INCOME TAX OFFICER, WARD 6(3), PUNE vs. MAHARASHTRA BANK EMPLOYEES COOP CREDIT SOCITEY LIMITED, PUNE

ORDER \nPER ASTHA CHANDRA, JM :\nTwo appeals filed by the Revenue are directed against the separate\norder(s) both dated 26.11.2024 of the Ld. Commissioner of Income Tax\n(Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Years (\"AYs\")\n2013-14 and 2017-18. Since the issue(s) involved are identical, these were\nheard together and are being disposed of by this common order.\n \n2. The Revenue has raised the following grounds of appeal:-\n\

1. On the facts and circumstances of the care and in law, the learned\nCIT(A) has erred in deleting the disallowance made by the Assessing\nOfficer of the deduction of Rs.2,99,19,650/- claimed under section\n80P of the Income-tax Act, 1961 being Interest earned from the\ninvestments with scheduled banks, Ignoring the decision of the\nHon'ble Supreme Court in the case of Totgars Co-operative Sales\nSociety Ltd. Vs. ITO, (SC) (322 ITR 283) (2010) wherein the Hon'ble\nCourt clearly held that the interest income which has been earned by\na co-operative society by investing surplus funds would come in the\ncategory of 'Income from other sources' taxable u/s 56 of the Act and\nwould not qualify for deduction as business income w/s 80P(2)(a) (i)\nof the Act.\n2. On the facts and circumstances of the case and in law, the learned\nCIT(A) erred in granting relief to the assessee Co-operative society\nwithout appreciating the fact that the above interest income does not\nsatisfy the ingredients of mutuality having been earned by\ncommercial activities carried out by the assessee with the non-\nmember banks/Co-operative banks and hence, such interest income\nneeds to be charged as income from other sources under section 56 of\nthe Income Tax Act, 1961.\n3. On the facts and circumstances of the case and in law, the learned\nCIT(A) failed to appreciate the fact that the entire deposits accepted\nfrom the members was a facility to the members, instead they were\nput into the cooperative bank as deposits to earn interest, the income\nof which cannot be considered to be attributable to the business of\nproviding credit facility to its members.\n4. On the facts and circumstances of the case and in law, the learned\nCIT(A) erred in holding that interest earned by the assessee on its\nsurplus investments with co-operative banks is eligible for deduction\nu/s.80P(2) (d) of the Income Tax Act, 1961 despite the fact that the\nprovisions of Sec.80P(4) of the Act specifically provides that the\nprovisions of Sec.80P shall not apply in relation to a cooperative bank\nand therefore, the benefit of deduction under the said provisions could\nnot have been extended to interest received on deposits kept in such\ncooperative banks.\n5. On the facts and circumstances of the case and in law, the learned\nCIT(A) erred in not giving due consideration to the decision of the\nHon'ble Karnataka High Court in the case of Pr. Commissioner of\nIncome Tax vs. Totagars Cooperative Sale Society (2017). (395 ITR\n611 Kar 2017), wherein, based on the decision of the Hon'ble Apex\nCourt in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO,\n(SC) (322 ITR 283) (2010), it was held that a co-operative society\nwould not be eligible for deduction u/s 80P(2)(d) on the interest\nincome earned by it on account of deposit of its surplus funds in a co-\noperative bank.\n6. On the facts and circumstances of the case and in law, the learned\nCIT(A) erred in holding that the assessee is entitled to 100% of\ndeduction under section 80P(2)(a)(i) in respect of whole of its income,\nwithout appreciating that not all of the income of the assessee were\nnot earned from the business of offering credit facilities to its\nmembers.\n7. The appellant craves leave to add to, amend, alter any of the above\ngrounds of appeal.”\n3. Briefly stated, the facts of the case are that the assessee is a Co-\noperative Society registered under the Maharashtra Co-operative Societies\nAct, 1960. It is engaged in the business of providing credit facilities to its\nmembers. The assessee society's membership is restricted to the employees\nof the Bank of Maharashtra, which is a Nationalized Bank. The assessee\nfiled its return of income for A.Y. 2013-14 on 28.09.2013 declaring a total\nincome of Rs. Nil. The return was duly processed u/s 143(1) of the Income\nTax Act, 1961 (the “Act”). Subsequently, the case was selected for\nscrutiny under CASS. Statutory notice u/s 143(2) of the Act was issued to\nthe assessee by DCIT, Circle-11(2), Pune on 01.09.2014 calling for various\ndetails. The notice was duly served on the assessee. The case was then\ntransferred to ITO, Ward-6(3), Pune(“AO”). The Ld. AO completed the\nassessment on 03.03.2016 assessing the total income at Rs.2,99,19,646.\nThereafter, the Assessee preferred an application to the Ld. PCIT, Pune\nunder section 264 of the Act and pursuant to the directions of the Ld.\nPCIT, the assessment was completed by the Ld. AO at assessed income of\nRs.2,99,19650/- by making an addition of Rs.2,99,19,650/- to the Nil\nincome returned by the assessee on account of disallowance of deduction\nunder section 80P(2)(a)(i) of the Act claimed by the assessee in respect of\ninterest income earned from fixed deposits with Bank of Maharashtra\namounting to Rs.2,95,80,110/- and interest on savings bank account\namounting to Rs.3,99,536/-, thereby aggregating to Rs. Rs.2,99,19,650/,.\nvide order dated 15.12.2018 passed under section 143(3) r.w.s.264 of the\nAct. During the assessment proceedings, the Ld. Assessing Officer ("AO”)\nfound that the assessee claimed deduction of Rs.2,99,19,646/- u/s\n80P(2)(a)(i) of the Act. The Ld. AO further found that the assessee has\nmade investments in Fixed Deposits in certain Nationalized Bank(s) and\nearned interest of Rs.2,95,80,110/- thereon and interest of Rs.3,39,536/-\nfrom saving bank account from Nationalized Bank totaling to\nRs.2,99,19,646/-.\n4. Aggrieved, the assessee carried the matter before the Ld. CIT(A) who\nallowed the deduction of interest claimed by the assessee u/s 80P(2)(a)(i) of\nthe Act observing that the identical issue has already been decided by the\nJurisdictional ITAT Pune in assessee's own case for earlier years and also\nplacing reliance on the decision(s) of Hon'ble Supreme Court in the case of\nPCIT vs. Annasaheb Patil Mathadi Kamgar sahkari patpedhi reported in\n454 ITR 117 and 454 ITR 528. The relevant observations and findings of\nthe Ld. CIT(A) reads as under :\n\

