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Facts
The assessee, a cooperative society engaged in banking and providing credit facilities to its members, claimed a deduction under Section 80P(2)(d) for interest income received from deposits with Burdwan Central Cooperative Bank Limited. The Assessing Officer and CIT(A) disallowed this deduction, arguing that Burdwan Central Cooperative Bank Limited was not a cooperative society and relying on the Supreme Court's decision in Totgars Cooperative Sale Society Ltd.
Held
The Tribunal found that Burdwan Central Cooperative Bank Limited is a registered cooperative society, supported by a certificate of registration. Since the assessee, also a cooperative society, earned interest from deposits with another cooperative society, the deduction under Section 80P(2)(d) of the Income Tax Act, 1961, is allowable. The Totgars decision was held to be inapplicable as the facts of the present case were distinguishable.
Key Issues
Whether interest income earned by a cooperative society from deposits with another cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, when the assessing authorities claimed the latter was not a cooperative society.
Sections Cited
80P(2)(d), 2(19), 143(3), 147, 36, 37, 40A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI GEORGE MATHAN
O R D E R This is an appeal filed by the assessee against the order of the ld Addl./JCIT(A), Mysore, dated 04.11.2024, passed in DIN & Order No.ITBA/APL/S/250/2024-25/1070088765(1) for the assessment year 2017-2018.
Shri Shyamadas Bandyopadhyay, ld.AR appeared on behalf of the assessee and Smt. Madhumita Das, ld. Sr. DR appeared on behalf of the revenue.
3. It was the submission of the ld. AR that the assessee is a cooperative society engaged in the banking business and also in the business of providing credit facilities to its members. It was the submission that the assessee had received interest income from its deposits with M/s Burdwan Central Cooperative Bank Limited. It was the submission that the Assessing Officer disallowed assessee’s claim of interest u/s.80P(2)(d) of the Act on the ground that the said M/s Burdwan Central Cooperative Bank Limited was not a cooperative society. It was the submission that the ld. CIT(A) applied the principle of law laid down by the Hon’ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd., reported in 188 Taxmann 282 (SC) to uphold the disallowance made by the ld. Assessing Officer. It was the submission that the decision in the case of Totgars Cooperative Sale Society Ltd (supra) had no applicability with the facts of the present case insofar as the assessee was in the activity of the banking and providing credit facilities to its members whereas in the case of Totgars Cooperative Sale Society Ltd (supra), the issue was involved in marketing agricultural produce grown by the members and providing credit facilities to the members by advancing loans to them. It was further submitted that the M/s Burdwan Central Cooperative Bank Limited is registered as cooperative society. Ld. AR has placed before me the certificate regarding the registration of the M/s Burdwan Central Cooperative Bank Limited, which reads as under :-
4. Ld.AR has also filed written submission, which reads as under :- SUBMISSION ΙΤΑ NO:-2671/KOL/2024 Assessment Year: 2017-18 PAN:- AACAR4632G Appellant :- Rajyadharpara Chandpur Samabay Krishi Unnayan Samity Limited Vill:- Bhatsala, Post :- Chakbamongoria, P.S. :- Nadanghat,Block:- Purbasthali-I, Dist:- Purba Bardhaman, Pin:-713513 Before the Hon'ble Bench "SMC" ITAT, Kolkata 1. Your appellant is a Primary Agricultural Credit Society (PACS) registered under the West Bengal Co-operative Societies Act, 2006 as amended up to date.
2. Your appellant is a grass root level credit organization in co- operative banking systems. There are three tire systems in co- operative banking. At the top level there is State Cooperative Bank, at the middle level there are District Central Banks and in the bottom level there are Primary Agricultural Credit Societies. District Central Co-operative Banks cannot provide credit to the farmer's directly, it is Primary agricultural credit society (PACS) who can provide credit facilities directly to the members farmers. The primary object of your appellant is collection of deposits and provide credit facilities to its members. Your appellant accepts deposits in the nature of savings deposit, recurring deposit, time deposit from the members of your appellant society. Your appellant society doing banking business with its members.
