DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2, AJMER , AJMER vs. AJMER ZILA DUGDH UTPADAK SAHKARI SANGH LIMITED, OPP. HMT, BEAWAR ROAD, AJMER

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ITA 1277/JPR/2025Status: DisposedITAT Jaipur06 November 2026AY 2018-1912 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A) was justified in allowing the assessee's claim for deduction under Section 80P(2)(d) concerning interest and dividend income earned from cooperative banks. The Tribunal noted that the Ld. CIT(A) had relied on various decisions of the High Courts, including the Karnataka High Court in PCIT & Another Vs. Totgar’s Cooperative Sales Society Ltd. and the Gujarat High Court in State Bank of India Vs. CIT and Surat Vankar Sahakari Sangh Ltd. Vs. ACIT. The Tribunal acknowledged that while the AO referred to a contrary decision of the Karnataka High Court, other High Courts had ruled in favour of the assessee. The Tribunal concluded that the view favouring the assessee could be safely applied, and the Ld. CIT(A) had rightly upheld the deduction. Regarding the deduction under Section 80P(2)(c), the Tribunal observed that the AO had denied the deduction without dealing with the assessee's contention that it was a consumer cooperative society. The Tribunal noted that the AO's restriction of the deduction to Rs. 50,000/- implied acknowledgment of profits from activities not specified in Section 80P(2)(a) and (b). Since there was no finding from the AO controverting the assessee's claim of being a consumer cooperative society, the Tribunal held that the Ld. CIT(A)'s order allowing the deduction of Rs. 1,00,000/- under Section 80P(2)(c) was correct. Therefore, all grounds raised by the Revenue were dismissed.

What were the facts?

The Revenue filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, dated July 16, 2025. The NFAC had allowed the assessee, Ajmer Zila DugdhUtpadak Sahkari Sangh Limited, a cooperative society engaged in milk product manufacturing, to claim deductions under Section 80P of the Income Tax Act, 1961. The Assessing Officer (AO) had denied a deduction of Rs. 30,68,798/- claimed for interest received on deposits in a cooperative bank and Rs. 18,76,654/- for dividend income from Rajasthan Co-operative Dairy Federation Limited, both under Section 80P(2)(d). The AO also restricted a deduction claimed under Section 80P(2)(c) from Rs. 1,00,000/- to Rs. 50,000/-. The total deduction denied by the AO was Rs. 50,37,452/-.

What were the issues?

1. Whether, on the facts and circumstances, the Ld. CIT(A) was justified in allowing the appeal by deleting the addition/disallowance of Rs. 30,68,798/- claimed by the assessee under Section 80P(2)(d) for interest received on deposits made in a cooperative bank. 2. Whether, on the facts and circumstances, the Ld. CIT(A) was justified in allowing the appeal by deleting the addition/disallowance of Rs. 18,76,654/- claimed by the assessee under Section 80P(2)(d) for dividend income received from Rajasthan Co-operative Dairy Federation Limited. 3. Whether, on the facts and circumstances, the Ld. CIT(A) was justified in allowing the appeal by deleting the addition/disallowance of a claim under Chapter VI-A by restricting the deduction under Section 80P(2)(c) from Rs. 1,00,000/- to Rs. 50,000/-. Assessee's Contentions: The assessee contended that it is a cooperative society and not a cooperative bank, and therefore, its entire income, including interest income from investments in a cooperative bank, should be considered for deduction under Section 80P. For the deduction under Section 80P(2)(c), the assessee argued it is a consumer cooperative society meant for the benefit of consumers within the Ajmer Municipal Corporation limits, entitling it to a deduction of Rs. 1,00,000/-, which could not be restricted to Rs. 50,000/-. Revenue's Contentions: The Revenue argued that interest and dividend income earned from investments made in a cooperative bank were not eligible for deduction under Section 80P(2)(d) due to Section 80P(4) of the Act. The Revenue also contended that the deduction under Section 80P(2)(c) should be restricted to Rs. 50,000/-.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(2)(d),Section 80P(2)(c),Section 80P(4),Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, “A” BENCH, JAIPUR

For Respondent: CA (thru V.C.)
Hearing: 11.08.2026Pronounced: 06.11.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “A” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.1277/JPR/2025 (Assessment Year: 2018-19)

DCIT Vs. Ajmer Zila Circle 2 DugdhUtpadakSahkari Ajmer Sangh Limited Opp. HMT, Beawar Road, Ajmer �थायीलेखासं./जीआइआरसं./PAN/GIR No:AABAA0141Q Appellant .. Respondent Appellant by : Sh. Abhimanyu Singh Yadav, Addl. CIT Respondent by : Sh. Sunil Porwal, CA (thru V.C.) Date of Hearing 11.08.2026 Date of Pronouncement 06.11.2026 O R D E R Per Annapurna Gupta, AM:- The present appeal has been filed by the Revenue against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 16.07.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

