JAGANNATH CO-OPERATIVE CREDIT SOCIETY,KURLA (EAST) vs. INCOME TAX OFFICER, WARD 41(1)(2), KAUTALIYA BHAVAN

We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records, we noticed that assessee being a Co-operative Credit Society deriving income from providing credit facilities to the members and hence claimed its entire income as exempt u/s. 80P(2)(a)(i) of the Income Tax Act, 1961. Thus filed return of income u/s 139(1) of the Act declaring income of Rs. 1,99,130/- after claiming deduction u/s-80(2)(a)(i) of the Act of 1,14,21,040/- in respect of income on providing credit facilities to the member. As per provisions of section 80P(2)(a)(i) of the Act, the income attributable to providing credit facilities to the members is fully deductible. Therefore, interest received on providing credit facilities to the members and interest income earned on mandatory investment in fixed deposits in Co-operative Banks is a attributable income to providing credit facilities and therefore entire income of Rs. 1,14,21,040/- was claimed as deduction u/s 80P(2)(a)(i) of the Act.

In this regard, Ld. AR made detailed submissions as to how the interest income received on investment in fixed deposit with co-operative bank was not out of idle funds but investments were made as per statutory requirements and therefore, the said interest income attributes to providing credit facilities to members and eligible for deduction u/s 80P(2)(a)(i) of the Act.

It was also submitted that in its own case under the same provisions the deductions were allowed for A.Y 2013-14, 2014-15 an 2018-19, however AO without examining the merits of the submissions and without considering the case laws relied upon summarily rejected the claim of the assessee for this year even the first appellate authority i.e NFAC observed that interest earned from investment in nationalized bank by the cooperative society engaged in providing credit facilities to the members was not eligible for deduction u/s 80P of the Act.

After having gone through the facts of the present case and the submissions of the parties, we noticed from the records that assessee is a cooperative credit society and is distinct from the cooperative bank as has already been held by the Hon’ble Supreme Court in the case of PCIT VS. M/S ANNASAHEB PATIL MATHADI KAMGAR SAHAKARI PATHPEDI LIMITED CIVIL APPEAL NO. 8719/2022, wherein the court analyzed the issue whether, Co-operative Credit Societies are bank or not. While dismissing the Appeal filed by the revenue, the Hon'ble Supreme Court has observed the assesses Society cannot be termed as bank/Co-operative bank and that being a credit Society they are entitled to exemption u/s 80P(2)(a)(i) of the Act. Even otherwise on merit also and taking into CBDT circulars and even definition under the banking regulation act the respondent/Assessee Society cannot to be said to be a Co-operative Bank and therefore section 80P (4) shall not be applicable and that the respondent/assessee Society shall be entitled to exemption/benefit under section Jagannath Co-operative Credit Society, Mumbai. 80(P)(2) of the Income Tax Act in respect of entire income received by providing credit facilities including attributable income.

Moreover, issue raised in the present case is also squarely covered by multiple decisions of Coordinate Benches of ITAT, wherein it was consistently held that interest on investments made by the cooperative society as per the statutory mandate is income from business and thus eligible for deduction u/s 80P(2)(a)(i) of the Act and therefore reliance in this regard is being placed upon the following case laws.

Jagannath Co-operative Credit Society, Mumbai. iii. In the case of NPC Employees Cooperative Credit Society Limited AY 2020-21. It was held that assessee Society is exclusively engaged in providing credit facilities to the members, is entitled to deduction under section 80 P (2 (a)(i) of the act on interest income received by the assessee from State Bank of India o funds which are immediately required for its utilization in case of assessee being a member's credit cooperative society. iv. In the case of Indraprastha Nagari Patsanstha Ltd Vs. ITO, Sangli, it was held that Assessee a Co- operative Society is eligible for deduction u/s 80P(2) of the Act in respect interest income earn by Assessee Society from either any other Co-operative Society or Co-operative Bank. v. In the case of Mumbai Sales Tax Staff Co-op Credit Soc Ltd.

Therefore considering the entire facts and circumstances and also the legal prepositions as discussed by us above, we are also of the view that the interest and dividend income attributes providing credit facilities to members is eligible for deduction u/s 80P(2)(A)(i) of the Act. Thus the impugned orders passed by the Jagannath Co-operative Credit Society, Mumbai. AO and sustained by Ld. CIT(A) / NFAC are not in accordance with law and judicial pronouncements as discussed by us above, therefore they are set aside and AO is directed to delete the additions as the assessee is found eligible for deduction u/s 80P(2)(A)(i) of the Act. Thus the grounds raised by the assessee stands allowed.

In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 20/01/2026