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Facts
The assessee, Avkar Urban Co-op. Credit Soc. Ltd., filed its return for AY 2017-18 declaring Nil income. The case was selected for limited scrutiny due to a large deduction claimed under Chapter VI-A. The Assessing Officer observed that the assessee claimed deduction u/s 80P(2)(a) and disallowed Rs.1,34,177/- of deduction claimed u/s 80P(2)(d) on interest and dividend income received from Surat District Cooperative Bank, which was a cooperative society.
Held
The Tribunal considered the grounds of appeal concerning the disallowance of deduction u/s 80P(2)(d) on interest and dividend income earned from a cooperative bank. The Tribunal relied on the decisions of the Hon'ble Gujarat High Court in the cases of Ashwanikumar Arban Co-operative Society Ltd. and PCIT vs. Rajkot Lodhika Sahakari Kharid Vechan Sangh Ltd., which held that such income is eligible for deduction.
Key Issues
Whether interest and dividend income earned by a cooperative society from investment in a cooperative bank is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.
Sections Cited
80P(2)(d), 250, 143(2), 142(1), 129, 263
AI-generated summary — verify with the full judgment below
Before: MS. SUCHITRA RAGHUNATH KAMBLE & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the revenue emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 18.06.2025 by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2017-18.
The grounds of appeal
raised by the assessee are as under: “1. That the CIT(A) erred in confirming the disallowance of deduction u/s 80P(2)(d) on Interest and dividend received from Co-op. Bank of Rs.1,84,177/-.
2. That the deduction claimed u/s 80P(2)(d) of Rs.1,84,177/- may kindly be allowed.
3. The appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of Appeal.”
/AY.2017-18 Avkar Urban Co-op. Credit Soc. Ltd.
The facts of the case in brief are that the assessee filed its return of income for AY 2017-18 on 15.08.2017, declaring total income of Rs. Nil. The was selected for limited scrutiny through CASS for large deduction under Chapter VI- A of the Act from total income. The assessee society was engaged in the business of granting of various credit facilities to its member. Various notices u/s 143(2), 142(1) and 142(1) r.w.s. 129 of the Act were issued on 28.08.2018, 13.03.2019, 07.09.2019 and served on the assessee. The Assessing Officer (in short, ‘AO’) observed that assessee had claimed Rs.70,01,142/- deduction u/s 80P(2)(a) of the Act. The assessee submitted that the main objective of the co- op. society is ‘Granting various loans and to collect deposits to encourage savings.” The reply of the assessee is at pages 2 to 6 of the assessment order. As per section 80P(2)(d) of the Act, deduction is available in respect of income by way of dividend and interest received by the co-operative society on its investment with any other co-operative society. The AO relied on the decision in cases of CIT vs. Bankimpur Club Ltd., 226 ITR 97 (SC), Surat Vankar Sahakari Sangh Ltd. vs. ACIT, TA No.73 to 96 of 2016 (Guj. – HC), Totagars’ Co-operative Sale Society Ltd. vs. ITO, Karnataka, (2010) 188 Taxman 288 (SC), Totagars’ Co- operative Sale Society Ltd. vs. PCIT, (2017) 83 taxmann.com 143 (Karnataka), Uttar Gujarat Uma Co-op. Soc. Ltd. vs. ITO, & 1671/Ahd/2018, SBI Employees Co-op. Credit & Soc. Ltd. vs. CIT, & 900/Ahd/2014, Sabarkantha District Co-op. Milk Producers Union Ltd. vs. CIT, TA No.473 of 2014, dated 16.06.2014 (Guj.). He completed the assessment by making addition of Rs.1,34,177/- towards disallowance of deduction claimed u/s 2 /AY.2017-18 Avkar Urban Co-op. Credit Soc. Ltd. 80P(2)(d) of the Act. Total income was assessed at Rs.1,34,177/- as against returned income of Rs. Nil.
Aggrieved by the order of AO, the assessee filed the appeal before the CIT(A). The CIT(A) reproduced the findings of the AO, which is at pages 3 to 9 of his appellate order. The submission of the appellant is reproduced at pages 10 to 20 of his appellate order. He observed that the interest and dividend income of Rs.1,84,177/- has been earned from the Surat District Cooperative bank. As per section 80(P)(2)(d) of the Act, interest earned ought to be out of investment from cooperative society. He relied on the decisions of Totagar’s Co-op. Sales Society Ltd. vs. ITO, 322 ITR 283 (SC), SBI vs. CIT, 72 taxmann.com 64 (Guj.) and sustained the addition made by AO. Accordingly, he dismissed the appeal of the appellant.