P a g e | 2 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited 2. The grounds raised by the Revenue read as under:- "1) Whether on the facts and circumstances of the case, the Ld. CIT(A), NFAC, was justified in allowing the appeal of the assessee by deleting the addition/disallowance of Rs. 30,68,798/- claimed by the assessee u/s 80P(2)(d) for Interest received on deposits made in a Co-operative Bank? 2) Whether on the facts and circumstances of the case, the Ld. CIT(A), NFAC, was justified in allowing the appeal of the assessee by deleting the addition/disallowance of Rs. 18,76,654/- claimed by the assessee u/s 80P(2)(d) for Dividend Income received from Rajasthan Co-operative Dairy Federation Limited? 3) Whether on the facts and circumstances of the case, the Ld. CIT(A), NFAC, was justified in allowing the appeal of the assessee by deleting the addition / disallowance of claim under Chapter VI-A by restricting the deduction u/s 80P(2) (c) of Rs. 1,00,000/- to Rs. 50,000/-." 4) That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing. 3. The Revenue is aggrieved by the order of the ld. CIT(A), who has allowed the assessee’s entire claim of deduction u/s 80P(2)(d) and 80P(2)(c) of the Act amounting in all to Rs.50,37,452/- which was denied by the AO in his order passed u/s 143(3) of the Act. 4. The assessee is a cooperative society engaged in the processing and manufacturing of milk products e.g. milk ghee, milk powder etc. It filed its return of income on 25.10.2018 declaring total income of Rs.1,60,82,730/- wherein it claimed deduction u/s 80P amounting to Rs.50,37,452/-. The deduction had been claimed on account of the following:-

P a g e | 3 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited

5.

The claim of deduction u/s 80P(2)(d) of the Act was denied by the AO holding that the interest and dividend income on which the deduction was claimed u/s 80P(2)(d) of the Act was earned from investments made in a cooperative bank which in terms of Section 80P(4) of the Act was not eligible for deduction u/s 80P of the Act. The deduction claimed by the assessee u/s 80P(2)(c) of the Act was restricted to Rs.50,000/-. 6. The Ld. CIT(A) allowed the assessee’s claim of deduction both u/s 80P(2)(d) and 80P(2)(c) of the Act, noting that the issue stands covered in the favour of the assessee by various decisions of the ITAT and the decision of the Hon’ble Karnataka High Court in the case of PCIT & Another Vs. Totgar’s Cooperative Sales Society Ltd. 392 ITR 74 (2017) holding that cooperative society banks also qualified as cooperative society and the interest and dividend income from investments made therein by cooperative societies are eligible for deduction u/s 80P(2)(d) of the Act. The Ld. CIT(A) has also referred to the decision of the Jurisdictional High Court in the case of CIT Vs. Rajasthan Sahakari Kray Vikray Sangh Ltd. DB ITA Nos. 139/2002, 20/2004, 24/2004, 27/2004 dated 01.09.2026, Hon'ble Gujarat High

P a g e | 4 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited Court in the case of Surat VankarSahakari Sangh Ltd. Vs. ACIT 72 taxman.com169 (Guj)., Hon'ble High Court of Gujaratin the case of State Bank of India Vs. CIT(2016) 389 ITR 578, Jaipur ITATin the case of ITO V/s Shri Keshorai Patan Sahakari Sugar Mills Ltd. In ITA 418 & 419 JP/2017 dated 31.01.2018, ITAT, Jaipur Bench Jaipur in assessee's own appeal no. ITA 90/JPR/2019 dated 28.08.2019. 7. The findings of the Ld. CIT(A) in this regard are as under:- …… The AO did not accept the assessee's submission was that it is a co-operative society and not co-operative bank. Hence, its all income including interest income out of investment made in banks should be considered for deduction u/s. 80P. The AO held that the provision of section 80P(2)(d) of the Act states that, "In respect of any income by way of interest or dividends derived by Cooperative society from its investments with any other co-operative society the whole of such income" From a plain reading of the above provision, it is clear that the section refers to interest and dividends earned from investments in another co-operative society only. Thus, this deduction cannot be extended to the interest income earned from the investment in any co-operative bank. The AO relied on Honourable Supreme Court in the case of Totgar Co-operatiove Sale Soc Ltd concluded that such interest income earned out of investment made in any bank(including Co-oprative Bank) be taxable under the head income from other sources u/s 56 and was not 100% deductible from gross total income

The contentions of the appellant have been examined and found to be in order

ITAT, Jaipur in the case of ITO Vs. Shree Keshorai Patan Sahakari Sugar Mill in ITA Nos. 418 & 419/JP/2017 and 23 & 24/JP/2017 has held as follows.

