TEACHERS CO-OPERATIVE SOCIETY LIMITED,VITTAL vs. INCOME TAX OFFICER, WARD-2(5), MANGALORE

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC, Delhi dated 04.11.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1082276544(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the A.Y.2017-18.

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 2 of 27 tax Act, 1961. The impugned appellate order, to that extent, is bad in law and liable to be set aside with a direction to decide the said ground on merits.

- Tax effect : Rs.77,45,938/-

- Tax effect Rs.35,63,277/-

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ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 12 of 27 3.1 We have heard both the parties on admission of additional grounds. The Lucknow bench of the Hon’ble Allahabad High Court in the case of CIT Vs. Sahara India (2012) 347 ITR 331 held that a legal issue can be raised at any stage but there shall be good reason for admitting the additional ground.In our Opinion all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of the adjudication of above grounds. Further we are also of the opinion that the additional grounds raised in the present case are purely legal in nature & therefore these are critical for a fair adjudication of the matter. The Hon’ble Madras High Court in the case of CIT Vs Indian Bank (2015) 230 Taxman 635 (Madras) held that Rule 11 of the I.T. Rules makes it clear that the assessee has the right to raise additional grounds and if the same is beneficial to the assessee, the same should be considered by the Tribunal.

3.2 Further, the Hon’ble Karnataka High Court in the case of Gundathur Thimmappa & Sons vs. CIT, Mysore, reported in (1968) 70 ITR 70 held that when the point raised by the assessee is a point which went to the root of the matter and affected not merely his liability to pay tax but also jurisdiction of the Tribunals and Authorities themselves to subject the amount concerned to tax, the Appellate Tribunal had the discretion to permit point of law to be raised for the first time in appeal because the question went to the root of the case. The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 held that undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Accordingly, we are inclined to

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 13 of 27 admit the additional legal grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and these are critical for a fair adjudication of the matter.

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 14 of 27 marketing of agricultural produces grown by its members. The assessee society also accepts deposits from its members and provides credit facility to its members, runs kirana stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods carriage, etc. The ld. CIT(A)/NFAC by relying on the decision of Hon’ble Karnataka High Court in PCIT, Hubballi Vs. Totgars Co-operative Sales Society reported in 83 taxmann.com 140 (Karnataka) held that even interest income from deposits with banks including co-operative banks are not eligible for deduction u/s 80P of the Act. The nature and character of passive interest income from bank deposits does not change merely because deposits are made with co-operative banks rather than commercial banks.

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 15 of 27 100067, 100068 and 100051-100054 of 2016) delivered on 16.06.2017. The assessee has also filed a written submission in a tabular form, which are reproduced below for ease of reference and convenience:

Sl.No. Issue Amount 1 Deduction u/s 80P(2)(a)(i) – Rs.1,68,38,528/- Disallowance on alleged violation of mutuality/nominal member status; AOP treatment – Additional Ground No.1 2 Interest income on mandatory Rs.77,46,040/- KCS Act reserve deposits with (included above) SCDCC Bank – Eligibility under section 80P(2)(a)(i) or, in the alternative, section 56 r.w.s. 57 – Additional grounds Nos.2 and 3

8.1. The ld. A.R. for the assessee, in his written submissions with regard to issue no.1 i.e. principle of mutuality, submitted as follows:

(a) Jurisdictional Error (Section 250(6)): The learned CIT(A) did not pass a speaking order on the mutuality/nominal member issue despite it being a specific ground of appeal. This violates section 250(6) of the Act. AjjiBasha vs. CIT(2019) 111 taxmann.com 348 (Madras HC); ACITvs. Pahar't Mata Sahkari A was Samiti (2024) 162 taxmann.com 320 (Lucknow-Trib.)

(b) AOP Treatment Unsustainable: A registered co operative society cannot be treated as an AOP so as to deny deduction under section SOP. ITO vs. Presbyterian Church Co. Operating Credit & Thrift Society (2024) 163 taxmann.com 1070 (Jaipur-Trib.)[Para 9]

(c) Nominal Members are 'Members' Under the KCS Act: Section 2(f) of the KCS Act expressly defines 'member' to include nominal and associate members. Section 18 of the KCS Act

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 16 of 27 authorises their admission. Differential rights are a lawful statutory feature. (d) Mavilayi SC (2021) 431 ITR 1 — Binding Five Judge Bench: [Para 46]: 'Nominal members are members as defined under the Kerala Act. Loans given to such nominal members would qualify for deduction u/s 80P(2)(a)(i).' [Para 28]: Term 'members' must be understood as per the relevant State Act. [Para 45]: Section SOP is a benevolent provision — to be read liberally. (e) IT AT Bangalore — KCS Act Directly Covered: Sahakara Nagar Credit Co op Society (2025) 175 taxmann.com 77 (Bangalore) [Para 26.1]: KCS Act society with nominal members is eligible for 80P(2)(a)(i) of the Act. Citizen Co op Society is distinguished — it arose under AP MACSA which has no provision for nominal members. (f) Citizen Co op Society Distinguishable: Arose under AP MACSA. (no nominal members allowed). Society dealt with general public; depositors and borrowers were distinct; operated in violation of governing Act. None of these facts apply in the present case. Case Citation Short Ratio Mavilayi Service Co- (2021)431 ITR 1 Nominal members are op Bank Ltd. (SC) (SC) members under State Act; 80P(2)(a)(i) eligible; benevolent provision; Paras 46, 28, 45