Aggrieved by the order of CIT(A), both the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee filed a paper book including copy of ITR, computation, P&L account and balance sheet, interest and dividend income ledger a/c for AY 2017-18. He relied on the decisions in cases of (i) Surat Vankar Sahkari Sangh Vs ACIT, 72 taxmann.com 169 (Gujarat), (ii) CIT Vs Sabarkantha District Co-operative Milk Producers Union, TA No. 473 of 2014, dated 16/06/2014, (iii) Merwanjee Cama Park Co- operative Housing Society Vs ITO, (iv) Kanilndass Udyog Bhawan Premises Co-operative Society Ltd Vs ITO, taxmann.com 15 (Mumbai Trib), (v) Veer Cooprative Groupm Housing Society Vs ITO, 67 ITR (trib) ITAT (Del), (vi) PCIT Vs Totgars Co-oprative Sales Society Ltd., 78 taxmann.com 3 /AY.2017-18 Avkar Urban Co-op. Credit Soc. Ltd. 169 (Kar), (vii) Totgars Cooprative Sales Society ltd Vs ITO, 188 Taxman 282 (SC), (viii) The Uttar Gujarat Uma Co-operative Society vs. ITO, & 1671/Ahd/2018, (ix) Menasi Seemeya group Gramagala Seva Sahakari Sangh Niyamitha Venalli Vs CIT, & 610/ BNG/2014, (x) Solitaire CGHS vs. PCIT, (xii) Sasme Co-op Society vs. PCIT, ITA No. 185/SRT/2020 (xiii) Bardoli Vibhag Gram Vikas Co Operative Credit Society Ltd. V/s PCIT, 127 taxmann.com 33, (xiv) Navapura Co Op Credit Consumer Society Ltd. vs. ITO, in ITA No.711/SRT/2023, dated 20.12.2023 (xv) Vishal Co-operative Housing Services Society Limited vs. ITO, in ITA No.886/SRT/2023, (xvi) Althan Bhatar Co-operative Credit Society Ltd vs. ACIT, ITA No.143/SRT/2024, dated 30.05.2024 (xvii) Shree Laxmi Co-Op. Savings & Credit Society Ltd. vs. ACIT, ITA No.200/SRT/2024, dated 10/06/2024 and (xviii) PCIT vs. Ashwinkumar Arban Co-operative Society Ltd., (2024) 168 taxmann.com 314 (Guj.). The ld. AR submitted that the Hon’ble Gujarat High Court in case of Ashwanikumar Arban Co-operative Society Ltd. (supra) has considered and distinguished the order passed by the Hon’ble Supreme Court in case of Totagars Co-operative Sales Society Ltd. (supra) and held that deduction u/s 80P(2)(d) is available to Co- operative Societies on income earned as interest on investment made with co- operative bank, which in turn is itself a co-operative society.
On the other hand, learned Commissioner of Income-tax – Departmental Representative (ld. CIT-DR) supported the order of lower authorities.
We have heard both the parties and perused the material available on record. We have also deliberated upon the decisions relied upon by both sides. 4 /AY.2017-18 Avkar Urban Co-op. Credit Soc. Ltd. The grounds raised
by the assessee, pertains to the deduction claimed u/s 80P(2)(d) of the Act on account of interest on investment held with Surat District Co-operative Bank Ltd. There is no dispute that the Surat District Co- operative Bank Ltd. is a co-operative society duly registered under Gujarat Co- operative Societies Act, 1961. The ld. AR has relied on the decisions of the Hon’ble jurisdictional High Court in case of Ashwinkumar Arban Co-operative Society Ltd. (supra) wherein the Hon’ble jurisdictional High Court held that deduction u/s 80P(2)(d) is available to co-operative societies on income earned as interest on investment made with co-operative bank, which in turn is a co- operative society. In case of Ashwanikumar Arban Co-op. Society Ltd. (supra), it was held as under: “28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. (supra) as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 80P(2)(d) of the Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. …………..
33. In view of the above dictum of law as well as the provisions of the Act which are considered we are of the opinion that the provisions of section 80P(2)(d) would be applicable in the facts of the case and the PCIT was not justified in invoking revisional powers under section 263 of the Act which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) of the Act which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled.”