"6.1 As regards the claim u/s 80P(2)(d), we find that the only condition for availing the deduction under this provision is any income by way of interest or dividend derived by the Cooperative Society from its investment with any other cooperative society, the whole of such income is allowable for deduction u/s 80P(1) As regards the cooperative bank shall be treated as cooperative societies for the purpose of the interest income on investment in such cooperative bank u/s 80P(2)(d) the Mumbai Bench of this Tribunal in

P a g e | 5 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited case of Lands End Co-operative Housing Society Ltd. vs. ITO(ITA No 3566/Mum/2014 dated 15.10.2016), after considering the decision of the Hon'ble Supreme Court in case of Totagar's Co-operative Sale Society Ltd. Vs. ITO(Supra) has considered and decided this issue in Para 8.3 as under-

"In the case of Totagar's Co-operative Sale Society Ltd v/s ITAT (supra) the Hon'ble Supreme Court while interpreting the section 80P(2)(a) (i) of the Act held that surplus funds not immediately required in the business and invested in the short term deposit would be assessable under the head "income from other sources where the Co-operative society is engaged in carrying on business of banking or providing credit facilities to its members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative banks is entitled to deduction u/s 80P(2)(d)

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From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) it is clear that the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect of its income assessable as business income and not as income from other sources if it carries on business of the banking or providing credit facilities to its members and has income assessable under the head business whereas for claiming u/s 80P(2)(d) it must have income of interest and dividend on investments with other Co-operative society may or may not be engaged in the banking for providing credit facilities to its members and the head under which the income is assessable is not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Hanble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. (Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its

P a g e | 6 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this, the provisions of section 80(P) (2) (d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop, society if such income is included in the gross total income of the such coop society in view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/-in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directly accordingly."

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6.

Further the Hon'ble Karnataka High Court in case of PCIT and Another vs. Totagars Co-operative Sale Society 392 ITR 74 (2017) as relied upon by the Ld. AR of the assessee as held in para 7 to 11 as under-

"7. However, the contention being taken by the learned counsel is untenable For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not? For, if a Co operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Co-operative Bank would necessarily be deductable under Section 80P(1) of the Act.

8.

The issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co- operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies Co- Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co- operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society"

P a g e | 7 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited

9.

Furthermore, even according to Section 56(1) (ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'.

10.

Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent

11.

The learned counsel has relied on the case of The Totgars Co-operative Sale Society Ltd. Vs. Income Tax. Officer, (supra) However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the IT. Act For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a) (i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case."

5.The following judgments have also been relied upon

1.

Hon'ble Rajasthan High Court in the case of CIT Vs Rajasthan Rajya Sahakari Kray Vikray Sangh Ltd. DB ITA Nos. 139/2002, 20/2004, 24/2004, 27/2004 dated 01.09.2016

2.

Hon'ble Gujarat High Court in the case of Surat VankarSahakari Sangh Ltd. Vs. ACIT 72 taxman.com169 (Guj).

3.

Hon'ble High Court of Gujarat in the case of State Bank of India Vs. CIT(2016) 389 ITR 578.

(iv) Jaipur ITAT ITO V/s Shri Keshorai Patan Sahakari Sugar Mills Ltd. In ITA 418 & 419 JP/2017 dated 31.01.2018.

(v) ITAT, Jaipur Bench Jaipur in assessee's own appeal no. ITA 90/JPR/2019 dated 28.08.2019

P a g e | 8 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited ……… 8. Before us, there was no dispute with regards to the fact that the assessee’s claim of deduction u/s 80P(2)(d) of the Act was with respect to interest and dividend income earned from cooperative banks. 9. The Ld. DR before us, was unable to controvert the findings of the Ld. CIT(A) that the issue of claim of deduction u/s 80P(2)(d) of the Act stood covered in favour of the assessee by various decisions of the Hon’ble High Courts including the Hon’ble Karnataka High Court in the case of PCIT & Another Vs. Totgar’s Cooperative Sales Society Ltd. 392 ITR 74 (2017) , the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT [2016] 389 ITR 578 and the Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. Vs. ACIT 72 taxmann.com 169 (Guj.). 10. Though admittedly, the AO has referred to the contrary decision of the Hon’ble Karnataka High Court in the case of Totagar Cooperative Sale Society in ITA No.100066/2016 and Connected cases dated 16.06.2017, the fact remains that the Hon’ble Gujarat High Court and the Hon’ble Karnataka High Court in the other decisions have ruled in favour of the assessee. Considering the contrary decisions of the Hon’ble High Courts on the issue, the view favouring assessee can be safely applied which we find the Ld. CIT(A) therefore has rightly relied upon to hold that the assessee’s claim of deduction of interest and dividend u/s 80P(2)(d) of the Act was in accordance with law.

