EKTA SAHAKARI PATPEDHI MARYADIT,VIRAR vs. INCOME TAX OFFICER, ASSESSMENT UNIT, NEW DELHI

ITA 106/MUM/2025Status: DisposedITAT Mumbai10 March 2025AY 2020-2118 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is eligible for deduction under Section 80P(2)(a)(i) and Section 80P(2)(d) of the Income-tax Act, 1961. The Tribunal found that the lower authorities had not considered the assessee's detailed submissions and overlooked various binding decisions of the Supreme Court, jurisdictional High Court, and the ITAT. It was noted that the assessee does not possess a banking license and its activities are confined to its members, not the public at large, making Section 80P(4) inapplicable. The Tribunal relied on Supreme Court judgments in *Citizen Co-operative Society Ltd. vs ACIT* and *The Mavilayi Service Cooperative vs. Commissioner of Income Tax* to establish that cooperative credit societies not holding banking licenses are eligible for deduction under Section 80P(2)(d). Furthermore, applying the principle that if two reasonable constructions of a taxing provision are possible, the one favoring the assessee must be adopted, as laid down in *CIT v. Vegetable Products Ltd.*, the Tribunal upheld the assessee's plea. Consequently, the Tribunal set aside the impugned orders and directed the AO to allow the deductions claimed by the assessee for both assessment years. Grounds related to interest and penalty were rendered academic. The Tribunal also imposed a cost of Rs. 12,500/- on the assessee for each appeal (totaling Rs. 25,000/-) due to substantial delay and a casual approach in pursuing the appeals.

What were the facts?

The assessee, Ekta Sahakari Patpedhi Maryadit, filed appeals before the Income-Tax Appellate Tribunal (ITAT) challenging orders from the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi. These orders pertained to assessment years (AY) 2018-19 and 2020-21, arising from assessments made under Section 143(3) of the Income-tax Act, 1961. The appeals were consolidated due to common and interlinked issues. The assessee is a cooperative credit society registered under the Maharashtra Co-operative Societies Act, 1960, engaged in accepting deposits from and advancing loans to its members. The Assessing Officer (AO) disallowed deductions claimed under Section 80P(2)(a)(i) and Section 80P(2)(d) for both assessment years, treating the assessee as a cooperative bank and thus ineligible for these deductions due to Section 80P(4). The assessee argued it was a cooperative society, not a bank, and eligible for the deductions.

What were the issues?

1. Whether the assessee, a cooperative credit society, is eligible for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961, in respect of its income from providing credit facilities to its members, or if Section 80P(4) disentitles it from such deduction by treating it as a cooperative bank. 2. Whether the assessee is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961, on income earned from interest on fixed deposits with cooperative banks. Assessee's Contentions: - The assessee is a registered cooperative society with byelaws approved by the Registrar of Societies, and its primary object is to accept deposits from and advance loans to its members. It is not a cooperative bank and does not hold a banking license. - The activities, though similar to a cooperative bank, are confined to its members and do not involve the public at large. - The deduction under Section 80P(2)(a)(i) was allowed in previous years, including AY 2017-18. - The deduction under Section 80P(2)(d) should be allowed as per the principles laid down in various Supreme Court judgments, specifically citing *Citizen Co-operative Society Ltd. vs ACIT* and *The Mavilayi Service Cooperative vs. Commissioner of Income Tax*. - The AO erred in disallowing deductions and wrongly charging interest and levying penalty. Revenue's Contentions: - The AO held that the assessee was engaged in banking activity and, therefore, not eligible for deduction under Section 80P(2)(a)(i) in view of Section 80P(4), as it was neither a primary agricultural credit society nor a primary cooperative agricultural and rural development bank. The assessee was considered an urban cooperative society engaged in banking business. - The AO concluded that interest and dividend income on investments were not required for business purposes and thus not attributable to the activities mentioned in Section 80P(2)(a)(i) or 80P(2)(d).

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(2)(a)(i),Section 80P(2)(d),Section 80P(4),Section 143(3),Section 234A,Section 234B,Section 234C,Section 270A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(8)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR

For Appellant: Shri Bhupendra Shah, AR
For Respondent: Shri Manish Ajudiya (Sr. DR)
Hearing: 03.03.2025Pronounced: 10.03.2025

Heard together (2 matters)

ITA No. 105/MUM/2025
ITA No. 106/MUM/2025

Read from the judgment's own cause title. This page is filed under one of them.

PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals have been filed by the assessee against the orders by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to the order passed u/s.143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Years [A.Y.] 2018-19 and 2020-21. Since the issues are common and interlinked, these appeals are being

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 80P

All 5,069 judgments and leading authorities on Section 80P →

Recent GST High Court judgments

Search GST case law →