THE DALLA CO OP AGRI MULTIPURPOSE SOCIETY LIMITED,JALANDHAR vs. INCOME TAX OFFICER WARD-, PHAGWARA

There are two grounds taken by the assessee in the memorandum of appeal in form 36 which are reproduced as below:

That the Revenue allowed the deduction u/s 80P during the assessment of AY 2017-18, AY 2019-20 and AY 2020-21. However, they violated the Principle of Consistency by rejecting such deduction in the relevant year in spite of the fact that the relevant provisions of law, facts and circumstances remained identical in all the years. Thus, order is bad in law as it leads to mere change of opinion.”

Brief facts emerging from records are that the assessee is an agricultural cooperative multipurpose society engaged in the business of supplying pesticides and fertilizers to the members at concessional rates. The surplus and unutilized funds not immediately required for buying agricultural products was temporarily invested with other cooperative banks from which interest has been earned amounting to Rs. 33.27 lakhs during the year under appeal, which has been claimed as deduction u/s 80P(2) (d) of the Act, ( as per details contained in para 3 of the assessment order) and the said claim of the assessee, has been disallowed by the AO due to the reasons that cooperative banks do not fall under the purview of cooperative society and are now governed by Banking Regulation Act, hence interest income arising from funds invested with either cooperative banks, Nationalised banks or Private banks, can be 4 Assessment Year: 2018-19 classified as “ income from other sources” under provisions of section 56 of the Act. (para – 4 of the order), and thereafter, the claim has been disallowed by observing as follows (Para – 7 of assessment order): “7. In view of the above facts of the case, interest income earned by the assessee from investments/FDRs in Co- operative/Nationalised bank held as 'not attributable' to the business activities of providing credit facilities to its members and is being treated as 'Income from other sources' as per provisions of section 56 of the I.T. Act, 1961. This being the case, the aforesaid interest income of Rs. 33,27,350.52 is not eligible for deduction u/s. 80P. Accordingly income of Rs. 33,27,350.52 is added to the total income of the assessee society. (Addition Rs. 33,27,350.52)”

Subsequently, the matter carried in appeal before the ld. first appellate authority, has been discussed in details by considering all relevant decisions of various High courts and the Hon’ble Supreme court , on the issue relating to the allowability of the claim of deductions u/s 80P(2)(a)(i) and section 80P(2)(d) of the Act , and the Ld CIT(A) has dismissed the claim by observing as follows: ( para – 11 of the appeal order ):

Now, the assessee is before the tribunal on the grounds contained in the memorandum of appeal.

In course of hearing, the ld. AR of the assessee submitted that the issue is squarely covered in favour of the assessee by various decisions of the coordinate bench of the tribunal as under: “Mullanpur Garibdas Co-operative Multipurpose Society vs. PCIT [2024] 163 Taxmann.Com 50 (Chandigarh Trib.) "Assessee-society, being a cooperative society, is entitled to exemption under section 80P(2)(d), in respect of its interest Income derived from fixed deposits with cooperative banks"

Now, coming to the decisions of the Hon'ble Karnataka High Court, we find that there are two decisions in case of Pr. CIT v. Totagars Co-operative Sale Society and in both of these decisions, the Hon'ble Karnataka High Court has referred to the decision of the Hon'ble Supreme Court in case of Totagars Cooperative Sale Society vs ITO (Supra). In case of first decision referred by the Id AR, it was held that according to section 80P(2)(d) of the Act, the 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. In the latter decision referred by the Id PCIT (he has not referred to the earlier decision), it was held that interest earned by the assessee, a Co-operative Society, from surplus deposits kept with a Co-operative Bank, was not eligible for deduction under Section 80P(2)(d) of the Act. We therefore find that there are divergent views of the non- jurisdictional High Court on the issue of eligibility of deduction under Section 80P(2)(d) of the Act in respect of interest earned from Co-operative Bank as against the decision of the Jurisdictional Punjab and Haryana High Court in case of CIT vs Doaba Co-operative Sugar Mills Ltd and latter shall be our guiding force as far as the present proceedings are concerned”.

The Ld. DR per contra relied on the decision of the Kolkata Tribunal in the case of “ Bibhisanpur Samabay Unnayan Samity Ltd in 2024 order dated 04th August, 2025, where the Hon’ble tribunal has taken a contradictory view on similar set of facts and has observed as follows: “8. Therefore, considering the totality of facts and circumstances of the case and in view of the legal provisions enumerated in the preceding paras that the exemption provisions have to be strictly interpreted, the submissions of the Ld. DR and as has been elaborately discussed and brought out in the orders of the Hon'ble Karnataka High Court in the case of Bangalore Club as well as Totagars (supra) in which reliance has been placed upon the judgment of Hon'ble Supreme Court, the interest received from Cooperative Banks, even though they are Cooperative Societies, is not allowable in view of the express provision of sub-section (4) of section 80P of the Act as the Cooperative Banks have been treated at par with the Scheduled Banks and the deduction u/s 80P of the Act is allowable only for the interest received from the Cooperative Society per se and not from the Cooperative Bank.

