JAI JALARAM CO-OPERATIVE CREDIT SOCIETY LIMITED,MUMBAI vs. THE INCOME TAX OFFICER, WARD 29(1)(5), MUMBAI

PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 13.03.2025 passed by the Ld. Commissioner of Income-tax (Appeals)-1, Visakhapatnam [in short ‘the Ld. CIT(A)’] for assessment year 2015-16, raising following grounds:

T(Appeals), NFAC has erred in dismissing t eduction u/s 80P(2)(a)(i) of The Income Tax Act
T(Appeals), NFAC has erred holding that the cooperative society on its investments he ks/Nationalised banks would not be eligib er Sec.80P(2)(d)/ 80P(2)(a)i) ant further reserves the rights to add, ame unds of appeal as they may think fit by the atives.
he facts of the case are that th ociety and had filed the return ring total income at Rs. NIL
2)(a)(i) of the Income-tax Act,19
Rs. 2,86,069/-. The case of th under CASS and order u/s. 1
2.2017 denying the deduction
2)(d) of the Act. The Assessing
80P(2)(a)(i) on the ground that t e condition laid down u/s. 56(c)( tion Act and is a co-operative within the purview of a prima of section 80P(4) are applicabl est income earned from vario iness income but is to be class
Other Sources”. As regards the a 2)(d), the Assessing Officer rej round that the investments ar m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
the appeal and t, 1961
interest income eld with a Co- ble for claim of end or alter the emselves or by he appellant is a n of income for L after claiming
61( in short the he assessee was 43(3) of the Act u/s. 80P(2)(a)(i)
Officer rejected the assessee co-
(ccv) of part V of bank and since ary co-operative le resulting and ous co-operative sified under the alternate plea of jected even this re made by the assessee in co-opera urban commercial b
“Co-operative Society
3. Aggrieved by th the assessee challen same. The relevant ex
“6.3 I have ca of appeal and the assessme
2,86,069/- by Act. In this ca with Coopera operative ban claim of dedu addition, app appellant wou
6.3.1 In this provisions of claiming dedu or dividends the AO disall from Coopera dividend inco
"14.3. While following poin
Jai Jalaram
ITA N ative banks and that a co-oper ank and does not fall under th y” referred in Section 80P(2)(d) o his disallowance made by the As nged it before the CIT(A) who xtract of the CIT(A)’s order is as arefully gone through the assessment ord d submissions made by the appellant. It ent order that the AO has made add y disallowing the claim of deduction u/s ase, assessee received interest income fr ative banks As assessee got interest inco nks and not from co-operative society, AO uction u/s 80P of the IT Act. Aggrieved wi pellant filed present appeal and sub uld be eligible for deduction u/s 80P of th regard, it is pertinent to mention that section 80P(2)(d), a cooperative society i uction under this section in respect of int earned from other cooperative societies o lowed the deduction claimed for the inte ative banks u/s 80P. With regard to th ome earned from a Co-operative bank/
on'ble Supreme Court in the case of Kera icultural and Rural Development Bank Ltd ssing Officer, Trivandrum & Ors. in Civil
16 dated 14.09.2023 analyzed the legal visions under relevant cooperative so , provisions of sec. 80P under the Inco t, the Banking Regulation Act and the var n similar issues. The observations of Hon
14.3 and 15.8 are of relevant that reads analysing Section 80P of the Act in nts are noted by this Court:
m Co-operative Credit
Society Ltd.
