KALLAKURICHI AGRICULTURAL PRODUCERS CO-OP MARKETING SOCIETY LTD,KALLAKURICHI vs. INCOME TAX OFFICER, WARD 1, VILLUPURAM, VILLUPURAM

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ITA 3562/CHNY/2026Status: DisposedITAT Chennai13 October 2026AY 2017-186 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Villupuram District Central Co-operative Bank Ltd. (VDCCB) is a 'Co-operative Society' as defined under Section 2(19) of the Income-tax Act, 1961, as it is registered under the Tamil Nadu Co-operative Societies Act. Following the binding decisions of the Hon'ble Jurisdictional High Court in "Thorapadi Urban Co-op Credit Society Limited Vs. Income Tax Officer" and "CIT v. Salem Agricultural Producers' Co-operative Marketing Society Ltd.", the Tribunal allowed the assessee's claim for deduction of Rs. 24,38,218/- on account of interest received from VDCCB under Section 80P(2)(d). Regarding the dividend income of Rs. 2,10,765/-, the Tribunal observed from the audited financial statements that the dividend was received on investments in shares of other Co-operative Societies and was duly reflected in the balance sheet and profit and loss account. The Tribunal found that the assessee had not been given an opportunity to provide a breakup of this income, and therefore, allowed the claim for deduction of Rs. 2,10,765/-. The AO was directed to allow both claims. The Tribunal expressed displeasure at the avoidable litigation created by the authorities below for not following the jurisdictional High Court's decision.

What were the facts?

The assessee, Kallakurichi Agricultural Producers Co-Op Marketing Society Ltd., filed its return for Assessment Year 2017-18 declaring NIL income after claiming a deduction of Rs. 26,48,983/- under Section 80P of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed this entire claim, stating that the income was received from Villupuram District Central Co-operative Bank Ltd. (VDCCB), which the AO considered not to be a 'Cooperative Society'. The assessee appealed to the Ld. CIT(A), who dismissed the appeal. The assessee then filed the present appeal before the Income Tax Appellate Tribunal (ITAT). The total disputed amount is Rs. 26,48,983/-.

What were the issues?

1. Whether the Villupuram District Central Co-operative Bank Ltd. (VDCCB) is a 'Co-operative Society' for the purposes of Section 80P of the Income-tax Act, 1961, and consequently, whether the interest income of Rs. 24,38,218/- received from VDCCB is eligible for deduction under Section 80P(2)(d)? - Assessee's contention: VDCCB is a Co-operative Bank registered under the Tamil Nadu Co-operative Societies Act, and therefore, by definition under Section 2(19) of the Act, it is a 'Co-operative Society'. The assessee argued that the decision in "The Totgars Co-operative Sale Society Ltd. v. Income-tax Officer" is inapplicable as it dealt with Section 80P(2)(a)(i), not Section 80P(2)(d). The assessee also relied on the jurisdictional Madras High Court decisions in "Thorapadi Urban Co-operative Credit Society Ltd. v. Income Tax Officer" and "CIT v. Salem Agricultural Producers' Co-operative Marketing Society Ltd.", and a Tribunal decision in "M/s. Ikkaraiboluvampatti Primary Agricultural Credit Co-operative Society v. The Income Tax Officer". - Revenue's contention: Not recorded in the judgment. 2. Whether the dividend income of Rs. 2,10,765/- received on shares from co-operative institutions is eligible for deduction under Section 80P(2)(d), given the AO's disallowance on the ground of absence of documentary evidence identifying specific co-operative societies? - Assessee's contention: The AO and CIT(A) never called upon the assessee to furnish a breakup of this dividend income or questioned its nature, source, or classification. The disallowance was made without affording the assessee an opportunity to respond, violating principles of natural justice. - Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 80P,Section 2(19),Section 80P(2)(d),Section 80P(2)(a)(i),Section 250,Section 139,Section 142(1),Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: HONOURABLE GEORGE GEORGE K. & SHRI GAGAN GOYAL

