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Facts
The assessee, a credit cooperative society, earned interest income of Rs.31,05,626/- from investments in cooperative banks. The Assessing Officer disallowed the deduction claimed under Section 80P(2)(d) based on the Totagars Cooperative Sale Society Ltd. case. The CIT(A) dismissed the appeal ex-parte.
Held
The Tribunal held that the interest income earned from other cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act. Following previous decisions of coordinate benches, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition.
Key Issues
Whether interest income earned by a cooperative society from deposits made with other cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act.
Sections Cited
80P, 80P(2)(d), 80P(2)(a)(i), 143(3), 147
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2018-19 Parag Nagari Sahakari Vs. ITO, Ward-10(1), Pune. Patsanstha Maryadit, At Post Manchar, Taluka Ambegaon, Pune Nasik Road, Manchar, Pune- 410503. PAN : AAEAP1251D Appellant Respondent Assessee by : Shri Abhay Avachat Revenue by : Shri A. D. Kulkarni Date of hearing : 01.04.2025 Date of pronouncement : 03.06.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 18.10.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19.
2. The appellant has raised the following grounds of appeal :- “Each ground is taken without prejudice to each other. On the facts and in the circumstances of the case and in law and 1. The learned AO has erred in not considering and in not allowing deduction under section 80P of the Income Tax Act in respect of CIT (A) erred in confirming the same.
The learned AO has erred in denying deduction claimed by assessee u/s 80P despite compliance with relevant provisions and the ld. CIT (A) erred in confirming the same.
The ld. AO has erred in holding that assessee is not entitled to the benefit of deduction u/s 80P(2)(d) and 80P2ai of the Act in respect of interest income earned out of investments made with cooperative Banks.
The ld. AO and CIT A erred in not following judgements of jurisdictional forum on the said issue while passing order.
The learned CIT Appeals erred in dismissing Assessee's appeal without affording adequate opportunity of being heard. The appellate proceedings, thus, suffer from principles of natural justice and needs to be set aside.
The assessee prays before your honour to afford and allow him an opportunity of being heard in interest of natural justice and on merits of the case as well, before the lower authorities or else to decide the matter if the honourable bench permits.
7. The assessee hereby requests for allowing any other relief as available under the law.
8. The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal
.”
3. Facts of the case, in brief, are that the assessee is a credit cooperative society duly registered under Maharashtra State Cooperative Societies Act and is engaged in providing credit facilities to its members and also accepting deposit from them. During the course of assessment proceedings, the Assessing Officer found that the assessee co-operative society has earned interest income of Rs.31,05,626/- from two cooperative banks namely Sharad Sahakari Bank Ltd. and Pune District Central Co-operative Bank Ltd. and claimed deduction u/s 80P(2)(a)(i)/ 80P2 d of the IT Act. The Assessing Officer in the light of decision of Totagars Cooperative Sale Society Ltd., (2010) 188 taxman.com 282 (SC) disallowed the deduction claimed by the assessee co-operative society u/s 80P(2)(a)(i)/ 80P2 d of the IT Act and made the addition of Rs.31,05,626/- being interest income under the head income from other sources. Accordingly, the assessment was completed u/s 143(3) of the IT Act by determining taxable income at Rs.31,05,626/- as against the income returned by the assessee at Rs.Nil.
4. Since the assessee remained absent, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee, however it is also seen that the Ld. CIT(A)/NFAC has decided the case on merits of the case after relying on various case laws including Totagars Cooperative Sale Society Ltd. vs. ITO, [2010] 188 taxmann.com 282 (SC) and PCIT, Hubli vs. Totagars Cooperative Sale Society, [2017] 83 taxmann.com 140 (Karnataka). It is this order against which the assessee is in appeal before this Tribunal.
