DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12 PUNE, PUNE V. JANATA GRAHAK MADHYAWARTI SAHKARI SANGH MARYADIT, PUNE

ITA 1746/PUN/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle -12, Pune, as the appellant, and Janata Grahak Madhyawarti Sahkari Sangh Maryadit, a cooperative society, as the respondent. The primary legal issue was whether the interest income earned by the assessee from deposits with cooperative banks qualifies for deduction under section 80P(2)(d) of the Income Tax Act, 1961. The Assessing Officer initially disallowed part of the deduction, leading to an appeal by the assessee. The CIT(A) reversed the AO's decision, which was contested by the Revenue in the Tribunal. The Tribunal found that the CIT(A)'s decision was supported by precedents and the specific provisions of the Income Tax Act, leading to the dismissal of the Revenue's appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 39508 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society Vs. ITO, Union of India Vs. Kamlakshi Finance Corporation, Principal Commissioner of Income Tax Vs. Ashwinkumar Arban Co Operative Society Ltd., Kerala State Co-operative Agricultural & Rural Development Bank Ltd. vs. Assessing Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Assessee Lawyers: KISHOR B. PHADKE; CATENA OF
• Keywords: Business income; TDS; Revision of order
• Section: 147; 148; 143(3); 142(1); 263; 56; 48; 194A; 80P

Judgement Text

" आयकर अपीलीय अधिकरण “ए” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA Nos.1745, 1746 & 1747/PUN/2024 धििाारण वर्ा / Assessment Years : 2016-17, 2017-18 & 2020-21 Dy. CIT, Circle -12, Pune Vs. Janata Grahak Madhyawarti Sahkari Sangh Maryadit, 2020 Grahak Bhavan, Tilak Road, Sadashiv Peth, Pune – 411030 PAN : AABAJ7614D अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Kishor B. Phadke Department by : Shri Amol Khairnar Date of hearing : 03-12-2024 Date of Pronouncement : 18-02-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : These three appeals filed by the Revenue are directed against the three separate orders dated 25.04.2024, 26.04.2024 and 26.04.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Years (“AYs”) 2016-17, 2017-18 and 2020-21 respectively. Since the issue(s) involved are identical, these were heard together and are being disposed of by this common order. ITA No. 1745/PUN/2024, AY 2016-17 2. Briefly stated, the facts of the case are that the assessee is a Co-operative Society. It filed its return of income for AY 2016-17 on 26.09.2016 declaring total income of Rs.1,54,81,910/- and claimed deduction u/s 80P(2)(d) of the Income Tax Act, 1961 (the “Act”) amounting to Rs.5,54,04,835/-. Subsequently, the case of the assessee was reopened and notice u/s 148 of the Act was issued and duly served upon the assessee on 25.07.2022. The assessee failed to file its return of income in response to the notice u/s 148 of the Act. However, in response to the notice u/s 142(1) of the Act, the assessee furnished its reply on 19.01.2023 submitting that the assessee is eligible for 2 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 deduction u/s 80P(2)(d) of the Act relying on the decision of the Tribunal in assessee’s own case for earlier year which has been decided in favour of the assessee and also the decision of the Mumbai Tribunal in support of the said claim. The assessee also furnished various details/documents as stated in para 3.1 of the assessment order. After considering the assessee’s submissions/details/documents furnished, the Ld. Assessing Officer (“AO”) observed that during the relevant AY the assessee had earned interest from investments in the form of deposits held in 12 Co-operative Banks/Co- 0perative Societies. Out of total claim of Rs.5,54,04,835/- u/s 80P(2)(d) of the Act, the Ld. AO observed that the interest income earned from the five Co- operative Banks amounted to Rs.3,29,38,312/- which were registered under the Maharashtra Co-operative Societies Act and allowed the claim of the assessee u/s 80P(2)(d) in respect of the same. However, the remaining interest income earned from the seven other Co-operative Banks to the tune of Rs.2,24,66,523/- were disallowed by the Ld. AO for the reason that these Co- operative Banks were not registered under the Co-operative Societies Act. He, therefore, proceeded to assessee the income of the assessee at Rs.3,79,48,433/-by making addition of Rs.2,24,66,523/- on account of disallowance of deduction claimed u/s 80P(2)(d) of the Act, to the total income of Rs.1,54,81,910/- returned by the assessee u/s 147 r.w.s. 144B of the Act vide his order dated 26.05.2023. 