We have heard the rival submissions and considered the materials on record and the various judgments cited by the ld. AR and also by the ld. DR. 9.1 On this issue, we find that the Kolkata bench order in kol/ 2024, has travelled to the High court and the matter has been elaborately discussed by the Hon’ble Sikkim High Court vide order dated 10.12.2025 in the case of “Sikkim State Cooperative Supply and Marketing Federation Limited ( referred to as SIMFED )” reported in 2025 (12) TMI 808 Sikkim High Court, where the Hon’ble High Court has considered the ratio laid down in the case of “Totgars Cooperative Sale Society Ltd.”, and has also considered the judgment of Hon’ble Gujrat High Court in the case of “Ashwin Kumar Urban Co-operative Society Ltd. 11 TMI 971 (Guj HC) and has observed as follows : 9.2 The relevant part of the order is reproduced as under: “13. Now we must look at section 80P(2)(d), which reads as follows: - “……. (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; ……...”

It is a matter of record that SIMFED earned interest from investments made in two co-operative banks, namely, Sikkim State Cooperative Bank Limited and Citizens Urban Co-operative Bank Limited, both registered as co-operative societies under the Sikkim Co-operative Societies Act, 1978. As stated hereinbefore, these investments were made from the surplus funds and statutory reserves of SIMFED as required under sections under the relevant provisions of Sikkim Cooperative Societies Act, 1978, more specifically, sections 57 to 66, under Chapter V of the Sikkim Co- operative Societies Act, 1978, which mandates prudent management and investment of funds only in approved securities of co-operative banks approved by the Registrar.

In our view, a plain reading of the provisions of law quoted above, clearly reveals that the learned Tribunal misinterpreted the provision of section 80P(4) of the Income Tax Act, 1961, which specifically excludes co-operative banks (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) and erroneously applied it in respect of SIMFED, thereby disentitling it from claiming benefit under section 80P of the Income Tax Act, 1961. As such, the first substantial question of law is answered in favour of the assessee.

So far as the second substantial question of law as framed by us is concerned, we are of the view that the Hon’ble High Court of Gujarat in the case of PCIT vs. Ashwin Kumar Urban Co- operative Society Ltd. reported in (2024) 168 taxmann.com 314 (Gujarat), has squarely answered this question in favour of the assessee by observing inter alia that the Hon’ble Supreme Court’s 1 Assessment Year: 2018-19 3 decision rendered in Totgars’ Cooperative Sale Society Ltd. (supra) was not applicable in the facts of that case — which is identical to the instant case — as the eligibility of deduction of interest in the facts of the instant case has to be decided under section 80P(2)(d) and not under section 80P(2)(a)(i). Totgars’ Cooperative Sale Society Ltd. (supra) was primarily concerned with section 80P(2)(a)(i) and retained members’ funds shown as liability to deny deductions under section 80P(2)(d). The facts of the Totagars’ Cooperative Sale Society Ltd (supra) — as well as the applicability of the statutory provisions insofar as in our case is concerned — are factually and materially different. As such, the second substantial question of law as framed by us is also answered in favour of the assessee.

Now, so far as the two judgments referred to by the learned Deputy Solicitor General of India are concerned, namely, Totgars’ Cooperative Sale Society Ltd. versus Income Tax Officer, Karnataka reported at (2010) 3 Supreme Court Cases 223 = (2010) 322 ITR 283 and the Principal Commissioner of Income-tax & Another vs. Totagars Co-operative Sale Society (and vice versa) by Karnataka High Court, reported at (2017) 395 ITR 611, we have already held earlier that the judgment of the Hon’ble Supreme Court’s judgment in Totgars’ Cooperative Sale Society Ltd (supra) is not applicable in the facts of our case. So far as judgment of the Karnataka High Court is concerned — which was relied upon by the learned Income Tax Appellate Tribunal, while rendering its impugned judgment and order dated 1 Assessment Year: 2018-19 4 18th June, 2025 — the Gujarat High Court in Ashwin Kumar Urban Co-operative Society Ltd. (supra) has considered the said Karnataka High Court judgment and has clearly held the same to be distinguishable and not applicable in a similar fact situation as our present case.

We are, therefore, of the view that in the facts of the instant case, the assessee is entitled to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961.

For reasons stated above, the impugned judgment and order dated 18th June, 2025, passed by the learned Income Tax Appellate Tribunal in I.T.A. Nos.: 1582/KOL/2024 in respect of the Assessment Year: 2018-19, is liable to be set aside and is accordingly set aside.

Tax Appeal No. 02 of 2025 is accordingly allowed.”

As such, respectfully following the law laid down by the Hon’ble Sikkim High Court (which is the most recent decision being delivered on December 10th, 2025, on the issue ) regarding claim of deduction u/s 80P(2)(d) of the Act, in the matter of interest earned by cooperative societies from investments made in cooperative banks , and also considering the decision of the Hon’ble jurisdictional High court in the case of CIT vs Doaba Cooperative Sugar Mills Ltd [1998] 230 ITR 774 and, and also considering the views of Hon’ble Chandigarh Bench in the case of the Jagraon Co-operative Marketing Cum Processing Society Ltd., order dated 25.9.2024, on identical issue, and the views expressed in the case of Mullanpur Garibdas 1 Assessment Year: 2018-19 5 Cooperative [2024] 163 taxmann.com 50 (Chandigarh) and in the case of Jagadhri Cooperative 159 taxmann.com 1253 ( Chandigarh ), we hold that the assessee co- operative Society is entitled to deduction u/s 80P(2)(d) of the Act on interest earned from deposits made in cooperative banks and as such, the deduction claimed by the assessee is to be allowed.

In the result, the appeal of the assessee is allowed.