3
No. 2887/MUM/2025
rative bank is a he purview of a f the Act.
ssessing Officer, o confirmed the under:- der, grounds is seen from dition of Rs
80P of the IT from deposits ome from Co-
O denied the ith the above bmitted that he IT Act.
t as per the is eligible for terest income only. Further erest earned e interest or / Scheduled ala State Co- d. KSCARDB
Appeal Nos.
l framework, ocieties Act, ome Tax Act, rious judicial
'ble Supreme as under:- n depth, the i) Firstly, the in respect of indicates the ii) Secondly, f must be a "co ill) Thirdly, th referred to in iv) Fourthly, being "engage or providing c v) Fifthly, the facts, that it is vi) Sixthly, members" do was highligh deduction and activity is a r given to non activity of pro cannot be ded vii) Seventhly must be regis a State Act an as residuary and (b), eithe then profits a to be deducte viii) Eighthly, income is der other co-opera deduction, th cooperative m
15.8. Since defined in the clause (a) of S
It states that bank is in rel bank shall be Jai Jalaram
ITA N marginal note to Section 80P which read income of co-operative societies" is sign general "drift" of the provision.
for purposes of eligibility for deduction, t
-operative society"
he gross total income must include inc sub- section (2) sub-clause (2)(a)(i) speaks of a co-oper ed in". inter alia, carrying on the busines credit facilities to its members.
e burden is on the assessee to show, b s entitled to claim the deduction under Se the expression "providing credit faci es not necessarily mean agricultural cre hted that the distinction between e d attributability of amount of profits and real one. Since profits and gains from cre members cannot be said to be attribu oviding credit facilities to its members, s ducted.
y, under Section 80P (1) (c), the co-operat stered either under Cooperative Societies A nd may be engaged in activities which ma activities i.e. activities not covered by su er independently of or in addition to tho and gains attributable to such activity ar d, but subject to the cap specified in sub- sub-clause (d) states that where interes rived by a co-operative society from inves ative societies, the whole of such income he object of the provision being further movement as a whole.
the words 'bank' and banking compa e NABARD Act, 1981, the definition in sub Section 56 of the BR Act, 1949 has to be a co-operative society in the context of a lation to or as a banking company. Thus, e construed as references to a banking c m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
ds "Deduction nificant as it the assessee come that is rative society ss of banking by adducing ection 80P.
ilities to its edit alone. It eligibility for d gains to an redit facilities utable to the such amount tive societies
Act, 1912, or ay be termed ub-clauses (a) ose activities, re also liable
-clause (c).
t or dividend stments with is eligible for rance of the any' are not b-clause (i) of e relied upon.
a cooperative co-operative company and when the def of the BR A transacts the banking busin accepting, for money from t withdrawal b when a co-op terms of the operative ban would apply operative ban conducting th
Section 5 of th and not so w central co-ope of Section 56( of a banking c defined in cla operative soci in clause (b) o operative ban would not ap bank, then su the other han
Section 56 of Act, 1981 the under sub-sec
6.3.2 Based o
Court and re
Karnataka H
Cooperative S
Hon'ble Gujar
CIT reported i earned by a c operative ban claim of dedu
6.3.3 Further,
80P(2)(a)(i) of Court in the c
283) (SC), wh
"The words business" in s
Jai Jalaram
ITA N finition of banking company in clause (c)
Act, 1949 is seen, it means any com business of banking in India and as al ness is defined in clause (b) of Section 5
r the purpose of lending or investment, of the public, repayable on demand or oth by cheque, draft, order or otherwise. Thu perative society is conducting banking definition referred to above that it be nk and in such a case, Section 22 of the B wherein it would require a licence t nk. In other words, if a co-operative so he business of banking as defined in c he BR Act, 1949, it would not be a co-op within the meanings of a state coopera erative bank or a primary co-operative ba
(c)(i)(cci). Whereas a co-operative bank is i company which transacts the business of ause (b) of Section 5 of the BR Act, 1949
iety does not transact business of bankin of Section 5 of the BR Act, 1949, it would nk. Then the definitions under the NABAR pply. If a co-operative society is not a uch an entity would be entitled to dedu nd, if it is a co-operative bank within the f BR Act, 1949 read with the provisions en it would Not be entitled to the benefit ction (4) or Section 80P of the Act."
on above such principle analyzed by Hon espectfully following the view taken by High Court in the case of PCIT & Anr. V
Sale Society reported in (2017) 392 I rat High Court in the case of State Bank in (2016) 389 ITR 578, I hold that, the int cooperative society on its investments hel nks/Nationalised banks would not be uction under Sec.80P(2)(d) of the Act.
r, the appellant is also not entitled for de f the Act in view of judgement of Hon'
case of Totgars Cooperative Sale Society L herein held as follows:
"the whole of the amount of profits a section 80P(2) of the Incometax Act, 1961
m Co-operative Credit
Society Ltd.
