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Facts
The assessee, a Primary Agricultural Co-operative Society, declared a total income of Nil after claiming a deduction of Rs. 1,10,05,198/- under section 80P(2)(a)(i) on interest income earned from investments in banks. The AO disallowed the deduction and added back the income, treating it as interest from a nationalized bank, not a cooperative society. The CIT(A) upheld the AO's order, relying on the Totagars Co-Operative Sale Society case.
Held
The Tribunal held that interest earned by a cooperative society from its investments in cooperative banks is eligible for deduction under Section 80P(2)(d) of the Act. The Tribunal distinguished the cases relied upon by the revenue, stating that a cooperative bank is considered a cooperative society and not just a banking company under the Banking Regulation Act, 1949.
Key Issues
Whether interest income earned by a cooperative society from investments in cooperative banks is eligible for deduction under Section 80P of the Income Tax Act, 1961, especially in light of Section 80P(4).
Sections Cited
250, 143(3), 144B, 80P, 80P(2)(a)(i), 56, 80P(2)(d), 80P(4)
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Income Tax Appellate Tribunal, COCHINBENCH “DB”, COCHIN
Per Shri Anikesh Banerjee (JM): Both the appeal of the assessee was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for assessment years2020-21 and 2023-24, date of order 23/07/2025. The impugned orders were emanated from the Assessment Unit, Income-tax Department (for brevity, the “Ld.AO”) passed u/s. 143(3) r.w.s 144B of the Act, dated of order 12.09.2022 for and 656/Coch/2025 Kayanna Service Co-operative Bank AY 2020-21 &for AY 2023-24 date of order 28/02/2025. Both the appeals are of same nature of facts and having common.
Both the appeal isheard together, taken together and dispose of by a common order. is taken as lead case.
Brief facts of the case are that the assessee is a Primary Agricultural Co- operative Society (PACS) registered under Kerala Co-operative Societies Act under Government of Kerala State. The only business is in the jurisdiction of Kayanna Panchayatha in Koyilandy Taluk, Kozhikode district in Kerala State. The assessee filed the return and declaring gross total income of Rs. 1,10,05,198/- and the total income declared Nil after claiming deduction u/s 80P(2)(a)(i). The assessee claimed deduction of Rs. 1,10,05,198/-. During the assessment proceeding the Ld.AO find that the assessee earned interest amounting to Rs. 4,50,39,123/- from Commercial Bank and Cooperative Bank but assessee has claimed of Rs.1,10,05,198/- as deduction under Chapter VI-A. The rest of the amountthe assessee received from co-operative bank and claimed as exempt income. Ld.AO rejected the claim of deduction u/s 80P amounting to Rs. 1,10,05,198/- and added back with the total income of the assessee. Being aggrieved the assessee filed the appeal before the Ld. CIT(A). The Ld. CIT(A) found that the alleged interest income was not interest received from members of assessee-society for providing credit facilities to them. What was sought to be taxed U/s 56 is the interest income arising on the surplus invested in cooperative bank and financial institution other that the “co-operative society”.The Ld. CIT(A) rejected the appeal of the assessee relied on the order of Totagars Co-Operative Sale Society Vs. ITO (2010) 188 Taxman 282 (SC). Before aggrieved the assessee filed an appeal before us.
and 656/Coch/2025 Kayanna Service Co-operative Bank 4. Ld.AR argued and stated that the assessee earned interest from investment of cooperative bank. The issue is well settled and assessee is allowable for deduction u/s 80P related to alleged interest of Rs. 1,10,05,198/-.
Ld.DR argued and stands in the favour of the revenue authorities.
We have heard the rival submission and considering the documents available on record. We find that the assessee earned interest amount of Rs. 1,10,05,198/- which claimed deduction u/s 80P of the Act. The assessee claimed that said amount was earned from investment from cooperative bank and saving bank account. The revenue has treated the income from interest in cooperative bank as nationalized bank not as cooperative societies.In our considered view the issue is well settled by the order of the Hon’ble Supreme Court. The revenue has restricted the claim of deduction U/s 80P(2)(d) in pursuance of section 80P(4) of the Act and the cooperative bank is not considered as cooperative society. Respectful reliance was placed on the order of PCIT Vs Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited, Civil Appeal No. 8719/2022 dated 20/04/2023and Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. KSCARDB vs. Assessing Officer, [2023] 458 ITR 384 (SC) where the Hon’ble Apex Court categorically stated that cooperative bank is the cooperative society and not acted as Bank under Banking Regulation Act,1949. We note the orders of the coordinate benches of ITAT who have taken same view in favour of the assessee. Our respectful finding is the order relied by the revenue is factually distinguishable.Considering the ratio laid down the Hon’ble Apex Court, the interest earned from investment in cooperative bank is allowable deduction U/s 80P(2)(d) of the Act.We direct Ld. AO to allow the deduction U/s 80P related to interest earned by the assessee from cooperative bank& cooperative society in and 656/Coch/2025 Kayanna Service Co-operative Bank impugned assessment year. We setaside the impugned appeal only for limited verification purposebefore the Ld.AO. Needless to say, the assessee should get reasonable opportunity of being heard in set aside assessment proceedings. Accordingly, the appeal of the assessee is allowed for statistical purposes.
The facts and circumstances in the above appeal, identical to , which we have already decided in favour of the assessee. Therefore, the decision arrived at above shall apply mutatis mutandis to the appeal also and the appealof the assessee is allowed for statistical purposes.
In the result, both appeals of the assessee bearing and areallowed statistical purposes. Order pronounced on 13th day of November 2025 in accordance with Rule 34(4) of the Income tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (INTURI RAMA RAO) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,�दनांक/Dated: 13/11/2025 Disha Raut, Stenographer Copy of the Order forwarded to: अपीलाथ�/The Appellant , 1. ��तवाद�/ The Respondent. 2. आयकरआयु�त CIT 3. �वभागीय��त�न�ध, आय.अपी.अ�ध.,/DR, ITAT, 4. COCHIN गाड�फाइल/Guard file. 5.