d). The disallowance by the lower authorities was deemed incorrect.

What were the facts?

The assessee, a cooperative society, claimed deduction under Section 80P for income earned from interest and dividends. The Assessing Officer and CIT(A) disallowed a significant portion of this claim, arguing a breach of mutuality and misapplication of the law.

What were the issues?

Whether interest and dividend income earned by a cooperative society from a cooperative bank is eligible for deduction under Section 80P(2)(d) and if there was a breach of mutuality.

Which sections of the Income-tax Act were involved?

Section 80P,Section 10(34)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT ‘SMC’ BENCH, SURAT

For Appellant: Shri Darshit J Naik, CA, Shri Ajay Uke, Sr. DR
Pronounced: 19.06.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT ‘SMC’ BENCH, SURAT (HYBRID HEARING) BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.136/SRT/2026 (Assessment Year: 2015-16) Shri Navsari Khedut Sahkari Society Assistant Commissioner of Income Ltd., Tax, Navsari Maneklal Road, Vs. Room No.302, Income Tax Office, Navsari, Charpool, Gujarat – 396445 Navsari-396445 PAN: AAAJS0533J (Appellant) : (Respondent) Assessee by : Shri Darshit J Naik, CA : Shri Ajay Uke, Sr. DR Respondent by : 23.04.2026 Date of Hearing Date of Pronouncement : 19.06.2026 O R D E R PER SUCHITRA KAMBLE, J M: The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), ADDL/JCIT(A) [in short “CIT(A)”], Jaipur dated 23.12.2025 for the Assessment Year (in short “AY”) 2015-16.

2.

The assessee has raised the following grounds of appeal: “(1) The Ld. CIT(A) has erred, in Law and on Facts, in assessing total income of your appellant at Rs.26,37,010/- as against returned income of Rs.NIL. 2) The Ld. CIT(A) has erred in Law and on Facts, in disallowing the claim of deduction of Rs.26,27,414/- u/s 80P based on incorrect interpretation of facts and law on the subject. 3) The Ld. CIT(A) erred in holding that there was a breach in the principle of mutuality by the Appellant co-operative society and consequently, erred in disallowing the deduction u/s 80P.

4) The Ld. CIT(A) has erred in Law and on Facts, in making disallowance of Rs.26.27,414/- on the basis of Supreme Court's decision in case of Totagars Coop w.r.t. provisions of section 80P(2)(a)(i) without appreciating the fact that appellant had claimed deduction under section 80P(2)(d) of the 1.T. Act, 1961. 5) The Learned Assessing Officer has erred in Law and on Facts, in disallowing claim of exemption of dividend claimed U/s. 10(34) of Rs.9,600/- received from co-operative bank and adding back to income without appreciating the fact that the same was otherwise allowable U/s. 80P(2)(d) and ought not to have been added to total income of your appellant without giving proper deduction U/s. 80P(2)(d). 6) The above Grounds of Appeal are without prejudice to and are independent of each other. (7) Your Appellant craves, leave to amend, alter, delete and/or add to foregoing Grounds of Appeal any time before the appeal is decided.” 3. The assessee is a cop-operative society engaged in the activities of Rice Mill Operations, trading in Oil, Grams, Pulses etc. The assessee filed its return of income for the A.Y. 2015-16 on 23.09.2015 by showing total income of Rs. 5,46,030/- after claiming deduction u/s 80P of the Income Tax Act, 1061 of Rs. 30,60,277/-. Thereafter, the assessee filed its revised return of income on 28.03.2017 by showing total income of Rs. Nil after claiming deduction u/s 80P of the Income Tax Act of Rs. 38,94,328/-. The case was selected for scrutiny by issuing a notice under Section 143(2) of the Income Tax Act, 1961 on 21.09.2016. The Assessing Officer issued various statutory notices from time to time. In response to various notices issued, the Authorized representative of the assessee attended the assessment proceedings and submitted the details. The Assessing Officer observed that the Assessee claimed deduction of Rs. 38,94,328/- under various sub-sections of Section 80P of the Income Tax Act, 1961 in respect of different activities being carried out by it. The details of various deductions claimed by the assessee in the computation of income is as under:

Sr. Nature of activity Section under Amount of No. which deduction deduction is claimed 1 Agriculture related activity 80P(2)(iv) 4,32,863 2 Interest /dividend from 80P(2)(d) 26,27,414 other co-operative society 3 Income from warehousing 80P(2)(e) 9,00,063 activity 4 Other activity – (deduction 80P(2)(c)(ii) 50,000 limited to Rs. 50,000/-) Total 40,10,340

3.1 The Assessing Officer observed from the details on record that during the year the assessee has received interest and dividend income from different entities including co-operative bank, private bank, company deposit, late payment of interest from clients etc. As per the computation of income the assessee has shown total interest of Rs. 33,58,976/- to have been received from various banks. However, during the cour4se of scrutiny assessment proceedings the assessee submitted bifurcation of interest income as per the chart given below: Nature of Income Amount Received from Interest income 26,27,414 Valsad District Central Co- operative Bank Limited Interest income 46,640 From IDBI Bank Interest income 2,07,011 Late payment interest received from clients Interest income 16,790 Interest on deposits from Ultratech Cement Interest income 70,534 Bhandar Vibhag Grahak Interest Interest income 3,43,220 Internal transaction Interest income 47,367 Bhandar Vibhag Total Interest 33,58,976 3.2 Further, bifurcation of dividend income is as per the chart given below: Dividend income 18,435 Other co-operative societies Dividend income 525 Gujarat Narmada valley Fertilizers & Chemicals Ltd. Dividend income 9600 Valsad District Central Co- operative Bank Limited Total dividend 28,560

3.3 After going through the assessee’s reply the Assessing Officer made addition of Rs. 26,83,654/- (Rs.26,27,414/-+Rs.46,640/-+Rs.9,600/-) and held that the same does not eligible for deduction u/s 80P of the Act.

4.

Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. AR submitted that the assessee society received the interest and the dividend from the Valsad District Co-operative Bank only and the Hon’ble jurisdictional High Court in case of Surat Vankar Sahkari Sangh Vs. ACIT (2016) 72 taxmann.com 169 (Gujarat) has categorically held that interest income earned by a cooperative Society on its investments held with the co-operative bank would be eligible for claim of deduction u/s 80P(2)(d) of the Act. The Ld. AR relied upon various cases laws of jurisdictional High Court as well as various other High Court.

6.

The Ld. DR relied upon the assessment order and the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee society is registered society under Co-operative Society Act and is providing credit facility to its members only. Besides this, the assessee society is earning interest income from the Valsad District Co-operative Bank which is also registered under Co- operative Society Act. The interest income earned from Co-operative Society cannot be equated with the interest earned from Commercial Bank. The Hon’ble Jurisdictional High Court in various decisions including that of Surat Vankar Sahakari Sangh (Supra) held the same. Therefore, the Assessing Officer as well as CIT(A) was not right in disallowing the deduction under Section 80P(2)(d) of the Act to the assessee society.

8.

In result, appeal of the assessee is allowed.

Order pronounced in the open court on 19.06.2026

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 19.06.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order,

Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

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