9. Decision:\n9.

and statement of facts. The grounds of\nappeal mainly relate to the only issue of addition of Rs.2.99,19,650/-being\ninterest on fixed deposits with Bank of Maharashtra on which the appellant\nsociety claimed deducted u/s.80P(2)(a)(i) of the Act. The appellant has stated\nthat it is registered under the Maharashtra Cooperative Societies Act, 1960\nand is engaged in the business of credit facilities to its members. It is\nrequired to create a reserve fund and invest the same in accordance with the\nprovisions of the Maharashtra Cooperative Societies Act and accordingly the\nsociety had invested part of its reserve fund in fixed deposits with Bank of\nMaharashtra which is the nationalized bank. The appellant society had\napplied for requisite permission from the registrar of cooperative societies\nu/s.70 of the Maharashtra Cooperative Societies Act and the registrar vides\nits letter dated 18-10-1995 in respect the investment of reserve funds had\ngranted permission for investing the funds in Bank of Maharashtra. The\nappellant has submitted that the issue is already covered in the favour of the\nappellant society for A. Yr.2007-08 to 2010-11, 2012-13, 2014-15 and 2018-\n19 and the copies of the orders of the Hon'ble ITAT, Pune have also been\nenclosed. Apart from the above, the appellant has also relied upon the\ndecision two latest decisions of the Hon'ble Supreme Court in the case of\nPCIT vs Anna sahib patel mathadi kamgarh sahkari patpedhi reported as\n454 ITR 117 and 454 ITR 528. Considering that the identical issue has\nalready been decided by the jurisdictional ITAT, Pune Bench in appellant's\nown cases in the earlier years, respectfully following the same, the grounds\nof appeal are allowed in favour of the appellant.\n10. In the result the appeal is allowed for statistical purposes.”\n5. Dissatisfied with such order of the Ld. CIT(A), the Revenue is in\nappeal before the Tribunal and all the grounds of appeal relate thereto.\n6. The Ld. AR reiterated the same submissions made before the lower\nauthorities in support of its claim of deduction of interest income u/s\n80P(2)(a)(i) of the Act and submitted that the impugned issue is no more\nres-integra as it is covered in favour of the assessee by catena of decisions\nof the coordinate bench(es) of the Tribunal including Pune Tribunal as well\nas other judicial forums. He submitted that the impugned issue has also\nbeen consistently decided by the Pune Tribunal in favour of the assessee in\nassessee's own case for AYs 2007-08 to 2010-11, 2012-13, 2024-15 and\n2018-19.\n7. The Ld. DR, on the other hand relied on the order of Ld. AO.\n8. We have heard the Ld. Representatives of the parties and perused\nthe material on record. Admittedly, there is no dispute on facts regarding\nthe assessee having derived the impugned interest income from fixed\ndeposits and savings bank account with Bank of Maharashtra, which is a\nNationalized Bank. We find some force in the argument of the Ld. AR that\nthe impugned issue is no more res-integra by virtue of catena of decisions\npassed various judicial forums. We also find that the impugned issue is\ncovered in favour of the assessee by the decision(s) of co-ordinate bench of\nthe Pune Tribunal in assessee's own case for AYs 2007-08 to 2010-11,\n2012-13, 2024-15 and 2018-19 on the basis of which the Ld. CIT(A) has\nallowed the appeal of the assessee. The facts in the AY 2013-14 under\nconsideration are identical to the facts in preceding AYs as well as in\nsubsequent AY 2018-19 already adjudicated by this Tribunal. Nothing has\nbeen brought on record by the Revenue to controvert the findings of Ld.\nCIT(A)/NFAC and Co-ordinate Bench of the Tribunal in assessee's own\ncase.\n9. We find that the Co-ordinate Bench of the Tribunal in its latest\ndecision in assessee's own case in for AY 2018-19,\ndated 20.12.2022 decided the impugned issue in favour of the assessee\nunder the similar set of facts, by observing as under :\n