ITO vs. Sahakara (2025) 175 KCS Act society with Nagar Credit Co op taxmann.com 77 nominal members eligible; Society (Bangalore) Citizen Co- op Society distinguished (AP MACSA has no nominal members); Para 26.1 YedapadavuVyvasaya (2025) 180 KCS Act society SahakaraSangha taxmann.com 332 transacting with nominal (Bangalore) members entitled to 80P(2)(a)(i); Paras 11, 15

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 17 of 27 SRCC Society Ltd. (2025) 173 KCS Act s.2(f) definition of (Bangalore) taxmann.com 188 'member' includes nominal members; 80P(2)(a)(i) eligible; Para 9

PCIT vs. Sri Laxmi (2022)138 Loans to nominal Venkatesh Credit Co taxmann.com 377 members qualify under Op. (Karnataka HC) 80P(2)(a)(i) per Mavilayi; Paras 13-16 ACIT vs. Pahari Mata (2024) 162 CIT(A) must pass speaking SahkariAwasSamiti taxmann.com 320 order on merits on all (Lucknow) grounds; non adjudication is jurisdictional error; Para 8 AjjiBasha vs. CIT (2019)111 Single line finding that (Madras HC) taxmann.com 348 AO order is self-speaking is unsustainable; CIT(A) must pass reasoned order; Paras 6-7

8.2 Further, with regard to the issue no.2, i.e. interest on mandatory deposits, the ld. A.R. for the assessee submitted as follows:

(a) Mandatory Statutory Reserves — Not Idle Surplus: Deposits of Rs. 7,20,28,1167 represent reserves mandated under Section 57 (25% of net surplus as statutory reserve), Section 58 (approved institutions only) of the KCS Act and Rule 28 of the KCS Rules, 1960 (SLR/CRR equivalent liquid resources). Not voluntary. Not idle.

(b)Totgars Factually Distinguishable: Totgars was a marketing society retaining voluntary sale proceeds in scheduled banks — no statutory compulsion. Present case = credit society + statutorycompulsionunder KCS Act + no discretion in choice of depository + mandatory condition to carry on credit business.

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 18 of 27 (c)Mavilayi Nexus Test: 'Attributable to' is wider than 'derived from.' Mandatory reserves are integral to the credit business cycle. The nexus is direct, statutory and inextricable. (d) Primary Claim — Section 80P(2)(a)(i): Four decisions of this Hon'ble Tribunal's Bangalore Bench in 2025 directly hold that interest on KCS Act mandatory reserve deposits under Sections 57, 58 and Rule 28 is eligible for deduction under section 80P(2)(a)(i). (e) Alternative —Section 56 r.w.s. 57: If held taxable under section 56, only net income after deduction of cost of funds (interest paid to members on their deposits mandatorily placed with SCDCC Bank under section 58 of the KCS Act) and proportionate administrative expenses is assessable under section 57 of the Act. Case Citation Short Katio ITO vs. (2025) 176 Interest on statutory GayatriPattinaSouhar taxmann.com deposits/fluid resources daSahakari 897 under KCS Act ss.57, 58 (Bangalore) + Rule 28 = business income; legal compulsion, not voluntary ITO vs. Nagini Co-op (2025)173 'If no statutory Credit Society taxmann.com requirement, would not (Bangalore) 518 have deposited'; KCS Act mandated deposits = 80P(2)(a)(i) eligible ITO vs. SRCC Society (2025) 173 Deposits with District Co Ltd. (Bangalore) taxmann.com op Banks under KCS Act 188 s.57(2) = operational income ITO vs. (2026)184 Interest on UdayaSouharda Co-op taxmann.com statutory/mandatory Society (Bangalore) 527 deposits eligible; surplus funds distinguished

PCIT vs. Sahyadri Co- (2024) 166 Deposit mandated by op Credit Society taxmann.com regulatory statute = (Kerala HC) 445 enhancement of profits from principal activity; character of income unchanged

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 19 of 27 ITO vs. Totgars Co-op (2015)58 If taxed u/s 56, only net Sale Society taxmann.com 35 income taxable; (Karnataka HC) proportionate cost of funds deductible u/s 57

8.3 In view of the aforesaid submissions, the ld. A.R. of the assessee, requested to allow the appeal and prayed to direct the AO to delete the entire addition of Rs. 1,68,38,528/- .

