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Facts
The assessee, Pune Zilla Sahakari Dudh Utpadak Sangh Maryadit, a Federal Co-operative Society, received interest and dividend income totaling Rs.1,46,90,994/- from PDCC Bank and other Co-operative Societies. The Assessing Officer disallowed the deduction claimed under Section 80P(2)(d) of the Income Tax Act, 1961, arguing that PDCC Bank is not a Co-operative Society. The CIT(A) upheld the disallowance.
Held
The Tribunal, following precedents from the Karnataka and Gujarat High Courts, held that Co-operative Banks are indeed Co-operative Societies for the purpose of Section 80P. Consequently, the interest and dividend income earned by the assessee from such Co-operative Banks/Societies is eligible for deduction under Section 80P(2)(d). The Tribunal also set aside the issue of deduction under Section 80P(2)(c) for A.Y. 2018-19 to the AO for de-novo adjudication.
Key Issues
Whether interest and dividend income earned by a Co-operative Society from other Co-operative Banks/Societies is eligible for deduction under Section 80P(2)(d) of the Income Tax Act. Whether a co-operative bank qualifies as a co-operative society for Section 80P purposes. Eligibility of deduction under section 80P(2)(c).
Sections Cited
Section 80P(2)(d), Section 250, Section 143(3), Section 80P(2)(a)(i), Section 10(34), Section 80P(2)(c), Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: MS.ASTHA CHANDRA & DR.DIPAK P. RIPOTE
PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by the Assessee are against the separate orders of ld.Commissioner of Income Tax(Appeal)[NFAC], passed under section 250 of the Income Tax Act, 1961 both dated 30.07.2025 emanating from the separate assessment orders under section 143(3) of the Act, 1961 dated 19.12.2019 and 19.01.2021 for the A.Y.2017-18 and 2018-19 respectively. For the sake of convenience, both the appeals were heard together and decided in a ITA Nos.2194 & 2195/PUN/2025 [A]
common order. We treat appeal in ITA No.2194/PUN/2025 as lead case. The Assessee for A.Y.2017-18 has raised the following grounds of appeal : “1] The learned CIT A NFAC erred in sustaining the rejection of the assessee society's claim for deduction under section 80 P(2)(d) in respect of interest and dividend received from Cooperative banks. 2] The learned CIT A NFAC erred in sustaining the addition of Rs.1,18,71,993/- relating to interest on fixed deposits with Cooperative banks and Rs.28,19,001/- relating to dividend on shares of Cooperative banks.
3] The total addition of Rs.1,46,90,994/- under section 80P(2)(d) be deleted and the society's assessed income be reduced to that extent. 4] Such other orders be passed as deemed fit and proper.
5] The appellant prays for leave to add to, modify or amend its Grounds of Appeal and lead evidence.”
Findings & Analysis :
We have heard both the parties and perused the records.
Basic Facts :
1 As emanating from the assessment order, Assessee is registered under Maharashtra State Co-op Societies Act, 1960 and is a Federal Co-operative Society and various primary co-operative milk societies of Pune District are its Members. The Assessee collects milk from members and sales part of the same to 2
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government and part of the sale is made to Mahananda dairy Mumbai and also in open market. Assessee filed Return of Income for A.Y.2017-18 on 30.10.2017. Assessee’s case was selected for scrutiny under CASS.
During the Assessment Proceedings, Assessing Officer noted that Assessee has received interest from PDCC Bank, Pune of Rs.1,18,71,993/-. It has received dividend from PDCC Bank of Rs.3,80,001/-. It has received dividend from Other Co-operative Society of Rs.24,39,000/-. Thus, the total was Rs.1,46,90,994/-. Assessing Officer held that the said income of Rs.1,46,90,994/- is not eligible for deduction under section 80P(2)(d) of the Act. Assessing Officer held that PDCC Bank is not a Co-operative Society, hence, Assessee is not eligible for 80P(2)(d) of the Act. Aggrieved by the assessment order, Assessee filed appeal before the ld.CIT(A) who confirmed the assessment order.
Ld.CIT(A) confirmed the assessment order relying on decision of Hon’ble Supreme Court in the case of Totagar’s Co-operative Society Ltd, 322 ITR 283 [2010] and Mavilayi Service Co-operative Bank Ltd., Vs. CIT 431 ITR 1 [2021]. 3
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Aggrieved by the order of ld.CIT(A), Assessee has filed appeal before this Tribunal.
Ld.AR for the Assessee submitted that the issue is covered in favour of Assessee by the decision of ITAT Pune.
1 Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of Assessing Officer and ld.CIT(A)
The issue before us is, whether interest and dividend earned by Assessee Society from PDCC Bank and Other Co-operative Society is eligible for deduction under section 80P(2)(d) or not!
Section 80P(2)(d) of the Act is reproduced here as under : “80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :— ………………………
(d) in respect of any income by way of interest or dividends derived 4
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by the co-operative society from its investments with any other co-operative society, the whole of such income;
The Hon’ble Karnataka High Court in the case of PCIT Vs. Totagar’s Co-operative Sale Society Ltd., 392 ITR 74 [2017] dated 05.01.2017 has held as under : Quote.”
