THE VIJAPUR TALUKA CO-OPERATIVE PURCHASE AND SALE UNION LTD.,VIJAPUR vs. INCOME TAX OFFICER, WARD-1, PATAN, PATAN

ITA 925/AHD/2026Status: DisposedITAT Ahmedabad05 October 2026AY 2017-189 pages
AI SummaryAllowed

What were the facts?

The assessee, The Vijapur Taluka Co-operative Purchase and Sale Union Ltd., a co-operative society, filed an appeal against the order of the Addl/Joint Commissioner of Income Tax (Appeals)-2, Pune, for Assessment Year 2017-18. The assessee had earned interest income of Rs. 14,84,685/- from co-operative societies, including Mehsana District Central Co-operative Bank Ltd., and Rs. 6,21,202/- as dividend from other co-operative societies. The Assessing Officer rejected the claim for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, holding that interest earned on deposits in a co-operative bank is not eligible for deduction. The Assessing Officer relied on the Gujarat High Court's decision in State Bank of India and the Karnataka High Court's decision in Totgar's Co-operative Sales Society.

What did the Tribunal hold?

The Tribunal allowed the appeal of the assessee. It held that the interest earned by the assessee from the co-operative bank is eligible for deduction under Section 80P(2)(d) of the Act. The Tribunal relied on the consistent view of the jurisdictional Gujarat High Court in the cases of State Bank of India and PCIT vs. Ashwinkumar Arban Co-operative Society Ltd. These decisions held that Section 80P(2)(d) is applicable to interest earned by co-operative societies from investments made with co-operative banks, and Section 80P(4) does not preclude such deductions. The Tribunal distinguished the Karnataka High Court's decision in Totgar's Co-operative Sales Society, noting that the Gujarat High Court had considered and differed from it. The Tribunal clarified that while interest and dividend from entities that are not co-operative societies would not be eligible for deduction, the interest earned from co-operative banks and societies is deductible. The disallowance of Rs. 68,33,529/- was directed to be deleted. However, the Tribunal noted that interest received from the State Bank of India and Sardar Sarovar Narmada Nigam Ltd., not being co-operative societies, would not be eligible for deduction under Section 80P(2)(d). The Assessing Officer was directed to verify and allow deductions only on amounts received from co-operative banks or societies.

What were the issues?

1. Whether the interest income earned by the assessee, a co-operative society, from deposits made with a co-operative bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, despite the provisions of Section 80P(4) of the Act. Assessee's contention: The assessee argued that the interest earned from co-operative banks is eligible for deduction under Section 80P(2)(d). They relied on the Gujarat High Court's decisions in State Bank of India vs. CIT and PCIT vs. Ashwinkumar Arban Co-operative Society Ltd., which held that interest income earned by a co-operative society on its investment with a co-operative bank is eligible for deduction under Section 80P(2)(d), and Section 80P(4) does not act as a bar. Revenue's contention: The revenue contended that interest earned on deposits in a co-operative bank is not eligible for deduction under Section 80P(2)(d), citing the Karnataka High Court's decision in Pr. Commissioner of Income Tax vs. The Totgars Co operative Sale Society, Sirsi, which held that such interest income is taxable under Section 56 and not deductible under Section 80P(2)(d). The revenue also pointed to the Supreme Court's decision in Totgar's Co-operative Sale Society Limited vs. Income Tax Officer.

Which sections of the Income-tax Act were involved?

Section 80P(2)(d),Section 80P(4),Section 56,Section 28,Section 194A(3)(v)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH

Before: Shri Tapas Ram Misra & Shri R. Govindarajan

For Appellant: Shri Rushin Patel, A.R
For Respondent: Shri Krishan Kumar, Sr. D.R

PER TAPAS RAM MISRA, JUDICIAL MEMBER:

The present appeal has been filed by the assessee against the order of the Ld. Addl/Joint Commissioner of Income Tax (Appeals)-2, Pune, (hereinafter referred to as “CIT(A)”), dated 09.02.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18. 2. The appellant is a Co-operative Society registered under the Co-operative Societies Act, engaged in activities as laid down in I.T.A No. 925/Ahd/2026 A.Y. 2017-18 The Vijapur Taluka Co-

The order continues below.

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