3. Aggrieved, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) in para 5.4 of his appellate order observed that the seven Co-operative Banks in respect of which the addition has been made by the Ld. AO on account of these being unregistered, the assessee has infact provided necessary evidences to substantiate that these banks are registered under the Co-operative Societies Act. In view thereof, the only issue to be decided relates to the claim of the assessee in respect of interest earned from all the 12 Co-operative Banks when all of these banks are found to be registered under the Co-operative Societies Act, either under the Central Act or State Act. The Ld. CIT(A) in para 5.8 of his appellate order further observed that the impugned issue is no longer res integra and has been decided in favour of the assessee by the Pune Bench of the Tribunal in assessee’s own case for AY 2009-10 and also in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co- op. Credit Society Vs. ITO in ITA No. 84/PUN/2018 for AY 2012-13, dated 27.05.2022 and therefore following the decision(s) (supra) of the Pune Tribunal, 3 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 the Ld. CIT(A) observed that the assessee is eligible for the said claim of deduction u/s 80P(2)(d) of the Act. The Ld. CIT(A) in para 5.11 of his order also observed that the revision order passed u/s 263 for AY 2017-18 in assessee’s own case has been quashed by the Pune Bench of the Tribunal holding that the original assessment order passed by the Assessing Officer which allowed the claim of deduction u/s 80P(2)(d) of the Act in respect of interest earned from the Co-operative Banks is neither erroneous nor prejudicial to the interest of the revenue. In the light of these observations, the Ld. CIT(A) allowed the appeal of the assessee and directed the Jurisdictional AO to allow the claim of deduction u/s 80P(2)(d) of the Act in respect of the interest income earned from the Co-operative Banks, to the assessee. The relevant observations and findings of the Ld. CIT(A) are reproduced below : “5.5 Therefore, the solitary issue of intrigue in the case under consideration relates to the denial of benefit of deduction u/s.80P(2)(d) based on the nature of interest income earned, when all the 12 Co-operative Banks are found to be registered under the Co-operative Societies Act, either under the Central Act or State Act. 5.6 As per the provisions of S.80P(2)(d), any income derived by a Co-operative Society by way of interest or dividends from its investments in any other Co- operative Society, the whole of such income is allowable as deduction. In the case under consideration, the disputed amounts covered under the claim of deduction u/s 80P(2) (d) have all been derived out of investments made with Co-operative Banks only and not with any Nationalised Banks. 5.7 The Co-op Banks are primarily co-operative societies at the time of its formation and based on the nature and characteristics of its operations, they transform themselves into co-operative banks. The provisions of the statute have not cleared the air of this ambiguity and hence, in the absence of a clear expression in the Income tax statute that Co-operative Banks are not to be considered as Co-operative Societies, the claim of deduction in respect of interest earnings derived from Co-operative Societies cannot be denied the benefit of deduction u/s 80P(2)(d). 5.8 This issue is no longer res integra as the issue was decided in favour of the assessee in its own case vide order in ITA No.573/PN/2013 -AY 2009-10 dated 27.11.2013, by the Hon'ble 'B' Bench of Pune ITAT which dismissed the appeal of the revenue and allowed the claim of eligibility of deduction u/s 80P(2)(d) to the assessee. Further, the issue was decided in favour of the assessee by the Hon'ble Bench of the Pune Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018 for A.Y. 2012-13 order dated 27.05.2022. 5.9 The Hon'ble Supreme Court has held in the case of Union of India Vs. Kamlakshi Finance Corporation, AIR 1992 SC 711 that the lower Appellate authority has to follow orders of the Higher Appellate Authority: As first appellate authority, the undersigned has to mandatorily follow the order of the Jurisdictional ITAT and therefore, respectfully following the decision of the Hon'ble Bench of ITAT, Pune it is held that the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks qualifies for deduction both under the provisions of section 80P(2)(d) of the Act, therefore, the reasoning given by the FAO on this issue cannot be accepted. 