5
No. 2887/MUM/2025
of Section 5
mpany which lready noted
5 to mean the of deposits of herwise, and us, it is only business in comes a co-
BR Act, 1949
to run a co- ociety is not clause (b) of perative bank ative bank, a ank in terms in the nature of banking as 9. But if a co- ng as defined d not be a co-
RD Act, 1981
co-operative uction but on e meaning of s of NABARD of deduction
'ble Supreme the Hon'ble
Vs. Totagars
ITR 74 and Of India Vs.
terest income ld with a Co- e eligible for eduction u/s 'ble Supreme
Ltd. (322 ITR and gains of 1, emphasise that the incom operative soc the other inco
The interest i the business marketing of which is not investment in as income fro
Act, 1961. Su activities of th credit facilitie of its membe retained by it mentioned in 6.3.4 Since operative ban under the he income earne eligible for de the AO is jus claimed u/s 8
4. We have carefu authorities, materia appellant and revenu the assessee co-oper
80P(2)(a)(i) of the Ac deduction claimed by fact is that the asse engaged in the busi members of the socie has earned interest investments made in Jai Jalaram
ITA N me in respect of which deduction is sou ciety must constitute the operational inco ome which accrues to the society.
income arising to a co-operative society s of providing credit facilities to its agricultural produce of its members, on t required immediately for business pu n short term deposits and securities, has om other sources under section 56 of th uch interest cannot be said to be attribu he society, viz., carrying on the business s to its members or marketing of agricult ers. Interest income of such society fro t cannot be said to be attributable either t section 80P(2)(a)(i) or section 80P(2)(a) (iii) the interest is earned by the appella nk/ Scheduled Bank, the same has to be ead 'income from other sources' and s ed from Co-operative banks/ Scheduled eduction under section 80P(2)(d)/ 80P(2
stified in disallowing the deduction of Rs
80P of the Act. Accordingly, the appeal is ully perused the orders passe al on record and the argum ue. The issue before us is about rative credit society about the ct or u/s. 80P(2)(d) of the Act.
y the assessee u/s. 80P(2)(a)(i) essee is a AOP running a co-o iness of accepting and lending ety and during the year under c income to the tune of Rs. 7
n various co-operative banks an m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
ught by a co- ome and not carrying on members or the surplus, urposes from s to be taxed e Income-tax utable to the s of providing tural produce om amounts to the activity i) of the Act."
ant from Co- e considered such interest
Bank is not 2)(a)(i). Thus, s 2,86,069/-
'Dismissed.”
d by the lower ments made by the eligibility of deduction u/s.
As regards the of the Act, the operative society g money to the consideration, it 7,19,303/- from nd the resultant income of the assesse
The issue which ar pertains to the scope co-operative society u of the Income-tax Act
4.1 Section 80P of operative societies, assistance and coo under consideration a o Section 8
income att the busine members.
o Section 80
of income investment
4.2 A careful readin judicial pronouncem distinct spheres. Se deduction where the business of banking source-based, and co earned by way of in Jai Jalaram
ITA N ee is not in the nature of any bu rises for consideration in the e and applicability of deduction under Section 80P(2)(a)(i) and S t, 1961, and the distinction that the Act confers certain tax be recognising their role in pro operative development. The re are as follows:
0P(2)(a)(i) provides for deductio tributable to a co-operative soc ess of banking or providing cred
0P(2)(d), on the other hand, pro by way of interest or dividen ts made with another co-opera ng of the statutory language, in ments, reveals that these provis ection 80P(2)(a)(i) is activity-b e income arises from the active g or lending to members. Sect onfers deduction where the inco nterest or dividends from in m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
usiness income.