“9. We have heard the rival submissions and perused the materials available on record. Undisputedly, in the present case, the assessee had claimed deduction u/s 80P(2)(a)(i) of the Act while filing the return of income on the ground that the interest income earned from the District Central Co-operative Bank, Hassan were out of the amount which was used by the assessee for providing credit facilities to its members and

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 20 of 27 therefore, the said interest amount is attributable to the credit facilities provided by the assessee and forms part of profit & gains of business.

9.1 Coming to the first contention of the A.O. that as the assessee is in receipt of fee of Rs.900/- from nominal members and therefore, the principle of mutuality gets defeated. The main contentions of the AO is that the assessee is providing credit facility to two categories of members i.e. (i) regular members & (ii) nominal members. The powers and the privileges of the permanent members and the nominal members are diverse and not identical. The ld. A.O. held that the principle of mutuality gets defeated as two classes of members with distinguishing characteristics are found operational in which one category of nominal members contributes and other category of permanent/regular members benefits. The AO relied upon the decision of Hon’ble Supreme Court in the case of M/s. Citizen Co-operative Society Ltd. Vs. ACIT in Civil appeal no.10245 of 2017 dated 08.08.2017. We are of the considered opinion that the judgment of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd v. CIT, Calicut reported in 431 ITR 1 (SC) clearly supports the case of the assessee and the mere presence of nominal/associate members cannot be a ground to deny the deduction claimed by the assessee. The relevant paragraph of the judgment is reproduced below for ease of reference and convenience:-

“45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co- operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word "agriculture" into Section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co- operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, 'nominal members' are 'members' as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions' Federation Ltd., Lucknow v. Commissioner of Income Tax, Lucknow-I [1997] 11 SCC 287 referred to section 80P of the IT Act and then held:

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"8. The expression "members" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in Section 80-P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression "members" in Section 80-P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: "2. (n) 'Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty;"" Considering the definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i).”

We are also of the considered opinion that the expression “Member” is not defined in the Income Tax Act. Therefore, it has to be construed in the context of provision of law enacted under the State Legislature. The definition of Member given u/s 2 (f) of the Karnataka Co-operative Societies Act, 1959 also includes nominal and associate member. The Income Tax Act has not drawn any distinction between regular member and nominal or associate member. Therefore, the transaction with nominal or associate member cannot be considered as the one with non-members or public and the assessee shall be given benefit of section 80P of the Act as held by the Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. (supra) and accordingly we held that the AO is not justified in not granting the deduction u/s 80P(2)(a)(i) of the Act by saying that the concept of principle of mutuality is defeated.

9.2 Now with regard to the contention of the assessee that the entire interest earned from the Co-operative Banks is attributable to the business of the assessee, we are of the considered opinion that under the identical issue, the coordinate bench of this Tribunal very recently in the case of Sri Kengal Credit Co-operative Society Limited v. ITO in ITA Nos. 238 & 331/Bang/2026 dated 04/08/2026 has held as under:-

“6.3 We note that primary issue in dispute pertains to the eligibility of deduction u/s 80P(2)(a)(i) of the Act in respect of interest income earned from deposit made with co- operative banks and/or district co-operative banks/Scheduled banks. Thus, the crux of the matter is whether such interest income is to be considered as “business income” eligible

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 22 of 27 for deduction u/s 80P(2)(a)(i) of the Act or not? We are of the considered opinion that the assessee is a co-operative society providing credit facilities to its members. It is not carrying out any other business. The Income earned by the assessee by providing credit facilities to its members was only deposited in banks for a short duration which earned interest. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. In our opinion, since the interest on deposits in bank was amount of profits and gains attributable to activity of carrying on business of providing credit facilities to its members by the assessee-society, we find that interest income is attributable to the profits and gains of business and therefore, the interest income derived from the deposits made with the banks are entitled for deductions u/s 80P(2)(a)(i) of the Act. In holding so, we also draw our support and guidance from the judgment of the Hon’ble Supreme Court reported in 113 ITR 84 in the case of Cambay Electrical Supply Industrial Co. Ltd. Vs. CIT which has considered the term “attributable” and held as follows:

"As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business" of the specific industry (here generation and distribution of society) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from" been used, it could have with some force been contented that a balance charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General, it has used the expression "derived from", as for instance, in Section 80J. In our view, since the expression of wider import, namely "attributable to" has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity"

6.4 Further, the Hon’ble High Court of Karnataka in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income-tax officer Ward-V, Tumkur reported in [2015] 230 Taxman 309 had also held as under-

“7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v.CIT [1978] 113 ITR 84 (SC) as under:

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 23 of 27 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor- General relied, it will be pertinent to observe that the legislature, has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression ''derived from", as, for instance, in section-80J. In our view, since the expression of wider import, namely, "attributable to'', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.'