4 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 5.10 Even the provisions of S.80P(4) had only expressed that a Co-op Bank is not eligible for deduction u/s.80P, but has never clarified that a Co-op Bank is not a Co-op Society. Appreciating this contention, the Hon'ble Madras High Court in the case of Thorapadi Urban Co-op Credit Society Limited Versus Income Tax Officer disposing the writ petitions in W.P.Nos. 11172, 11174, 11177 and 11180 of 2023 dated 10th October, 2023 had held that: \"Interest income received from a Cooperative bank is also entitled to deduction under Section 80P(2)(d) of the Income Tax Act 1961\" 5.11 Furthermore, in the appellant's own case, the order passed u/s 263 for the AY 2017-18, which had directed the AO to disentitle the claim of deduction u/s 80P(2)(d) was quashed by the Hon'ble ITAT at Pune in its order in ITA No.1273/PUN/2023 A.Y. 2017-18 in its order dated 25.01.2024 on a finding that the original order passed by the AO, Circle 12, Pune for the AY 2017-18 on 14.11.2019 which allowed the claim of deduction u/s 80P(2)(d) in respect of interest earned from Co-operative Banks is neither erroneous nor prejudicial to the interests of revenue. 5.12 Therefore, the Jurisdictional Assessing Officer is directed to allow deduction 80P(2)(d) in respect of interest income earned from cooperative banks and grant relief to the appellant. Thus, the grounds of appeal filed by the assessee stands allowed.” 4. The Revenue is aggrieved by the impugned order of the Ld. CIT(A) and is in appeal before the Tribunal raising the following grounds of appeal: “A. Whether in the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing deduction under u/s 80P(2)(d) on surplus fund parked with cooperative banks. B. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that the interest income of Rs.2,24,66,523/- the society earned from investment with other co-operative banks was allowable as deduction u/s 80P(2)(d) of the IT Act, ignoring the decision of Hon'ble Supreme Court in the case of TOTAGARS CO-OPERATIVE SALE SOCIETY LTD vs ITO 322 ITR 283 ?\" 5. The Ld. DR supported the order the Ld. AO and submitted that the assessee has not proved with the sufficient documentary evidence that the seven Co-operative Banks identified by the Ld. AO are registered under the Co- operative Societies Act. The Ld. CIT(A) though has recorded the findings that all the 12 Co-operative Banks from whom the assessee has earned interest income are registered Co-operative Banks, however, no verification has been done by the Ld. AO in respect of the same. Therefore, the Ld. CIT(A) is not justified in deleting the addition made by the Ld. AO. 6. The Ld. AR, on the other hand, submitted that the Department has not raised the above plea in its grounds of appeal before the Tribunal and hence these contentions of the Ld. DR are unsustainable. He submitted that there is a clear cut finding that all the 12 Co-operative Banks are registered Co- 5 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 operative Societies available on record. He further made a statement at Bar that all the 12 Co-operative Banks from whom the assessee has earned interest income during the relevant AY are all registered Co-operative Banks. The Ld. AR submitted that the assessee society claimed deduction u/s 80P(2)(d) of the Act earned by it by way of interest on deposits with Co-operative Banks formed an integral part of its business income. He further submitted that the impugned issue is squarely covered in favour of the assessee by catena of decisions of various judicial forums including the decision of the Pune Bench of the Tribunal in assessee’s own case for AYs 2009-10 and 2017-18. The Ld. AR placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Principal Commissioner of Income Tax Vs. Ashwinkumar Arban Co Operative Society Ltd. reported in (2024) 168 taxmann.com 314 (Guj.) in support of its above claim. 7. We have heard the Ld. Representatives of the parties and perused the material on record. The facts of the case are not disputed. We observe that the Ld. CIT(A) has categorically recorded a finding that the assessee has earned interest income from 12 Co-operative Banks and all the banks are registered banks/societies. The Ld. Counsel for the assessee also stated at the Bar that all the 12 Co-operative Banks are registered Co-operative Banks. We observe that the impugned issue is no more res integra and is covered in favour of the assessee by various judicial precedents on the subject. The Revenue is aggrieved by the order of the Ld. CIT(A) on the ground that the Ld. CIT(A) has allowed the claim of the assessee u/s 80P(2)(d) of the Act in respect of interest income earned from Co-operative Banks during the relevant AY ignoring the decision of the Hon’ble Supreme Court in the case of Totagars Co-operative Sale Society Ltd. Vs. ITO 322 ITR 283. In our considered view, the case of Totagars Co-operative Sale Society Ltd. (supra) is distinguishable on facts and therefore not be applied in the instant case of the assessee. In that case the society was also marketing the agricultural produce of its members and hence was engaged in carrying on the business of marketing agricultural produce of the members of the assessee. However, in the present case, the interest income earned by the assessee from deposits made with the Co-operative Banks form an integral part of its business. 