The activities of your appellant are as follows: (1) Banking or Providing credit facilities to its members. (ii) Purchase of fertilizers in order to supply to the members of the society. (iii) Supply of water through submersible pump for irrigation The activities of your appellant are within the ambit of section 80P of the Income Tax Act 1961. Your appellant provide various types of loans like Loan Account KCC, Interest income is the main income source of your appellant. Your appellant paid interest to the members who keep deposit with your appellant society. Your appellant society paid interest to Burdwan Central Cooperative Bank for loan taken from them for the Banking Business of your appellant society. Burdwan Central Cooperative Bank is the Financing Bank of your appellant society. Your appellant earns interest on loans provided to the members of your appellant society and also earns interest from the deposits in bank in course its banking business.
4. Member deposits other bank cheques for clearance in their savings account. Your appellant society is not doing banking with public after obtaining licence from Reserve Bank of India, hence your appellant is not the member in clearing house. Your appellant took help from Axis Bank in respect of clearing of the outstation cheques in course of Banking Business of your appellant. Your appellant maintains savings account with Axis bank for smooth running of banking business of your appellant, hence the interest received from Axis bank is income from Business or Profession. Learned Commissioner of Income Tax (Appeals), Income Tax Department considers interest received from Axis bank as income from other sources based on the judgment delivered by Hon'ble Apex Court in the case of the Totgar's Co-operative Sale Society Ltd. vs. ITO 322 ITR 283 (S.C.) which is not applicable in the instant case.
Your appellant filed income tax return on 03/12/2017, vide acknowledgement no. 3237235700217 for the Assessment year 2017-18 showing total income nil after claiming deduction under section 80P of Rs. 21,46,280/-, 6. In course of its business of banking/providing credit facilities to its members your appellant has obtained interest from Burdwan central cooperative bank, on Term deposit maintained with them and the savings account thereon, besides your appellant has also received interest of Rs. 39,690/- from the savings account maintained with Axis Bank, Katwa Branch and Rs. 97/- from the savings bank account of Union Bank of India, Jahannagar Branch. Details of Interest received during the year 2016-17, relating to A.Y.2017-18: Particulars Details (Rs.) Amount (Rs.) Interest from Burdwan Central Cooperative Bank (Samudragarh Branch) Interest on term deposit 6772148.00 Interest on Savings Deposit 50029.00 6822177.00 Interest from Non-Cooperative Bank Interest from Savings deposit Axis Bank (Katwa Branch) 39690.00 Union Bank of India 97.00 (jahannagar Branch) 39787.00 Total Interest 6861964.00 Computation of Total Income as per Income Tax Return filed are as follows: Particulars Details(Rs) Amount(Rs) Net Profit as per Audited Profit & Loss 18,05,878 00 Account Add : Depreciation debited in P/L 39,567 00 Account Total : 18,45,445 00 Less : Depreciation Allowable 77,368 00 Total : 17,68,077 00 Add : Disallowable Expenditure u/s 36 1) P.P. 24,636 00 2) Provision for Bad & Doubtful Debts 1,50,847 00 1,75,483 00 Add : Disallowable Expenditure u/s 37 1 ) Sine Board Writing Expenditure 3000 00 Add : Disallowable Expenditure u/s 40A 1) Provision for Gratuity 1,99,720 00 Gross Total Income 21,46,280 00 Less : Deduction u/s.80P 21,46,280 00 Total Income NIL 8. The Learned Income Tax Officer, Ward-2(4), Burdwan considered the total amount of interest received of Rs. 68.61,9647- as Income from other sources and computed his assessed total income of Rs. 21,46,2807- on which a demand of Rs. 9.10,9497- raised which is completely Bad in Law. 8.1. The assessed total income computed by Learned Income Tax Officer, Ward-2(4), Burdwan are as follows: Particulars