AAYKAR KARMACHARI SAHAKARI PATSANSTHA MARYADIT,NASHIK vs. ITO, NASHIK

ITA 3383/PUN/2026Status: DisposedITAT Pune29 September 2026AY 2017-187 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the interest income earned by the assessee, a co-operative credit society, from deposits made with the State Bank of India is eligible for deduction under Section 80P(2)(a) of the Income Tax Act, 1961. The Tribunal reasoned that the interest income is attributable to the assessee's primary business of providing credit facilities to its members. The Tribunal distinguished the decision in Totgars' Co-operative Sale Society Ltd. by noting that in that case, the income was derived from marketing agricultural produce, and the business activity other than marketing resulted in a net loss, making the interest income not directly attributable to the core business. However, in the present case, the interest income was earned from surplus funds generated from the core business of providing credit. The Tribunal relied on the decisions of the Hon'ble Supreme Court in CIT vs. Karnataka State Co-operative Apex Bank, the Hon'ble High Courts of Andhra Pradesh and Telangana in Vavveru Co-operative Rural Bank Ltd., and Kerala in Pr. CIT Vs. Sahyadri Co-operative Credit Society Ltd., and the Telangana High Court in Ismailia Co-operative Credit Society Ltd. The AO was directed to delete the addition. No issue was expressly left undecided.

What were the facts?

The assessee, Aaykar Karmchari Sahkari Patsasntha Maryadit, a co-operative credit society, filed its return for Assessment Year 2017-18 declaring Nil income after claiming deduction under Section 80P(2)(a) of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed a deduction of Rs. 1,77,017/- representing interest income from deposits with the State Bank of India, following the Supreme Court's decision in Totgars' Co-operative Sale Society Ltd. The Commissioner of Income Tax (Appeals) upheld the AO's order. The assessee appealed to the Income Tax Appellate Tribunal (ITAT). The assessee is engaged in providing credit facilities and accepting deposits from its members.

What were the issues?

1. Whether the interest income of Rs. 1,77,017/- earned by the assessee, a co-operative credit society, from deposits with the State Bank of India is eligible for deduction under Section 80P(2)(a) of the Income Tax Act, 1961, as income attributable to its business of providing credit facilities to its members. Assessee's Contention: The assessee argued that the interest income is derived from its business activities and is eligible for deduction under Section 80P(2)(a). The assessee relied on various High Court decisions, including Vavveru Co-operative Rural Bank Ltd. and Pr. CIT Vs. Sahyadri Co-operative Credit Society Ltd., which distinguished the Totgars' case and allowed similar deductions. Revenue's Contention: The Revenue relied on the decision of the Hon'ble Supreme Court in Totgars' Co-operative Sale Society Ltd. Vs. ITO to disallow the deduction, holding that interest income from deposits is not eligible for deduction under Section 80P(2)(a).

Which sections of the Income-tax Act were involved?

Section 80P(2)(a),Section 250,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI Dr. DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Pramod S Shingte
For Respondent: Smt. Sonal L Sonkavde, Addl. CIT

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2017-18 on 22.05.2026, emanating from the Assessment Order u/s 143(3) of the Act, dated 11.09.2019. Findings and Analysis :

2.

We have heard both the parties and perused the records. In this case, the Assessing Officer (AO) observed that the assessee has received interest amount of Rs.1,77,017/- from deposits kept with State Bank of India. The AO held that the said amount is not eligible for deduction u/s 80P(2)(a) of the Act by following

The order continues below.

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