4. We have heard both the sides and gone through the relevant material on\nrecord. It is seen that similar issue came up for consideration before the\nTribunal in assessee's own case for the A.Y. 2014-15 (ITA\nNo.1763/PUN/2017, order dated 06-08-2019) albeit in the appeal preferred\nby the Revenue. After examining the relevant points and following other\norders passed by the Pune Benches, the Tribunal upheld the eligibility of\ndeduction u/s.80P on such interest income. Both the sides are in agreement\nthat the facts and circumstances are similar. Respectfully following the\nprecedent, we overturn the impugned order and direct to grant the deduction\nu/s.80P(2)(a)(i) on such interest income.”\n10. In the light of the factual and legal position enumerated above and\nrespectfully following the decision of the coordinate bench of the Pune\nTribunal in assessee's own case (supra), for the parity of reasons we\nuphold the order of the Ld. CIT(A)/NFAC and direct the Ld. AO to allow the\ndeduction claimed by the assessee u/s 80P(2)(a)(i) of the Act in respect of\nthe impugned interest income. We hold and direct accordingly. The\ngrounds raised by the Revenue are accordingly dismissed.\n11. In the result, the appeal of the Revenue is dismissed.\nITA No. 209/PUN/25, A.Y. 2017-18\n12. Both the sides are unanimous in stating that the facts and the\nground of appeal in ITA No.209/PUN/2025 for A.Y. 2017-18 is identical to\nthe grounds raised in AY 2013-14 except for\nthe variance in amounts. Thus, in view of the fact that the issue(s) raised\nin both the appeals are identical and arising from the same set of facts, the\nfinding given by us while adjudicating the appeal in ITA No.\n208/PUN/2025 shall mutatis mutandis apply to the appeal in ITA No.\n209/PUN/2025 as well. Accordingly, the grounds of appeal raised by the\nRevenue in ITA No. 209/PUN/2025 are dismissed in the same terms.\n13. To sum up, both the appeals of the Revenue for AY 2013-14 (ITA No.\n208/PUN/2025) and AY 2017-18 (ITA No. 209/PUN/2025) are dismissed.\nOrder pronounced in the open court on 29th May, 2025.\nSd/-\n(R.K. Panda)\nVICE PRESIDENT\nSd/-\n(Astha Chandra)\nJUDICIAL MEMBER\nपुणे / Pune; दिनांक / Dated : 29th May, 2025.\nरवि\nआदेश की प्रतिलिपि अग्रेषित /