Hearing: 19.08.2026Pronounced: 13.10.2026

आयकर अपीलीय अधिकरण ’सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय श्री जॉजज जॉजज के., उपाध्यक्ष एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE GEORGE GEORGE K., VICE PRESIDENT AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 3562/Chny/2026 ननिाारण वर्ा /Assessment Years: 2017-18 Kallakurichi Agricultural Producers Co- v. Income Tax Officer, Op Marketing Society Ltd., Ward-1, No.25, Nepal Street, Kallakurichi, Villupuram. Tamil Nadu-606 202. [PAN: AAAAK1847N] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. V. Meenakshi Sundar, C.A, Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr. R. Raghupathy, Addl. CIT Ld. DR सुनवाईकीतारीख/Date of Hearing : 19.08.2026 घोषणाकीतारीख /Date of Pronouncement : 13.10.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of Ld. Addl. / JCIT (A)-1 (hereinafter referred as the ‘Ld. Addl. / JCIT(A)-1’), Nagpur dated 29.04.2026 for the Assessment Year (hereinafter referred as the ‘AY’) 2017-18.

GROUDS OF APPEAL 1. The Order of the Ld. Addl./JCIT (Appeals)-1, Nagpur, dated 29.04.2026 passed under Section 250 of the Income-tax Act, 1961, is bad in law, contrary to the facts and circumstances of the case, and is liable to be quashed and set aside. 2. The Ld. First Appellate Authority erred in law and on facts in holding that the Villupuram District Central Co-operative Bank Ltd. (VDCCB) is not a Co-operative Society, and in consequently upholding the disallowance of Rs 24,38,218/-(interest received from VDCCB) under Section 80P(2)(d) of the Act, without appreciating that VDCCB is a Co-operative Bank registered under the Tamil Nadu Co-operative Societies Act. The Income-tax Act, 1961 defines 'Co-operative Society' under Section 2(19) as 'a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of co-operative societies. A Co-operative Bank registered under a State Co-operative Societies Act is therefore, by definition, a 'Co-operative Society' within the meaning of Section 2(19) of the Act,

ITA No.3562/Chny/2026 Kallakurichi Agricultural Producers Co-Op Marketing Society Ltd. 3. The Ld. First Appellate Authority gravely erred in law in relying upon the decision of the Hon'ble Supreme Court in The Totgars Co-operative Sale Society Ltd. v. Income-tax Officer [(2010) 322 ITR 283 (SC)] and the decision of the Karnataka High Court in PCIT, Hubballi v. The Totagars Co-operative Sale Society [ITA No. 100066 of 2016, dated 16.06.2017] to disallow the deduction under Section 80P(2)(d), without appreciating the following crucial distinctions: (a) The Hon'ble Supreme Court in Totgars was examining the eligibility of interest income from bank deposits under Section 80P(2)(a)(i) a provision governing Income from the business of banking or providing credit facilities to members. The Supreme Court was not called upon to and did not decide the scope or applicability of Section 80P(2)(d), which is an independent and distinct provision. The ratio of Totgars is, therefore, wholly inapplicable to a claim under Section 80P(2)(d), (b) The decision relied upon by the CIT(A) le., Karnataka High Court in PCIT, Hubballi v. The Totagars Co-operative Sale Society is in fact supporting the case of the appellant. 4 The Ld. First Appellate Authority erred in law in failing to follow the binding decisions of the Hon'ble Madras High Court the jurisdictional High Court -which are squarely applicable to the facts of the present case, and which have conclusively held in favour of the Appellant (a) In Thorapadi Urban Co-operative Credit Society Ltd. v. Income Tax Officer [TS-5813-HC- 2023(Madras)-O), the Hon'ble Madras High Court held that a Co-operative Bank registered under a State Co-operative Societies Act is a 'Co-operative Society for the purposes of Section 80P(2)(d), and that interest income derived by a co-operative society from its investments with a co-operative bank is wholly deductible. The Court also held that the law laid down by the Supreme Court in Totgars is not applicable to claims under Section 80P(2)(d), and (b) In CIT v. Salem Agricultural Producers' Co-operative Marketing Society Ltd [Tax Case Appeal No.5 of 2015, dated 10.08.2016, reported at (2016) 76 taxmann.com 225 (Madras)), a Division Bench of the Hon'ble Madras High Court held that a Co-operative Society is entitled to avail the benefit of deduction under Section 80P(2)(d) in respect of interest income received from its investments with Co-operative institutions, even after considering the 2010 Supreme Court ruling. The Ld. First Appellate Authority's failure to follow these binding precedents of the jurisdictional High Court is an error of law which goes to the root of the impugned order and renders it unsustainable. 5. The Ld. First Appellate Authority erred in law in confirming the disallowance of Rs 26,48,983/- under Section 80P(2)(d) of the Act without giving any reason for not following and without even adverting to the binding decision of the Jurisdictional Bench of this Hon'ble Tribunal in M/s. Ikkaraiboluvampatti Primary Agricultural Credit Co-operative Society (PACCS) v. The Income Tax Officer, Non-Corporate Ward 4(2), Coimbatore (ITA No.461/Chny/2021], which had been specifically cited and relied upon by the Appellant in its written submissions before the Ld. First Appellate Authority, wherein this Tribunal had categorically held that a Co- operative Bank is also a Co-operative Society within the meaning of Section 2(19) of the Act and that interest income received by a Co-operative Society from its deposits with a Co- operative Bank is eligible for deduction of the whole of such income under Section 80P(2)(d) of the Act the very question that falls for consideration in the present appeal on identical facts and the said binding decision having been neither distinguished nor overruled, the Ld. First Appellate Authority was duty-bound to follow and apply the same, and its failure to do so renders the impugned order unsustainable in law. 6. The Ld. First Appellate Authority gravely erred in law and on facts in rejecting the Appellant's claim for deduction of Rs. 2.10.765/-being dividend income received on shares from Co- Page 2 of 6