present matter ns available to a Section 80P(2)(d) t exists therein.
enefits upon co- omoting mutual elevant clauses on in respect of ciety engaged in it facilities to its ovides deduction nd earned from ative society.
n light of settled sions operate in based, granting e conduct of the tion 80P(2)(d) is ome is passively nvestments with other co-operative
Mavilayi Service Co
1 (SC)], held that 80P(2)(a)(i) does not Regulation Act. Wha in fact engaged in p
Court overruled the c
High Courts that pl operative bank”. The operative Sale Soci where the Hon’ble C surplus funds depos under Section 80P(2
business of banking open for deduction u arises from investmen
4.3 The decision of Co-operative Sale Soc so far as the deducti in the present case assessee is dismissed
4.4 Apropos, the de observed that the a Jai Jalaram
ITA N societies. The Hon’ble Supre o-operative Bank Ltd. v. CIT [( the eligibility for deduction t depend on registration unde t is required is that the co-ope providing credit facilities to its contrary view expressed in earli laced emphasis on the nomen distinction was further clarified iety Ltd. v. ITO [(2010) 322
Court held that interest incom sited in banks does not qualify
2)(a)(i), as it is not income de or credit facilities. However, th under Section 80P(2)(d), provide nts with a co-operative society.
the Hon’ble Apex Court in the ciety Ltd. (322 ITR 283) (SC) squ ion u/s. 80P(2)(a)(i) is claimed
. In the result, ground no. 1
d.
eduction claimed u/s. 80P(2)(d) assessee is eligible for deduct m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
eme Court, in (2021) 431 ITR under Section er the Banking erative society is s members. The ier judgments of nclature of “co- d in Totgars Co-
ITR 283 (SC)], me arising from fy for deduction erived from the he door was left ed such income case of Totgars uarely applies in by the assessee
1 raised by the of the Act, it is tion of interest income taxed under same is earned fro
Courts have consist that interest incom are co-operative so Reference may be m
High Court in PCIT v
395 ITR 611 (Kar)], for deduction under c
4.5 The assessee c has been earned from are co-operative so contention, if substan under Section 80P(2) verification. Accordin matter to the file of t verifying whether the interest income are meaning of the Act.
shall adjudicate the accordance with law to the assessee. The allowed for statistical
Jai Jalaram
ITA N the head “Income from other m a co-operative society. The tently held, following the afore me received from co-operative cieties) is deductible under Se made to the decision of the Hon v. Totagars Co-operative Sale
, wherein such interest was he clause (d).
ontends that the interest inco m investments with co-operativ ocieties for the purposes of ntiated, would entitle the assess
(d). However, this is a question ngly, we consider it appropriate the Assessing Officer for the lim e entities from which the asses e, in fact, co-operative societ
Upon such verification, the A claim for deduction under Sect and after affording due opportu e ground no.2 of the assessee l purposes.
m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
sources” if the e Hon’ble High esaid precedent, banks (if they ection 80P(2)(d).
n’ble Karnataka
Society [(2017) eld to be eligible ome in question ve banks, which the Act. This see to deduction of fact requiring e to remand the mited purpose of ssee has earned ties within the ssessing Officer tion 80P(2)(d) in unity of hearing e is accordingly

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

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Jai Jalaram
ITA N ppeal of the assessee is allo ced in the open Court on 30/0
/- GOSAIN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu m Co-operative Credit
Society Ltd.
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No. 2887/MUM/2025
owed partly for 06/2025. d/-
KASH KANT)
ANT MEMBER
R, gistrar) umbai