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 24 of 27 takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220 In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside….”

6.5 Further, the Hon’ble High Court of Karnataka in the case of Guttigedarara Credit Co-operative Society Ltd. v. Income-tax Officer, Ward 2(2), Mysore reported in (2015) 377 ITR 464 : [2016] 234 Taxman 476 had also held as under-

'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor- General relied, it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor- General, it has used the expression "derived from", as, for instance, in section 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.'

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 25 of 27 11. In this context when we look at the judgment of the Apex Court in Totgars Co- operative Sale Society's case (supra), on which reliance is placed, the Supreme Court was dealing with a case where the assessee/Co-operative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security.

Such an amount which was retained by the assessee-Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law.

6.6 Again the Hon’ble jurisdictional High Court of Karnataka in the case of Lalitamba Pattina Souharda sahakari Niyamita v. ITO reported in (Karn-HC) : (2019) 307 CTR 770 by following the case of Tumkur Merchants Souharda Credit Cooperative Ltd. v. Income-tax officer Ward-V, Tumkur (cited supra) has held as under:-

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 26 of 27 Tribunal proceeded to hold that the Commissioner (Appeals) has considered the judgment of Tumkur Merchants Souharda Credit Co-operative Ltd., supra as well as M/s. Totgar's Co-operative Sale Society Ltd., supra and given the benefit of deduction under section 80P on the interest or dividend received in respect of income by way of deposits with the Co-operative Banks from its investment. The Tribunal proceeded to consider the deduction given under section 80P(2)(d) of the Act as the deduction under section 80P(2)(a)(i) of the Act or in other words deduction given under section 80P(2)(d) of the Act would not further entitle the appellant/assessee to claim deduction under section 80P(2)(a)(i) of the Act. These two provisions being entirely different and distinct, the Tribunal ought to have examined the applicability of section 80P(2)(a)(i) of the Act in the facts and circumstances of the case. Deduction given under section 80P(2)(d) of the Act would not disentitle the assessee to claim deduction under section 80P(2)(a)(i) of the Act. Even assuming as submitted by the learned counsel for the assessee, M/s. Totgar's Co- operative Sale Society Ltd., supra is applicable to the facts and circumstances of the present case, it was obligatory on the part of the Tribunal being a last fact finding authority to examine the factual aspect in respect of the proportionate costs and administration expenses to be incurred by the appellant regarding the interest earned under section 56 of the Act and the availability of deduction under section 57 of the Act to the assessee. This exercise also not being done by the Tribunal merely upholding the order of the Commissioner of Income Tax as well as the assessing officer is wholly unsustainable.

6.7 Respectfully, following the above decisions of the Hon’ble jurisdictional High Court of Karnataka which has consistently held that the interest earned by the society in investing in the Banks is attributable to the activity of carrying on business in the banking or providing credit facilities to its members by a Co-operative Society and is liable to be deducted from the gross total income u/s 80P(2)(a)(i) of the Act. In view of the above, we have no hesitation to hold that as in the present case the assessee had claimed the entire interest income u/s 80P(2)(a)(i) of the Act & thus the entire interest income earned are attributable to the business of providing credit facilities to its members. Accordingly, we direct the AO to allow the same u/s 80P(2)(a)(i) of the Act as claimed by the assessee.

9.3 Respectfully, following the above decision of the coordinate bench of this Tribunal we held that the interest earned by the society in investing in the Co-operative Banks/commercial banks is attributable to the activity of carrying on business in the banking or providing credit facilities to its members by a Co-operative Society and is liable to be deducted from the gross total income u/s 80P(2)(a)(i) of the Act. In view of the

ITA No.3063/Bang/2025 Teachers Co-operative Society Ltd., Mangaluru Page 27 of 27 above, we have no hesitation to hold that as in the present case the assessee had claimed the entire interest income u/s 80P(2)(a)(i) of the Act & thus the entire interest income earned are attributable to the business of providing credit facilities to its members. Accordingly, we direct the AO to allow the same u/s 80P(2)(a)(i) of the Act as claimed by the assessee.”

10.1 In view of the above & respectfully following the decision of the co-ordinate bench of this Tribunal, we held that the entire interest income earned by the assessee society are attributable to the business of providing credit facilities to its members. Accordingly, we direct the AO to allow the same u/s 80P(2)(a)(i) of the Act as claimed by the assessee.

Sd/- Sd/- (Balakrishnan S.) (Keshav Dubey) Accountant Member Judicial Member

Bangalore, Dated 6th Oct, 2026. VG/SPS

Copy to:

Asst. Registrar, ITAT, Bangalore.

P G Digitally signed by P G RAJANI RAJANI Date: 2026.10.15 12:00:39 +05'30'