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Facts
The assessee, a cooperative society, claimed deduction under section 80P for AY 2021-22. The Assessing Officer (AO) denied the deduction, and the Commissioner (Appeals) upheld the denial. The assessee appealed, arguing the AO and CIT(A) did not properly examine the deduction claim related to providing credit facilities and supplying agricultural inputs.
Held
The Tribunal found that the lower authorities had focused on interest income from banks, overlooking the assessee's claim for deduction related to its core business activities of providing credit and agricultural supplies. The Tribunal held that the assessee was entitled to have its claim examined on merits.
Key Issues
Whether the lower authorities properly examined the assessee's claim for deduction under section 80P for income derived from providing credit facilities and agricultural supplies to its members, or if they erroneously focused on interest income from banks.
Sections Cited
80P(2)(a)(i), 80P(2)(a)(iv), 80P(2)(d), 80P(4), 143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 27.01.2025 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 23.12.2022 passed by learned Assessment Unit of Income-tax Department [“AO”] u/s 143(3) r.w.s. 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2021-22, the assessee has filed this appeal on the grounds as mentioned in Form No. 36 (Appeal Memo).
Page 1 of 7 assessee is claiming a society to be engaged in the business of providing credit facilities to its members and supplying of fertilizer, seeds, etc. to its members. For AY 2021-22, the assessee filed return declaring a total income of Rs. Nil after claiming deduction u/s 80P amounting to Rs. 24,06,897/-.
The case of assessee was selected for scrutiny and the AO issued notices u/s 143(2)/142(1). During proceedings, the AO raised queries for which the assessee made submissions. Ultimately, the AO completed assessment u/s 143(3) denying the deduction u/s 80P claimed by assessee and thereby assessing total income at Rs. 24,06,897/-. Aggrieved, the assessee carried matter in first appeal and contested for deduction u/s 80P but did not get any success. Now, the assessee has come in next appeal before us.
Presently, the assessee is aggrieved by the disallowance of deduction u/s 80P made by AO and upheld by CIT(A).
Ld. AR for assessee at first submitted following working of deduction of Rs. 24,06,897/- claimed by assessee in his Written-Synopsis:
Page 2 of 7
Thereafter, Ld. AR carried us to Page No. 18 to 20 of assessment-order and demonstrated that the AO has denied deduction to assessee taking into account the provisions of section 80P(2)(d), 80P(4), decision of Hon’ble Karnataka High Court in PCIT Vs. Totagars’ Co-operative Sale Society Ltd.
395 ITR 611 with reference to the interest income earned from co-operative bank. The Ld. AR, however, submitted that the AO has not paid due attention to the business carried on by assessee, namely the business of providing credit facilities to its members which is eligible for deduction u/s 80P(2)(a)(i) and supplying of fertilizer, seeds, etc. to its members which is eligible for deduction u/s 80P(2)(a)(iv). Ld. AR referred the working of Page 3 of 7 excluded the interest or dividend income earned from co-operative banks [Rs.
2,95,464 + 17,600 + 87,915] eligible for deduction u/s 80P(2)(d) in the working of overall deduction of Rs. 24,06,987/- claimed u/s 80P. Ld. AR submitted that although the assessee could very well claim deduction u/s 80P(2)(d) in relation to the interest/dividend income from co-operative banks but due to difference of opinion amongst judicial forums, the assessee did not claim. In nutshell, the main contention of Ld. AR is such that the deduction of Rs. 24,06,897/- claimed by assessee was u/s 80P(2)(a)(i)/(iv) but the AO has not examined the same in framing assessment-order.
Ld. AR next carried us to Page 15 of the order of first-appeal passed by CIT(A) and demonstrated that the CIT(A) although sought remand-report from AO but ultimately passed following order:
“7.6 The appellant disclosed three different business namely, sale of goods (Rs. 1,19,83,045/-), sale of service (Rs. 4,44,254/-) and interest from members (Rs. 1,22,49,939/-). The AO called for the details of interest income of Rs. 1,22,49,933/-and the deduction claimed u/s 80P(2)(a)(i) of the IT Act. The appellant failed to substantiate ledger account of the interest income earned from the advances or the credit facilities given to the members. In one of the submissions, the appellant stated before the AO that, they are eligible for deduction u/s 80P(2)(a)(i) and 80P(2)(a)(iv) of the IT Act. However, this submission filed before the AO is contrary to the ITR where the entire sum of Rs. 24,06,897/- was claimed as a deduction u/s 80P(2)(a)(i) of the IT Act.” Referring to above para, Ld. AR claimed that the CIT(A) has also not given a vehement adjudication to the claim of assessee.
With above submissions, Ld. AR contended that none of the lower authorities have given a vehement and meritorious adjudication to the Page 4 of 7 back to the file of AO for a vehement and speaking adjudication on the claim of assessee. He acknowledged that the assessee shall be making effective representation to AO as and when called upon.
Ld. DR for revenue, though dutifully relied upon orders of lower authorities yet could not controvert the submissions made by Ld. AR for assessee.
We have heard both the sides and perused the material available on record. The short issue arising for our consideration in the present appeal is whether the deduction of Rs. 24,06,897/- claimed by the assessee u/s 80P of the Act has been properly examined and adjudicated upon by the lower authorities. On a careful perusal of the assessment order, we find that the AO has proceeded to deny the deduction u/s 80P primarily by invoking the provisions of section 80P(2)(d) and 80P(4) of the Act and placing reliance on the decision of Hon'ble Karnataka High Court in PCIT Vs. Totagars' Co- operative Sale Society Ltd. (2017) 395 ITR 611 (Kar). The AO's entire focus appears to have been on the interest/dividend income earned by the assessee from co-operative banks. However, from the working of deduction as reproduced at paragraph 4 above, it is discernible that the deduction of Rs. 24,06,897/- claimed by the assessee does not include the interest or dividend income received from co-operative banks [aggregating to Rs.
2,95,464 + Rs. 17,600 + Rs. 87,915], which amounts have been specifically
Page 5 of 7 as claimed pertains to (i) income from the business of providing credit facilities to its members eligible u/s 80P(2)(a)(i); and (ii) income from the business of supplying fertilizer, seeds, etc. to its members eligible u/s 80P(2)(a)(iv). We find that neither the AO in the assessment-order nor the CIT(A) in the appellate order has rendered any specific or cogent finding on the eligibility of these two categories of income for deduction u/s 80P(2)(a)(i) and 80P(2)(a)(iv). The AO appears to have conflated the issue of interest income from co-operative banks with the broader claim of deduction, and the CIT(A), despite seeking a remand report, has also not given any categorical adjudication on the primary grounds of claim. In our considered view, the assessee is entitled to have its claim examined on merits with reference to the applicable provisions and supported by relevant facts and evidence. Therefore, in such circumstance, without expressing any opinion on the merits of the claim, we deem it appropriate to restore the matter to the file of the AO with a direction to:
(i) Examine the claim of deduction of Rs. 24,06,897/- u/s 80P(2)(a)(i) and 80P(2)(a)(iv) independently and on its own merits; (ii) Provide due opportunity of being heard to the assessee and call for such details/documents as may be required; (iii) Pass a fresh, speaking and reasoned assessment order after considering the assessee's submissions in accordance with law.
Page 6 of 7 before the AO and place all necessary material in support of its claim, and shall co-operate in the expeditious completion of assessment proceedings.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 10/04/2026
Sd/- Sd/- (PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 10/04/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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