SHARADCHANDRA NAGARI SAHAKARI PATSANSTHA MARYADIT,PUNE vs. ITO WARD 10(1), PUNE

This appeal filed at the instance of assessee is directed against the order of Ld. CIT(A)/NFAC dated 30.03.2024 which is arising out of the assessment order u/s 143(3) r.ws. 144B of the Act for Assessment Year 2020-21 framed on 22.09.2022 by the ITO, NFAC.

Brief facts of the case are that the assessee is a cooperative society established with the object to enroll the members, to educate the members, to effect cooperation, to accept deposits under various schemes and pay interest thereon and to lend money to members. Income of Rs.3,92,570/- declared in the e-return for assessment year 2020-21 filed on 06.01.2021 after claiming deduction u/s 80P of the Act at Rs.1,33,50,608/-. The case selected for complete scrutiny followed by validly serving notices u/s 143(2) and 142(1) of the Act. During the course of assessment proceedings, Ld. Assessing Officer observed that principle of mutuality cannot be invoked in the instant case as basic requirement of mutuality are missing. Ld. Assessing Officer also observed that the assessee has invested surplus funds with cooperative banks and other banks which are not eligible for deduction and such interest income from such investments are not allowable u/s 80P(2)(d) of the Act. Ld. Assessing Officer taking into consideration the fact that the assessee has admitted nominal/associate members who do not have voting rights, the principle of mutuality is violated and the nature of business of the assessee society bears the character of a banking institution. Accordingly, income assessed at Rs.1,37,43,180/-.

Aggrieved the assessee preferred an appeal before Ld. CIT(A)/NFAC but failed to succeed. Now the assessee is in appeal before this Tribunal.

Ld. Counsel for the assessee, at the outset, submitted that out of the total interest income earned from banks/cooperative banks/MSEDCL at Rs.4,16,37,342/-, interest income of Rs.4,15,27,813/- is earned from deposits with cooperative banks which are eligible for deduction u/s 80P(2)(d) of the Act. For this he relied on the decision of Co-ordinate Bench of this Tribunal in the case of Samarth Nagari Shakari Path Sanstha Maryadit vs. ITO in dated 03.05.2024.

On the other hand, Ld. DR supported the orders of the lower authorities. 7. We have heard rival contentions and perused the records placed before us. We observe that the assessee which is a co- 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