5. Ld. AR appearing from the side of the assessee submitted before us that the ex-parte order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR furnished written submission before us and requested to delete the addition made on account of disallowance of deduction claimed by the assessee u/s 80P(2) of the IT Act of Rs.31,05,626/-. It was also contended before the bench that the assessee credit cooperative society has invested funds with other cooperative banks which are also registered cooperative societies and therefore the interest income received from those cooperative banks are deductible u/s 80P(2)(d) of The IT Act. Learned AR submitted before us that the reliance place by Ld. CIT(A)/NFAC on Totagars Cooperative Sale Society Ltd’s case, and on the judgement of Gujarat High Court and also on the decision of Ahmedabad Tribunal is not correct since there are number of cases of this coordinate jurisdictional tribunal wherein the issue has already been decided in favour of the various other credit cooperative societies. In this regard, Ld. AR placed reliance on following case laws :- (i) Yashwant Nagari Sahakari Patsanstha Maryadit vs. ITO, dated 04.06.2024. (ii) Kolhapur District Central Co-op. Bank Kanista Sevakanch Sahakari Pat Sanstha Ltd. vs. ITO, dated 01.01.2024. (iii) Sharchandra Nagari Sahakari Patsanstha Maryadit vs. ITO, ITA No.1391/PUN/2024 dated 24.03.2025.
(iv) Jakraya Multi-State Co-operative Credit Society Ltd. vs. ITO, dated 01.10.2024.
6. Ld. AR also placed heavy reliance on the decision passed by coordinate bench of jurisdictional Tribunal in the case of ShriKrushna Gramin Bigarsheti Patsanstha wherein the Tribunal has allowed assessee’s claim of deduction u/s 80P(2)(d) despite non- appearance by the assessee before Ld. CIT(A). Accordingly, Ld. AR prayed to delete the addition of Rs.31,05,626/- made by the Assessing Officer on account of disallowance of deduction claimed u/s 80P(2) of the IT Act.
Ld. DR appearing from the side of the Revenue relied on the order passed by subordinate authorities and requested to confirm the same.
We have heard the Ld. counsels from both the sides and perused the material available on record including the written submission and paper book and copy of decisions produced by the assessee co-operative society. In this regard, we find that the issue raised by the assessee is no more rest integra in the light of various decisions passed by this coordinate bench of jurisdictional Tribunal in the case of other credit cooperative societies including those which are also relied on by the assessee. In this regard, we find that Tribunal in the case of Sharadchandra Nagri Sahkari Patsanstha Maryadit in order dated 24-03-2025 has allowed the deduction u/s 80P(2)(d) claimed by the credit cooperative society by observing as under :- “7. We have heard rival contentions and perused the records placed before us. We observe that the assessee which is a co-operative society has declared income of Rs.3,92,570/- after claiming deduction u/s 80P at Rs.1,33,50,608/-. We also observe that during the year the assessee society has earned interest income of Rs.18,96,95,893/- and has made interest payments of Rs.13,78,57,308/-. Further, the net total income of Rs.1,37,43,180/- has been assessed after considering the interest income earned from surplus funds deposited with cooperative banks at Rs.4,15,27,813/-. We observe that since the cooperative banks are basically cooperative societies, therefore, the interest earned from cooperative banks are clearly eligible for deduction u/s 80P(2)(d) of the Act and this view has been consistently followed by the Co-ordinate Bench of Tribunal in plethora of decisions including that of Samarth Nagari Shakari Path Sanstha Maryadit (supra) and The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in order dated 27.05.2022. Therefore, in view of the above, the interest income from cooperative banks at Rs.4,15,27,813/- is eligible for deduction u/s 80P(2)(d) of the Act. However, deposit with MSEDCL at Rs.1,09,529/-, Ld. Counsel for the assessee failed to furnish any judicial precedent, therefore, disallowance to the extent of Rs.1,09,529/- is hereby confirmed. In view of the above, against the total disallowance u/s 80P of the Act at Rs.1,33,50,608/-, we allow the deduction u/s 80P of the Act to the extent of Rs.1,32,41,080/- and confirm the disallowance of Rs.1,09,529/-. Effecting grounds of appeal
raised by the assessee are partly allowed. In the result, the appeal of the assessee is partly allowed.” 8.
9. Accordingly respectfully following the above decision passed by a coordinate bench of this tribunal in the case of Sharadchandra