Details(Rs) Amount(Rs) Net Profit as per Profit & Loss Account 18,05,8787- Add : Depreciation debited in Profit & Loss 39,5677- Account 18,45,4457- Less : Depreciation Allowable as per the 77,3687- Act 17,68,0777- Add : Disallowable Expenditures and Provisional Expenses P.P. Contribution 24,636/- Provision for Bad & Doubtful Debts 1,50,847/- Provision for Gratuity 1,99,720/- Sine Board Writing Expenditure 3000/- 3,78,2037- 21,46,2807- Less : Interest on deposit to be considered 68,61,9647- under Income from Other Sources Income under the head Business & (-) 47,15,6847- Profession Income under the head Income from Other Sources Interest on Deposits 68,61,964/- Gross Total Income (=Rs. 68,61,964 - Rs. 21, 46,2807- 47,15,684) Less : Deduction under chapter -VI NIL (as discussed above no deduction is eligible u/s 80P) Total Income 21,46,280/-
The Learned Income Tax Officer, Ward-2(4), Burdwan denied to allow the deduction u/s 80P(2)(d) of the Income Tax Act 1961 of the amount of interest received from Burdwan Central Co-operative Bank. According to Section 2(19) "Co-operative society" means a co- operative society registered under the Co-operative Societies Act, 1912(2 of 1912), or under any other law for the time being in force in any State for the registration of Co-operative Societies: Burdwan Central Cooperative bank is Registered under the Cooperative Societies Act 1912 hence it is a Cooperative Society for the purpose of section 80P(2)(d).
Section 80P(2)(d) Means "in respect of any income by way of interest or dividends derived by the Co-operative society from its investments with any other co-operative society, the whole of such income".
The Cash deposited into bank during the year 2016-17 had completely scrutinized by. Ld. Income Tax Officer, Ward-2(4), Burdwan. Your appellant has submitted the details of bank accounts, details of cash deposited in bank of Rs. 1,61,500/-, copy of bank pass book of BCCB, Samudragarh Branch, Savings A/c No. 1361520200017020, Copy of Bank Statement of BCCB, Samudragarh Branch Account No. 1361510200022012, copy of Bank Statement of Axis Bank Account No. 911010041333859, copy of bank statement of Union Bank of India, Jahannagar Branch, Savings Account No. 458902010002049, copy of bank passbook of BCCB, Kalna branch, Savings account no. SOC118, members register, list of members loan against deposit sources of cash deposit, members cash deposit from 08/11/2016 to 30/12/2016. Reply of show-cause notice, copy of day book and other required document. Ld. Income Tax Officer, Ward-2(4) Burdwan was satisfied with the documents submitted in respect of cash deposit in bank during demonetization period including the whole Financial Year of 2016-17 and he mentioned on his Assessment Order in page no. 02, last para "It is observed from the submission filed that a sum of Rs. 20,66,000/- was deposited in cash in the bank account no. 911010041333859 maintained by the assessee with Axis Bank, Katwa Branch during the Financial Year: 2016-17, also another sum of Rs. 9,01,500/-was deposited in cash in the bank account no. 1361520200017020 maintained with BCCB, Sumudragarh Branch during the year. Yet another sum of Rs. 5000/- was found credited in the bank account no. 458902010002049 with Union Bank of India Jahannagar Branch during the year source of the said cash deposits in the above bank accounts was stated to be cash received from members, fertilizers and pesticides sales, KCC loan realised from members during the Financial Year: 2016-17." Cash deposit in bank already thoroughly scrutinized by the Ld. Income Tax Officer, Ward-2(4), Burdwan and again the case was selected for re-assessment on the same ground of cash deposited into bank, and Interest of Rs. 68,61,954/- again considered as Income from other sources, hence the Re-assessment proceedings is bad in Law. Re-assessment order issued on 26/03/2022. Appeal pending with CIT(Appeal). Therefore it is earnestly prayed to delete the unlawful tax burden imposed on the shoulder of your appellant society.
