MANGALORE TRAWL BOAT FISHERMANS PRIMARY CO-OPERATIVE SOCIETY LIMITED,MANGALORE vs. INCOME-TAX OFFICER, WARD - 1(1), MANGALORE, MANGALORE

ITA 1696/BANG/2026Status: DisposedITAT Bangalore08 October 20268 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the interest income earned by the assessee is eligible for deduction under Section 80P(2)(a)(vii) of the Income Tax Act, 1961. The Tribunal noted that the assessee is a co-operative society established for the benefit of fishermen, and it deposited a part of its profits in banks, including co-operative and scheduled banks, pursuant to statutory requirements under the Karnataka Co-operative Societies Act. The Tribunal found that maintaining accounts with these banks is necessary for the society's day-to-day business activities. Applying the principle laid down by the jurisdictional High Court in the *Tumkur Merchants Souharda Credit Co-operative Ltd.* case, which held that interest earned from deposits is attributable to the profits and gains of the business of providing credit facilities and thus eligible for deduction under Section 80P(2)(a)(i), the Tribunal concluded that the interest income earned by the assessee is attributable to its business. The Tribunal also noted that the jurisdictional High Court in that case had differentiated the Supreme Court's judgment in *Totgars Co-operative Sales Society Ltd.*. The Tribunal further relied on a Coordinate Bench order in *Sree Cauvery Souharda Credit Sahakari Sangha Niyamitha* which followed the *Tumkur Merchants* principle. Therefore, the assessee is entitled to claim deduction under Section 80P(2)(a)(vii). The appeal is allowed.

What were the facts?

The assessee, Mangalore Trawl Boat Fishermans Primary Co-operative Society Ltd., filed its return of income for Assessment Year 2018-19. The case was selected for scrutiny. The assessee, a fisherman's co-operative society, earned income from house property, interest, and business. It claimed a deduction of Rs. 2,27,39,435/- under Section 80P(2)(a)(vii) for business income, specifically interest earned on deposits made in co-operative and nationalized banks, which it argued were necessary for compliance with the Karnataka Co-operative Societies Act and thus attributable to its business. The Assessing Officer (AO) disallowed interest income of Rs. 10,11,084/-, holding that the entities from whom interest was earned were not members, negating mutuality, and thus the interest did not arise from providing credit facilities eligible for deduction under Section 80P(2). The Commissioner (Appeals) upheld the AO's order, relying on Supreme Court judgments.

What were the issues?

1. Whether the interest income earned by the assessee on deposits made in co-operative and nationalized banks is eligible for deduction under Section 80P(2)(a)(vii) of the Income Tax Act, 1961, as income attributable to the assessee's business activities. Assessee's Contentions: - The interest income was earned from compulsory deposits made to comply with the Karnataka Co-operative Societies Act and from surplus funds, making it attributable to the assessee's business of providing credit facilities. - The AO wrongly applied the concept of mutuality. - Relied on the jurisdictional High Court's decision in *Tumkur Merchants Souharda Credit Co-operative Ltd.* (2015) 55 taxmann.com 447, which held that interest earned from surplus or statutory deposits is eligible for deduction under Section 80P(2)(a)(i) as it is derived from business. - Also relied on the Andhra Pradesh High Court judgment in *CIT vs. Andhra Pradesh State Co-operative Bank Ltd.* (2011) 12 taxmann.com 66 and a Coordinate Bench order. - Alternatively, argued for deduction under Section 80P(2)(d). - Relied on a Coordinate Bench order in *Sree Cauvery Souharda Credit Sahakari Sangha Niyamitha*. Revenue's Contentions: - There are differences between claims under Section 80P(2)(a)(i) and Section 80P(2)(a)(vii). - Relied on the proviso to Section 80P(2) and the orders of the lower authorities, arguing that the interest income is not eligible for deduction.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(vii),Section 143(2),Section 142(1),Section 80P(2),Section 80P(2)(a)(iii),Section 80P(2)(d),Section 80P(2)(a)(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI BALAKRISHNAN S. & SHRI SOUNDARARAJAN K.

PER SHRI SOUNDARARAJAN K., JUDICIAL MEMBER:

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 16/03/2026 in respect of the A.Y. 2018-19. 1 Mangalore Trawl Boat Fishermans Primary Co-operative Society Ltd.

2.

The brief facts of the case are that the assessee is a fisherman’s primary co-operative society registered under the provisions of the Karnataka Co- operative Societies A

The order continues below.

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