Briefly the facts of the case are that the respondent assessee is a Co-operative Credit Society providing credit facilities to its members, and marketing the agricultural produce of its members; it runs a kirana section, rice mills, van section, medical shop, Arecanut trading section, lodging in the name of Samrat Hotels in Sirsi, and is also involved in plying and hiring of goods carriage. After claiming a deduction of Rs.4,09,34,404/-under Section 80P of the Income Tax Act, ('the Act' for short), along with deduction under Section 10(34) of the Act, the assessee filed its returns. While assessing the income tax returns, the Assessing Officer disallowed the claim of deduction under Section 80P(2)(d) of the Act, to the extent of Rs. 3,34,970/-. The said deduction was disallowed ostensibly on the ground that the said amount of income was earned by the assessee in the form of interest from deposits in the Co-operative Banks. Thus, it should be brought to tax under the head "other sources". Therefore, the assessee was not eligible for deduction under Section 80P(2)(d) of the Act, on this count. Therefore, the Assessing Officer made an addition of the interest earned by the assessee from the Co-operative Banks by denying deduction under Section 80P(2)(d) of the Act.
………………………
The learned counsel for the Revenue has pleaded that two substantial questions of law are raised in the present appeal, namely, 5
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'
Whether the learned Tribunal was justified in deleting the additions made by the Assessing Authority being the disallowed deduction claimed u/s.80P(2)(d) of the Income Tax Act and in the light of the decision of the Supreme Court with regard to the same exact assessee as the present one, namely, The Totgars Co- operative Sale Society Ltd. v. Income Tax Officer in Civil AppealNos.1622 to 1629/2010 decided by the Apex Court on 08.02.2010 or not?
Whether, in the facts and circumstances of the case, the Tribunal is justified in not following the decision rendered by the Hon'ble Supreme Court in Civil Appeal No. 1622 of 2010, wherein the Apex Court has to be held that the words used in Section 80P "the whole of the amount of profits and gains of business" emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society and as such interest earned on funds which are not required for business purposes falls under the category of" other income" taxable under the Income Tax Act?
…………………….
Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co- operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.
The learned counsel has relied on the case of Totgars Co-operative Sale Society Ltd. v. ITO [2010] 322ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. 6 For, in the present case the interpretation that is required is of Section ITA Nos.2194 & 2195/PUN/2025 [A]
80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.
For the reasons stated above, this Court does not find any merit in the present appeal. Hence, the appeal is dismissed.”Unquote
1 Thus, Hon’ble Karnataka High Court distinguish the decision of Hon’ble Supreme Court in the case of Totagar’s Co-operative Sale Society Ltd., [2010] 322 ITR 283, Hon’ble Karnataka High Court held that the interest earned from Co-operative Banks by the Assessee is eligible for deduction u/s.80P(2)(d) of the Act, holding that Co-operative Banks are Co-operative Societies.
Similarly, Hon’ble Gujarat High Court in the case of PCIT Vs. Ambika Co-operative Credit Society Limited [2025] 174 taxmann.com 532 dated 21.04.2025 has dismissed the appeal of the Revenue.
In the case of the Assessee, Assessee Society earned interest and dividend income from PDCC Bank and Other Co-operative Society. Admittedly, Assessee is a Co-operative Society. The Question is whether PDCC Bank can be treated as Co-operative Society or not! The Hon'ble Karnataka High Court held that for the 7
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purpose of Section 80P, Co-operative Banks are Co-operative Societies. Hence, conditions stipulated in Section 80P(2)(d) are fulfilled.
Respectfully following the decision of Hon’ble Karnataka High Court and Hon’ble Gujarat High Court(supra), we hold that interest and dividend earned by Assessee of Rs.1,46,90,994/- is eligible for deduction under section 80P(2)(d) of the Act. Accordingly, we direct the Assessing Officer to delete the addition. According, Grounds of appeal raised by the Assessee are allowed.
In the result, appeal of the Assessee for A.Y.2017-18 is allowed.
ITA No.2195/PUN/2025 for A.Y.2018-19
Since we have decided the main appeal in favour of the assessee above, the same shall apply mutatis-mutandis to the present appeal qua deduction u/s.80P(2)(d) of the Act, also.
1 Accordingly, Ground No.1, 2 and 4 raised by the Assessee regarding deduction u/s.80P(2)(d) are allowed.
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Grond No.3 :
This Ground is regarding deduction u/s.80P(2)(c) of Rs.50,000/-. The Assessing Officer has disallowed assessee’s claim for deduction u/s.80P(2)(c) of the Act, on the ground that Assessee failed to file the details called-for. Since assessee failed to file the basic details before the Assessing Officer, we set-aside the issue of Deduction u/s.80P(2)(c) to the Assessing Officer for denovo adjudication. Assessing Officer shall provide opportunity of hearing to the Assessee. Assessee shall file necessary details before the Assessing Officer. Accordingly, Ground No.3 is allowed for statistical purpose.
In the result, appeal of the assessee for A.Y.2018-19 is partly allowed.
To sum up, appeal of the Assessee for A.Y.2017-18 is Allowed and appeal of the Assessee for A.Y.2018-19 is partly allowed. Order pronounced in the open Court on 08 January, 2026. ASTHA CHANDRA Dr.DIPAK P. RIPOTE JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददिधंक / Dated : 08 Jan, 2026/ SGR 9
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आदेशकीप्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : अपऩलधर्थी / The Appellant. 1. प्रत्यर्थी / The Respondent.
The CIT(A), concerned.
The Pr. CIT, concerned. नवभधगऩयप्रनिनिनर्, आयकर अपऩलऩय अनर्करण, “बऩ” बेंच, पपणे / DR,
ITAT, “B” Bench, Pune. गधर्ाफ़धइल / Guard File. 6. आदेशधिपसधर / BY ORDER, ////