In the case of Gopinath Ghorai v. ACIT, circle 27, A.Y. 2005-06, ITAT- "A" Bench, Kolkata, Hon'ble ITAT Kolkata held, in page no. 06, para 05, of the order, dated 20/04/2016, in the aforementioned case that, "The assessment made by AO was 143(3)/147 is independent and separate from the order passed w/s 143(3) in as much as the scope of such assessment is limited to bringing to tax the income which has escaped assessment, made originally inter alia u/s 143(3) and the theory of doctrine of merger does not apply in the case of assessment made u/s 143(3) originally and the assessment made subsequently u/s 143(3)/147. Both these assessments stand independently on their own footing." Reliance is placed: (i) The Pr. Commissioner of Income Tax 17, Mumbai Vs. M/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited, Civil Appeal No. 8719/2022. (S.C.) (454 ITR 117) SC. (ii) Mavilayi Service Co-operative Bank Ltd. and others Vs. CIT, civil appeal no. 7343-7350 of 2019, Judgment delivered on 12/01/2021. 431 ITR 1 (SC). (iii) The recent decision of Hon'ble Supreme Court in the case of Kerala State Cooperative Agricultural and Rural Development Bank Limited vs. Assessing Officer [2023] 154.com 305(S.C.) Dated 14/09/2023 has upheld the view of allowing deduction under section 80P(2)(d) of the Act to the Cooperative Society. (iv) Dhatrigram Niralgachi Samabay Krishi Unnayan Samity Limited vs. Income tax officer, Ward 1(3), Burdwan, ITAT KOL Date of pronouncing order - 07/05/2025. (v) Deputy Commissioner of Income Tax, Circle 32, Kolkata Vs. Bongaon Co-operative Credit Society Limited, Bongaon, ITA No. 1101/Kol/2023, Date of Pronouncement 18/11/2024. (vi) The Rifle Factory Cooperative Society Limited Vs. Assistant Commissioner of Income Tax, Circle-49(1), Kolkata, ITA NO. 41/Kol/2023, date of pronouncement 11/04/2023 (vii) Bhairabnala Samabay Krishi Unnayan Samity Ltd. Vs. 1.T.O. Ward-1(1), Burdwan. ITA NO. 111/Kol/2022, Date of pronouncement 15/12/2022. (viii) Ghatal Co-operative Agriculture and Rural Development Bank Ltd. Vs. ACIT, Circle-38, Midnapur, ITA No. 114/Kol/2023, Date of Pronouncement 31.03.2023. (ix) Gopinath Ghorai v. ACIT, circle 27, ITA no. 01/kol/2016, A.Y. 2005-06, ITAT- "A" Bench, Kolkata, Sd/- Date: 08/07/2025 [SHYAMADAS BANDYOPADHYAY] Authorized Representative 5. It was the submission that the Assessing Officer may be directed to grant the assessee the benefit of deduction u/s.80P(2)(d) of the Act.
Ld.AR has also relied upon the decision of the Hon’ble Supreme Court in the case of M/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited, passed in Civil Appeal No.8719/2022 (SC) dated 20.04.2023/ 454 ITR 117(SC).
In reply, ld. Sr. DR vehemently supported the orders of the ld. Assessing Officer and ld.CIT(A).
I have considered the rival submissions. A perusal of the facts of the present case clearly show that M/s Burdwan Central Cooperative Bank Limited is registered as cooperative society. The assessee is a cooperative society which is in the business of banking and providing credit facilities to its members. As the assessee has received the interest income from its deposits with another cooperative societies, the assessee is entitled to deduction u/s.80P(2)(d) of the Act. Accordingly, the Assessing Officer is directed to grant the benefit of deduction u/s.80P(2)(d) of the Act claimed by the assessee in respect of interest income earned by the assessee from its deposits with M/s Burdwan Central Cooperative Bank Limited.