7.1 The Ld. AR has placed reliance on the decision of the Pune Bench of the Tribunal wherein the Tribunal in assessee’s own case for AY 2009-10 and AY 6 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 2017-18 has allowed the said claim of the assessee. We have perused the order of the Tribunal in assessee’s own case for AY 2009-10 and find that the Tribunal dismissed the appeal of the Revenue and allowed the claim of the assessee observing as under : “2. At the outset of hearing, learned Authorized Representative pointed out that this issue is covered in favour of assessee by the decision of ITAT, Pune B Bench in ITA No.1047/PN/2012 in the case of ACIT Vs. M/s. Bajaj Auto Ltd. Employees Co-op. Credit Society Ltd., wherein the Tribunal has decided the issue in favour of the assessee by observing as under: “4. We have heard the Ld. DR. None was present for the assessee. We have also perused the order of the authorities below. In our opinion so far as the amount of interest received on the deposit with Aurangabad District Central Co-operative Bank is concerned the Assessing Officer has not properly appreciated the provisions of law. Sec. 80P(2)(d) reads as under: 80P(1): Where, in the case of an assessee being a cooperative 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 subsection (2), in computing the total income of the assessee. 80P(2): The sums referred to in sub-section (1) shall be the following, namely: (a) ……….. (b) ……….. (c) ……….. 2(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; 5. Sub-sec. (4) of Sec. 80P has withdrawn the deduction to the co operative bank other than primary agricultural credit society or a primary co- operative agricultural and rural development bank w.e.f. the A.Y. 2007-08. The said provision is applicable to the Aurangabad District Central Co- operative Bank (ADCCB) in which the assessee society has kept deposit. The withdrawal of deduction by insertion of Sub-section (4) of Sec. SOP does not change \"status\" of Aurangabad District Central Co-operative Bank \"as a co-operative society which is contemplated in Sec. 80P(1) of the Act. We, therefore, hold that the interest received on the deposit with the Aurangabad District Central Co operative Bank by the assessee on the deposits are squarely covered u/s. 80P(l)(d) and the interest received on deposit kept with the Aurangabad District Central Cooperative Bank is an allowable deduction. So far as the finding of the Ld. CIT(A) that the provisions of Sec. 80P(2)(a)(i), in our opinion the decision of the Hon'ble Supreme Court in the case of Totagars Cooperative Vs. ITO (supra) is against the assessee as interest received on deposits with Aurangabad District Central Co-operative Bank cannot be said to be the income derived from providing credit facilities to its members. We, accordingly, answer the ground taken by the revenue. But, finally we have confirmed order of Ld. CIT(A) giving relief to the assessee u/s. 80P(2)(d).” 2.1 Facts being similar, so following the same reasoning, the assessee is entitled to deduction u/s.80P(2)(d). In view of above, assessee is eligible for claiming 7 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 deduction u/s.80P(2)(d) of I.T Act, which is available for income earned from business and not from other sources as rightly held by CIT(A). We uphold the same.” 7.2 We also find that the Pune Bench of the Tribunal while deciding the impugned issue in appeal filed by the assessee against the revision order passed by the Ld. PCIT u/s 263 of the Act has allowed the appeal of the assessee holding that the assessment order is neither erroneous nor prejudicial to the interest of the revenue on the ground that the Ld. AO had allowed the deduction after considering the assessee’s submissions which indicates due application of mind by him and following the Tribunal’s order for earlier AY 2009-10 in assessee’s own case (supra). 7.3 We have also perused the decision of the Hon’ble Gujarat High Court in the case of Ashwinkumar Arban Co Operative Society Ltd. (supra) wherein the Hon’ble High Court under similar set of facts has held that deduction u/s 80P(2)(d) is available to Co-operative Societies on income earned as interest on investments made with Co-operative Banks which in turn, is a Co-operative Society itself. The relevant observations and findings of the Hon’ble High Court are reproduced below : “27. It was therefore submitted that when the respondent-assessee has earned interest on the investment made with the cooperative society which was carrying out the banking business, the deduction under section 80P 2(d) of the Act cannot be denied. 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. 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. 