P a g e | 9 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited 11. The order of the Ld. CIT(A) therefore allowing assessee’s claim of deduction u/s 80P(2)(d) of the Act amounting to Rs.18,76,654/- and Rs.30,60,798/- is accordingly upheld. 12. On the issue of deduction claimed u/s 80P(2)(c) of the Act the assessee claim of deduction of Rs.1 lakh was on the ground that it fulfilled the condition specified in section 80P(2)(c) of the Act of being a consumer cooperative. Before the AO, the assessee stated that it is a consumer cooperative society meant for the benefit of the consumer within the limits of municipal corporation and that all areas coming under said jurisdiction are or can become member of society and area of operation of society is limited to Ajmer Municipal Limit as per M/c RCDF Ltd. (A State Government Undertaking). The assessee accordingly had contended that it was rightly entitled for deduction u/s 80P(2)(c) of the Act of Rs.1 lakh and the same could not be restricted to Rs.50,000/-. The contentions of the assessee in this regard are contained at page 8 of the assessment order as under:- …… Now coming on the issue of claim of deduction u/sec. 80P(2)(c)(i) of Rs. 1,00,000.00 by assessee. The issue is that Ajmer zila DugdhUtpadakSahakari Samiti Ltd. (Assessee) is a "CONSUMER CO-OPERATIVE SOCIETY meant for the benefit of the consumers within the limits of municipal co-operation etc. The assessee jurisdiction is limited to Ajmer Municipality & all area coming under said jurisdiction are or can become member of society & area of operation of society is limited to Ajmer Municipal Limit as per M/c RCDF Ltd. (A State Government Undertaking) & thus the assessee is rightly entitled for deduction u/sec. 80P(2)(i) for Rs. 1,00,000.00 & same cannot be restricted to Rs. 50,000.00 as proposed. …….

P a g e | 10 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited 13. The AO, we find has denied the deduction without dealing with this contention of the assessee and we do not find any discussion on this aspect in the order of the Ld. CIT(A) also. 14. We have gone through the provisions of section 80P(2)(c) of the Act which is reproduced hereunder: ….. Deduction in respect of income of co-operative societies. 80P. ….. (2) The sums referred to in sub-section (1) shall be the following, namely :— ….. (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,— (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees; and (ii) in any other case, fifty thousand rupees. Explanation.—In this clause, "consumers' co-operative society" means a society for the benefit of the consumers; ……

. 15. As per the said provision, a cooperative society which is a consumer cooperative society ,theprofits and gains attributable to activities other than those specified in clause (a) and (b) of the Section 80P(2) of the Act are entitled to deduction amounting to Rs.1,00,000/-. In case of other cooperative societies the deduction is restricted to Rs.50,000/-. 16. The AO has restricted the deduction to Rs.50,000/- .Which implies that he acknowledges the fact that the assessee has earned

P a g e | 11 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited profits from activities not specified in Section 80P(2)(a) and (b) of the Act. The case of the AO probably is that the assessee is not a consumer cooperative society. However, we find that despite the assessee contending that it was a consumer cooperative society, there is no finding in the order of the AO controverting the contention of the assessee. Therefore, we hold that the order of the Ld. CIT(A) allowing the claim of deduction u/s 80P(2)(c) of the Act to the extent of Rs.1,00,000/- is correct. We see no reason to interfere in the order of the Ld. CIT(A) allowing assessee’s claim of deduction u/s 80P(2)(c) of the Act to the extent of Rs.1 lakh. 17. Thus, all grounds raised by the Revenue are dismissed. 18. In effect, the appeal of the Revenue stands dismissed. Order pronounced in the Open Court on 06.11.2026

Sd/- Sd/- (Kuldip Singh) (Annapurna Gupta) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated .11.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

P a g e | 12 ITA No.1277/JPR/2025 Ajmer Zila DugdhUtpadak Sahkari Sangh Limited

By Order, Asst. Registrar/Sr. PS ITAT, Jaipur Mittali Digitally signed by: Mittali DN: CN = Mittali email = mittaligupta34671@gmail.com C = IN O = Personal Date: 2026.11.06 13:03:30 + 05'30'

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