ITA No.3562/Chny/2026 Kallakurichi Agricultural Producers Co-Op Marketing Society Ltd. operative institutions, solely on the grounds of absence of 'documentary evidence identifying the specific co-operative societies, without appreciating the following: (a) Neither the Assessing Officer at any stage during the scrutiny assessment proceedings under Section 142(1)/143(2) nor the Ld. First Appellate Authority at any stage during the appellate proceedings under Section 250 ever called upon the Appellant to furnish a breakup of this dividend income or questioned its nature, source, or classification. The Ld. First Appellate Authority has thus rejected a claim on a ground that was never raised, without affording the Appellant any opportunity to respond a course of action which is contrary to the fundamental principles of natural justice and the settled rule that an adverse finding cannot be rendered on a point not put to the party concerned; The rejection of the deduction of Rs. 2,10,765/- being dividend income from Co-operative institutions is accordingly unsustainable in law and on the facts and is liable to be deleted. 7. Appellant craves leave to add, alter, amend, or withdraw any of the foregoing Grounds of Appeal at the time of hearing, with the leave of this Hon'ble Tribunal. PRAYER For the foregoing reasons, it is respectfully prayed that this Hon'ble Tribunal may be pleased to a) Allow the Appellant's claim for deduction of Rs. 26,48,983/- in full under Section 80P(2)(d) of the Act comprising Rs.24.38.218/-being interest income from VDCCB and Rs. 2,10,765/- being dividend income from Co-operative institutions by holding that VDCCB is a Co- operative Society within the meaning of Section 2(19) of the Act and that all three conditions of Section 80P(2)(d) are satisfied; and (b) Set aside the impugned order dated 29.04.2026 of the Ld. Addl./JCIT (Appeals)-1, Nagpur, and allow the Appellant's appeal in full. And for this act of kindness, the Appellant shall, as in duty bound, ever pray.

2.

The brief facts of the case are that the assessee society has filed its return of income u/s. 139 of the Act on 30.10.2017 declaring NIL income after claiming deduction u/s. 80P of the Act amounting to Rs. 26, 48, 983/-. The case of the assessee was selected for complete scrutiny. Ultimately, the case of the assessee was assessed after disallowance of deduction claimed by the assessee u/s. 80P of the Act. The assessee being aggrieved preferred an appeal before the Ld. CIT(A), who in turn dismissed the appeal of the assessee. The assessee being further aggrieved preferred the present appeal before us. 3. We have gone through the order of the AO, the order of the CIT(A) and the submissions of the assessee along with the grounds raised before us. It is observed that the appellant is a cooperative society engaged in marketing the produce of its agriculturist members. The AO disallowed a sum of Rs. 26, 48, 983/- out of the claim

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ITA No.3562/Chny/2026 Kallakurichi Agricultural Producers Co-Op Marketing Society Ltd. under section 80P(2)(d) of the Act, on the ground that the amount was received from the Villupuram District Central Cooperative Bank Ltd., which according to the AO, is not a “Cooperative Society”. The issue under consideration is primarily is Technical / Legal issue and the same is attained finality in view of the decision of Hon’ble Jurisdictional High Court as well as the Hon’ble High Courts of various states.