29. Reliance placed by the learned advocate for the revenue on decisions of the Hon‟ble Karnataka High Court and Hon‟ble Supreme Court in case of Totgars‟ Cooperative Sale Society Ltd, the Hon‟ble Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) of the Act wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears that the interpretation made by the Hon‟ble Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act,2015 by amending section 194A(3)(v) of the Act is concerned, on perusal of section 194A (3) of the Act, it appears that it provides for exemption from deducting Tax Deducted at Source [„TDS‟ for short] from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that cooperative banks are excluded from the definition of cooperative societies by such an amendment. 8 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 30. Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) of the Act in the facts of the case is also not possible to accept as section 80P(4) of the Act would be applicable to the cooperative bank when the cooperative bank is liable to pay tax under the provisions of the Act and in such eventuality, the provision of section 80P would not be applicable as per the amendment of sub-section (4) of section 80P of the Act. Therefore, the exclusion of applicability of section 80P to cooperative banks by section 80P (4) of the Act would not disentitle the respondent-assessee from claiming deduction under section 80P(2)(d) of the Act in absence of any amendment in the said section and that would not be sufficient to deny the claim of the respondent-assessee for deduction of interest earned from investment made in a cooperative bank which is also a cooperative society from the total income. 31. The Hon‟ble Apex Court in case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. vs. Assessing Officer (supra) while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) of the Act would not be applicable to a cooperative bank which is not a bank as per the provisions of the BR Act,1949, as under: “5. Interpretation.— In this Act, unless there is anything repugnant in the subject or context, X X X (b) “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) “banking company” means any company which transacts the business of banking in India. Explanation.—Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;” 32. After considering the above interpretation of various provisions and the Case laws, the Hon‟ble Apex Court has analyzed the provisions as under: “14.1. In Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd., it was categorically held that under Section 56 of the BR Act, 1949 only three co-operative banks have been defined, namely, state cooperative bank, central co-operative bank and primary co-operative bank which are covered under Section 56 (cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. Thus, it is only these three banks which are co-operative banks which require a licence under the BR Act, 1949 to engage in banking business. If any bank does not fall within the nomenclature of the aforesaid three banks as defined under the NABARD Act, 1981, it would not be a co-operative bank within the meaning of Section 56 of BR Act, 1949 irrespective of whatever nomenclature it may have or structure it may possess or incorporated under any Act. It was further stated that if a bank has to be a state co- operative bank, there has to be a declaration made by the State Government in terms of Section 2(u) of NABARD Act, 1981. Hence, it is necessary to go into the question as to, whether, the appellant herein has been so declared as a state cooperative bank. This question would need not detain us for long as the Kerala High Court in A.P. Varghese had categorically stated that the “Kerala State Co- operative Bank” is a “state co-operative bank” as defined under the NABARD Act, 1981. Therefore, the appellant bank has not been declared as a state co- operative bank under the provisions of NABARD Act, 1981. Further, in the case of Mavilayi Service Co-operative Bank, this Court observed that a co-operative bank would engage in banking business on obtaining a licence under Section 22(1b) of the BR Act, 1949. In the instant 9 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 case, the appellant herein is not a co-operative bank having regard to the aforesaid conspectus of the provisions so as to require a licence under the aforesaid provision for carrying on banking business. In the circumstances, the question could still arise as to whether the appellant herein is entitled to benefit of deduction under Section 80P of the Act. 14.2. In Mavilayi Service Co-operative Bank, it has been observed that Section 80P of the Act is a beneficial provision which was enacted in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and therefore, has to be read liberally in favour of the assessee. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub- section (2) of Section 80P must be given by way of deduction vide Citizen Cooperative Society. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in sub- sections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co- operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: i) Firstly, the marginal note to Section 80P which reads “Deduction in respect of income of co-operative societies” is significant as it indicates the general “drift” of the provision. ii) Secondly, for purposes of eligibility for deduction, the assessee must be a “co-operative society”. iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being “engaged in”, inter alia, carrying on the business of banking or providing credit facilities to its members. v) Fifthly, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. vi) Sixthly, the expression “providing credit facilities to its members” does not necessarily mean agricultural credit alone. It was highlighted that the distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non- members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. vii) Seventhly, under Section 80P(1) (c), the co-operative societies must be registered either under Cooperative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other cooperative societies, the whole of such income is eligible for 10 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 deduction, the object of the provision being furtherance of the co- operative movement as a whole. 14.4. In paragraph 42 of Mavilayi Service Co-operative Bank, this Court observed that the object and purpose of sub-section (4) of Section 80P is to exclude only co-operative banks that function on par with other commercial banks i.e. which lend money to members of the public. That on a reading of Section 3 read with Section 56 of the BR Act, 1949, the primary co- operative bank cannot be a primary agricultural credit society. As such co- operative bank must be engaged in the business of banking as defined by Section 5(b) of the BR Act, 1949, which means accepting, for the purpose of lending or investment, of deposits of money from the public. Also under Section 22(1)(b) of the BR Act, 1949, no co- operative society can carry on banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by Reserve Bank of India. It was pointed out that as opposed to the above, a primary agricultural credit society is a co- operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6. Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That subsection (4) of Section 80P which is in the nature of a proviso specifically excludes co- operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from Reserve Bank of India.” 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.” 7.4. On the facts and in the circumstances of the case and legal position enumerated above, we do not find any infirmity in the order of the Ld. CIT(A). Accordingly, the grounds No. 1 and 2 raised by the Revenue are hereby dismissed. 8. In the result, the appeal of the Revenue in ITA No. 1745/PUN/2024 is dismissed. ITA No. 1747/PUN/2024, AY 2020-21 11 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 9. At the outset, both the Ld. DR and Ld. AR submitted that the facts of this case are exactly similar to the facts in appeal for AY 2016-17 and the Ld. CIT(A) has allowed the appeal of the assessee for the same reasons as reproduced above. The Revenue has raised the common grounds of appeal except the variance of amount of deduction claimed u/s 80P(2)(d) of the Act for AY 2020- 21, the same being Rs.4,16,93,020/-. 10. Thus, in view of the above submission of the Ld. Representatives of the parties that the issue raised in the appeal are identical and are arising from same set of facts, the findings given by us while adjudicating the appeal in ITA No. 1745/PUN/2024 would mutatis mutandis apply to the appeal in ITA No. 1747/PUN/2024, as well. Accordingly, the appeal of the Revenue is dismissed in the same terms. 11. In the result, the appeal of the Revenue in ITA No. 1747/PUN/2024 is dismissed. ITA No. 1746/PUN/2024, AY 2017-18 12. Briefly stated the facts of the case in the relevant AY are that the Ld. AO allowed the claim of deduction u/s 80P(2)(d) of the Act amounting to Rs.5,90,63,718/- made by the assessee accepting the income returned by the assessee vide his order dated 14.11.2019 passed u/s 143(3) of the Act. The Ld. PCIT initiated revision proceedings by invoking provisions of section 263 of the Act and directed the Ld. AO to re-verify/re-examine the assessee’s claim of deduction u/s 80P(2)(d) of the Act vide his revision order dated 28.03.2022. Aggrieved, the assessee filed appeal against revision order of the Ld. PCIT passed u/s 263 of the Act before this Tribunal. The Tribunal vide order dated 25.01.2024 quashed the revision order of the Ld. PCIT u/s 263 of the Act, dated 28.03.2022 in ITA No. 1273/PUN/2023 for AY 2017-18. 