LOKMANYA NAGARI SAHAKARI PATH SANSTHA MARYADIT YELUR,KOLHAPUR vs. ITO WARD 1(1), KOLHAPUR, KOLHAPUR

ITA 3409/PUN/2026Status: DisposedITAT Pune06 October 2026AY 2016-178 pages
AI SummaryAllowed

What were the facts?

The assessee, Lokmanya Nagari Sahakari Path Sanstha Maryadit Yelur, is a cooperative credit society. The assessment year in question is 2016-17. The appeal is against the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi, which confirmed an addition of Rs. 1,04,662/- made by the Income Tax Officer, Assessment Unit. This addition was on account of interest income earned from a bank deposit with RBL Bank. The Assessing Officer held that this interest income did not qualify for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961, and treated it as income from other sources. The assessee had filed a return of income in response to a notice under Section 148, following a reassessment proceeding initiated under Section 147 read with Section 144B.

What did the Tribunal hold?

The Tribunal held that the interest income of Rs. 1,04,662/- earned by the assessee, a cooperative credit society engaged in providing credit facilities to its members, from deposits with a bank is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Tribunal relied on decisions of the Hon'ble Supreme Court in CIT vs. Karnataka State Co-operative Apex Bank and the Hon'ble High Courts of Andhra Pradesh and Telangana in Vavveru Co-operative Rural Bank Ltd., Kerala in Pr.CIT Vs. Sahyadri Co-operative Credit Society Ltd., and Telangana in Ismailia Co-operative Credit Society Ltd. These judgments establish that interest earned by cooperative credit societies from funds deposited with banks, when such deposits are made out of surplus funds generated from their primary business of providing credit facilities, is considered business income attributable to their core activities and thus eligible for deduction under Section 80P(2)(a)(i). The Tribunal found the facts of the present case to be identical to those in the cited precedents. Consequently, the addition made by the Assessing Officer was directed to be deleted. The issue regarding proportionate deduction for interest paid on deposits and the jurisdiction for reopening were implicitly decided in favour of the assessee by allowing the deduction and directing deletion of the addition.

What were the issues?

1. Whether the interest income of Rs. 1,04,662/- earned on deposits with RBL Bank qualifies for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961, as the assessee society is engaged in the business of providing credit facilities to its members? The assessee contends that its entire income is eligible for deduction under Section 80P(2)(a)(i) as it carries on the business of banking or providing credit facilities. The revenue, through the Assessing Officer and confirmed by the Ld. CIT(A), argued that this specific interest income is not derived from providing credit facilities to members or from deposits with cooperative societies, hence not eligible for deduction. 2. If the interest on deposits is treated as income from other sources, should the Assessing Officer be directed to allow proportionate deduction for interest paid on deposits accepted by the cooperative credit society? The assessee argues that the interest paid on deposits from members is greater than the interest earned on bank deposits, resulting in no profit on this specific interest income, and the bank deposit was only to comply with statutory liquidity ratio requirements. 3. Whether the Assessing Officer erred in assuming jurisdiction to make the addition of ₹1,04,662/- when the primary basis for reopening under Section 147, which was alleged escaped income of ₹64,99,250/- from cash deposits, ultimately led to no addition? The assessee relies on the decision of the Hon'ble Bombay High Court in CIT v. Jet Airways (I) Ltd. for the proposition that reassessment beyond jurisdiction is invalid.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 56,Section 147,Section 144B,Section 250

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 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 2016-17 on 13.07.2026, emanating from the Assessment Order u/s 147 r.w.s 144B of the Act, dated 16.03.2024. 2. The assessee has raised the following grounds of appeal :

“1. On the facts and in the circumstances of the case and in law, Commissioner of Income Tax (Appeals), NATIONAL FACELESS APPEAL CENTRE (NFAC), Delhi, erred in confirming addition of Rs. 1,04,662/- made by the Income Tax Officer, Assessment Unit, on account of in

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 80P(2)(a)(i)

All 2,331 judgments and leading authorities on Section 80P(2)(a)(i) →

Recent GST High Court judgments

Search GST case law →