4.

As observed (supra) the only objection of the AO while disallowing the claim of the assessee u/s. 80P (2) (d) of the Act was that the amount received from the Villupuram District Central Cooperative Bank Ltd., is not a Cooperative Society for the purposes of section 80P of the Act. On this issue the assessee relied upon the decision of the Hon’ble Jurisdictional High Court in the case of Thorapadi Urban Co- op Credit Society Limited Vs. Income Tax Officer, (2023) 156 taxmann.com 419(Madras), wherein the Hon’ble High court held as below: -

“...A reading of section 80P(2)(d) makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term 'Co-operative Society'. In the present case, the assessee produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20-5-2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co-operative Bank registered under the Co-operative Societies Act. [Para 9] A reading of the definition in section 2(19) would make it clear that 'Co-operative Society' means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank. [Para 10] It would be appropriate to refer a judgment passed by a Division Bench of this Court in 'CIT v. Salem Agricultural Producers Co-operative Marketing Society Ltd.' [2016] 76 taxmann.com 225 (Mad.), wherein, apart from other substantial issues, the following issue has been framed for consideration, which reads as under: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 with respect to the interest received from Class B members who were involved in non-agricultural society?". While answering the above, the Division Bench held that the respondent therein, which is a Co- operative society, is entitled to avail the benefit under 80P(2)(d). [Para 12]...”

5.

Respectfully following the directions of the Hon’ble Jurisdictional High Court as mentioned (supra), the claim of the assessee u/s. 80P (2) (d) of the Act

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ITA No.3562/Chny/2026 Kallakurichi Agricultural Producers Co-Op Marketing Society Ltd. amounting to Rs. 24, 38, 218/- on account of interest received from Villupuram District Central Cooperative Bank Ltd., is allowed and the AO is directed to allow the same. As far as the claim of the assessee on account of dividend income received on shares from Cooperative institutions is concerned, the same was disallowed on the ground that the assessee has not submitted the breakup of the amount claimed u/s. 80P (2) (d) of the Act. On this issue, we have gone through the paper book filed by the assessee vide dated 19.08.2026, page nos. 18 to 27 (copy of the relevant extracts of audited financial statements) and vide page no. 26, it is observed that the assessee has received dividend on its investments in the shares of other Cooperative Societies and the same are duly reflected in the balance sheet and profit and loss account of the assessee. In view of the above observations, we deem it fit to allow the claim of the assessee on this account also and the AO is directed to allow the same.

6.

It is further observed that in this matter a straight jacket view is to be taken by the authorities below following the decision of the Hon’ble Jurisdictional High Court in the vase of Thorapadi Urban Co-op Credit Society Limited Vs. Income Tax Officer. Still, they chose to ignore the same and rather on a settled position of law an avoidable litigation created by them and this is taken seriously by this bench of Tribunal. Resultantly the relevant grounds taken by the assessee are allowed in the above terms and directions.

7.

In the result, the appeal of the assessee is allowed in above terms.

Order pronounced on the 13th day of October 2026, in Chennai.

Sd/- Sd/- (जॉजा जॉजा के.) (गगन गोयल) (GAGAN GOYAL) (GEORGE GEORGE K.) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT चेन्नई/Chennai, ददनाांक/Dated: 13th October 2026. KB

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ITA No.3562/Chny/2026 Kallakurichi Agricultural Producers Co-Op Marketing Society Ltd. आदेश की प्रततललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रतततनधि/DR 5. गार्ड फाईल/GF Digitally signed K BABU by K BABU Date: 2026.10.16 15:46:14 +05'30'

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