NAGINI COOPERATIVE CREDIT SOCIETY LIMITED,BASAVESWARA NAGAR BANGALORE vs. ITO, WARD 6(2)(1), BANGALORE, BENGALURU,

ITA 619/BANG/2026Status: DisposedITAT Bangalore28 September 2026AY 2023-2410 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Nagini Cooperative Credit Society Limited, filed an appeal for assessment year 2023-24 against an order of the National Faceless Appeal Centre, Delhi (CIT(A)). The CIT(A) had partly allowed the assessee's appeal against the assessment order passed by the National Faceless Assessment Centre (AO) under section 143(3) read with section 144B of the Income-tax Act, 1961. The assessee, a cooperative society, declared nil total income by claiming a deduction under section 80P(2)(a)(i) on its entire income. The AO noted that the income included interest of ₹76,91,299 on investments, which he proposed to disallow as it was not earned from providing credit facilities to members. The assessee contended that this interest was on statutory/reserve fund deposits and mandatory funds, and therefore eligible for deduction under section 80P(2)(a)(i).

What did the Tribunal hold?

The Tribunal held that the interest income of ₹77,31,599 is attributable to the assessee's business and therefore eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act. The Tribunal relied on the decisions of the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Co-operative Ltd. v. ITO and the Hon’ble Bombay High Court in Gateway Terminals India Private Limited v. Deputy Commissioner of Income-tax. The Karnataka High Court held that interest earned by a cooperative society engaged in providing credit facilities on funds temporarily deposited with banks is attributable to that business and deductible under section 80P, as depositing funds to earn interest does not constitute a separate business. The Tribunal distinguished the facts from the Supreme Court decision in Totgars Co-operative Sale Society Ltd. v. ITO. Consequently, Ground No. 3 was allowed, and the AO was directed to grant the deduction. Ground No. 1, being general, was dismissed. Ground No. 2 supported the finding on Ground No. 3. Ground No. 4 concerned the Supreme Court decision already considered. Ground No. 5 relied on judicial precedents covered by the High Court decision. Grounds Nos. 6 to 11 raised alternative contentions, and Grounds Nos. 12 and 13 were general, and thus these grounds were dismissed. The assessee made no claim under section 80P(2)(d), so that provision was not applicable. The issue of deduction under section 57(iii) was not explicitly decided as the primary claim under section 80P(2)(a)(i) was allowed.

What were the issues?

1. Whether the interest income of ₹77,31,599 earned by the assessee, a credit cooperative society, on statutory/reserve fund deposits and other mandatory funds is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. - Assessee's contention: The interest income pertains to mandatory deposits and funds required under the Karnataka Co-operative Societies Act, 1959, and therefore qualifies for deduction under section 80P(2)(a)(i). The assessee relied on precedents like Siddhartha Pattina Sahakari Sangha Niyamita v. ITO, Yedamangala Vyavasaya Seva Sahakari PACS Ltd. v. ITO, Shree Sharada Credit Co-operative Society Ltd. v. ITO, and M/s. Sree Maruthi Cooperative Housing Society, Bengaluru v. ITO. - Revenue's contention: The learned departmental representative strongly supported the orders of the lower authorities, implying that the interest income was not eligible for deduction under section 80P(2)(a)(i). 2. Whether the interest income is assessable under section 56 of the Income-tax Act, 1961. - Assessee's contention: The interest income cannot be treated as 'Income from Other Sources' as it forms part of the business cycle of a credit cooperative society. - Revenue's contention: Not recorded. 3. Whether the assessee is entitled to a deduction under section 80P(2)(d) of the Income-tax Act, 1961, in respect of interest earned from deposits made with cooperative banks. - Assessee's contention: This was an alternative claim that the CIT(A) failed to adjudicate. - Revenue's contention: Not recorded. 4. Whether the assessee is entitled to a deduction under section 57(iii) of the Income-tax Act, 1961, for interest paid to members and administrative expenses. - Assessee's contention: This was an alternative claim rejected by the CIT(A). - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 143(3),Section 144B,Section 250,Section 56,Section 80P(2)(d),Section 57(iii),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY

PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

1.

The assessee, Nagini Cooperative Credit Society Limited, has filed this appeal for assessment year 2023–24 against the order of the National Faceless Appeal Centre, Delhi (the learned CIT(A)). That order partly allowed the assessee’s appeal against the assessment order dated 1

The order continues below.

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