12.1 In the meantime, the Ld. AO passed the fresh assessment order u/s 143(3) r.w.s. 263 of the Act pursuant to the direction of the Ld. PCIT vide order dated 28.03.2023 and dismissed the claim of the assessee u/s 80P(2)(d) of the Act. The assessee challenged the said order of the Ld. AO dated 28.03.2023 before the Ld. CIT(A) and the Ld. CIT(A) decided the appeal in favour of the assessee vide his order dated 26.04.2024. It is against this order of the Ld. 12 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 CIT(A) that the Revenue is in appeal before this Tribunal, raising the following grounds of appeal : “A. Whether in the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing deduction under u/s 80P(2)(d) on surplus fund parked with cooperative banks. B. \"Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that the interest income of Rs.5,90,63,718/- the society earned from investment with other co-operative banks was allowable as deduction u/s u/s.80P(2)(d) of the IT Act, ignoring the decision of Hon'ble Supreme Court in the case of TOTAGARS CO-OPERATIVE SALE SOCIETY LTD vs ITO 322 ITR 283 ?\" C. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in concluding that the Assessment Order is not erroneous and prejudicial to the interest of Revenue without appreciating the fact that The interest income from investment earned by the assessee society is out of its surplus funds, not immediately required for its business, and that which is parked as \"investment\". The Assessing Officer should have examined that the assessee Society is investing its Surplus money which is not required for its activities in to Deposits and hence should have applied the Decision of Hon'ble Supreme Court in the case of TOTAGARS CO-OPERATIVE SALE SOCIETY LTD vs ITO 322 ITR 283. Failure on the part of the Assessing Officer in examining the above issue has rendered the assessment order dated 14/11/2019 erroneous in so far as it is prejudicial to the interest of the revenue. D. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in concluding that the Assessment Order is not erroneous and prejudicial to the interest of the Revenue without appreciating the fact that the interest income earned by the assessee society in the instant case, cannot be held eligible for deduction u/s 80P (2)(d) as the provisions of sec.80P(2)(d) specifies that the interest income earned by the Co-operative societies from its investment with any other Cooperative Society would be eligible for deduction under the said section. Interest income earned from investment with Co-operative Banks do not qualify for deduction u/s 80P of the I.T. Act, 1961. In the instant case The Assessing officer has also failed to examine whether the Co-operative Banks wherein surplus funds have been invested are only Co-operative Societies or they have License given by RBI. If they are registered with RBI then in view of above stated apex court's decision, the interest received from them is not entitled for deduction u/s 80P(2)(d). By not verifying this aspect, the Assessing Officer has allowed the claim of deduction made by the assessee. This also has rendered the assessment erroneous and prejudicial to the Interest of revenue.” 13. Both the Ld. AR and Ld. DR conceded that the Tribunal has already allowed the appeal of the assessee against the order of the Ld. PCIT passed u/s 263 of the Act dated 28.03.2022 in ITA No. 1273/PUN/2023 for AY 2017-18, a copy of which was placed before the Bench. In this view of the matter, the appeal filed by the Revenue becomes academic in nature. 14. We have perused the order of the Pune Tribunal in assessee’s own case for AY 2017-18 in ITA No. 1273/PUN/2023 (supra) and find that the Co- ordinate Bench has decided the impugned issue in favour of the assessee holding that the assessment order is neither erroneous nor prejudicial to the 13 ITA Nos.1745, 1746 & 1747/PUN/2024, AYs. 2016-17, 2017-18 & 2020-21 interest of the revenue for the Ld. PCIT to invoke the provisions of section 263 of the Act. 15. On the facts and in the circumstances of the case set out above and in the light of the order of the Co-ordinate Bench of Tribunal in assessee’s own case in ITA No. 1273/PUN/2023 for AY 2017-18 (supra), in our considered view the grounds raised by the Revenue in the present appeal has no legs to stand. Accordingly, grounds raised by the Revenue are dismissed. 16. In the result, the appeal of the Revenue in ITA No. 1746/PUN/2024 is dismissed. 17. To sum up, all the three appeals by the Revenue for AYs 2016-17, 2017- 18 and 2020-21 are dismissed. Order pronounced in the open court on 18th February, 2025. Sd/- Sd/- (R.K. Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 18th February, 2025. रदि आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “ए” बेंच, पुणे / DR, ITAT, “A” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER, िररष्ठ दनजी सदचि / Sr. Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune "