INCOME TAX OFFICER WARD-1(1) KOLHAPUR, KOLHAPUR V. SHRI GAJANAN NAGARI SAHAKARI PAT SANSTHA MARYADIT , KOLHAPUR

ITA 2695/PUN/2025

AI Insights

The case involves Shri Gajanan Nagari Sahakari Pat Sanstha Maryadit, a cooperative credit society, which appealed against the disallowance of a deduction claimed under section 80P of the Income Tax Act, 1961, by the Income Tax Officer, Ward-1(1), Kolhapur. The society had earned interest income from deposits with cooperative banks and claimed deductions under sections 80P(2)(a)(i) and 80P(2)(d). The Assessing Officer disallowed these deductions, but the CIT(A) reversed this decision, leading to the Revenue's appeal to the Tribunal. The Tribunal's decision favored the assessee, aligning with precedents that recognized such interest income as eligible for deduction under section 80P.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839659 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 18-11-2025
• Other Referred Cases: Totagars Cooperative Sale Society Limited v/s ITO, Mavilayi Service Cooperative Bank Ltd. v. CIT, Tumkur Merchants Souharda Credit Cooperative Ltd, Lands End Co-operative Housing Society Ltd, Sea Green Co-operative Housing Society, Prerna Co-op Society, Rena Sahakari Sakhar Karkhana Ltd, Deeplaxmi Nagari Sahakari Patsanstha Maryadit Vs. ITO, Karad Urban Sevak Sahakari Patsanstha Maryadit Karad Vs. ITO, Nashik Road Nagari Sahkari Patsanstha Limited Vs. ITO, Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. Vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHILPA N C
• Assessee Lawyers: PRAMOD S. SHINGTE; . FINDINGS; DETERMINATION; CATENA OF DECISIONS OF VARIOUS; CATENA OF DECISIONS OF VARIOUS JUDICIAL; VARIOUS DECISIONS
• Keywords: Set aside; Business income; Additional evidence; Co-operative Credit Society
• Section: 143(3); 142(1); 56

Judgement Text

" आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI R.K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER आयकर अपील सं. / ITA No.2695/PUN/2025 धििाारण वर्ा / Assessment Year : 2018-19 Income Tax Officer, Ward – 1(1), Kolhapur Vs. Shri Gajanan Nagari Sahakari Pat Sanstha Maryadit, House No. 1253, Gajanan, Tilak Path, Gadhinglaj, Kolhapur-416502 PAN : AAAAG2890B अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Pramod S. Shingte Department by : Smt. Shilpa NC Date of hearing : 18-02-2026 Date of Pronouncement : 24-02-2026 आदेश / ORDER PER ASTHA CHANDRA, JM : The appeal filed by the Revenue is directed against the order dated 24.09.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2018-19. 2. Briefly stated, the facts of the case are that the assessee is a Co- operative Credit society registered under the Maharashtra Co-operative Society Act, 1960. It is engaged in the activities of providing credit facilities to its members and accepting deposits from its members. For AY 2018-19, the assessee filed its return of income on 28.09.2018 declaring total income of Rs.53,590/- after claiming deduction of Rs.1,22,55,394/- u/s 80P of the Income Tax Act, 1961 (the “Act”). The case of the assessee was selected for limited scrutiny under CASS on the issues of: (i) investments/advances/loans and (ii) deduction from total income under Chapter VI-A. Accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee from time to time, in response to which, the assessee filed the requisite submissions. The Ld. Assessing Officer (“AO”) completed the assessment u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act vide his order dated 22.03.2021 disallowing Printed from counselvise.com 2 ITA No. 2695/PUN/2025, AY 2018-19 the assessee’s claim of deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the Act in respect of interest income amounting to Rs.2,37,86,964/- earned by the assessee during the relevant AY under consideration from investments with Co-operative Banks. 3. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A)/NFAC. During the appellate proceedings, placing reliance on the various judicial precedents covering the impugned issue in favour of the assessee, the assessee contended before the Ld. CIT(A)/NFAC that the interest income earned by the assessee during the relevant AY from investments with Co-operative Banks is eligible for deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act. The Ld. CIT(A)/ NFAC after considering the submissions of the assessee allowed the appeal of the assessee by observing as under : “5. Findings & determination: Ground 1 The Assessing Officer, NeAC (hereinafter referred to as the AO) erred in denying deduction under section 80P in respect interest earned by the appellant society on deposits with other co-operative banks. The appellant submits as under, without prejudice to each other: i. The interest income of the appellant society being its income from business the same is eligible for deduction under section 80P(2)(a)(i) ii. The interest having been earned from other co-operative banks who are also co-operative societies and hence interest income earned from such co-operative societies is eligible for deduction u/s 80P(2)(d). iii. The appellant society ought to have been allowed deduction for total proportionate cost instead of only the interest paid for earning such interest income. Ground 2 The appellant prays that the AO be directed to delete the addition. Ground 3 The appellant craves leave to add, amend, alter, modify, delete or add a new ground of appeal before or at the time of hearing. The only issue involved in the appeal is inadmissibility of deduction u/s 80P(2)(a)(i) of the Act leading to addition of Rs.2,37,86,964/-. The appellant is a co-operative credit society engaged in providing credit facilities to its members. It claimed deduction u/s 80P(2)(a)(i) in respect of its entire income in the return of income filed. The the appellant included interest earned an deposits with other co-operative banks to the extent of Rs. 2,37,86,964/-. Relying on the decision of the Supreme Court in the case of Totagars Co- operative Sale Society Limited v/s ITO (2010) 322 ITR 283 (SC), the AO has concluded that such interest income is not income from business and hence Printed from counselvise.com 3 ITA No. 2695/PUN/2025, AY 2018-19 not eligible for deduction u/s 80(2)(a)(i) Further relying on the decision of Karnataka High Court dated 16.06.2017 in the case the of Totagars Co- operative Sale Society Limited, AO has concluded that such interest income is also not entitled for deduction u/s 80P(2)(d) since co-operative banks are different from co-operative societies referred to in that sub-section. The appellant in its submission states that ratio of the decision of the Supreme Court in the case of Totagars (Supra) is not applicable to the facts of the appellant society inasmuch as in the case of the Totagars, the said society was also engaged in marketing of products for members. Distinguishing the ratio of the said decision the Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd 55 taxmann.com 447 has held that such interest income for a co-operative credit society is income from business and thus is eligible for deduction u/s 80P(2)(a)(i1). The Hon. ITAT, Mumbai in the following cases allowed the deduction u/s 80P(2)(d) in respect of interest received by co-operative society from its investment in cooperative banks: M/s Sea Green Co-operative Housing Society Vs | TO - 21(3)(2) , Mumbai dated 31.03.2017 Prerna Co-op Society Vs ITO Ward 17(3)(2) Mumbai dated 03.12.2018 Lands End Co-operative Housing Society Ltd in ITA No.3566/Mum/2014 dated 15 January, 2016 Hon'ble ITAT \"A\" BENCH, MUMBAI in the case of Lands End Co-operative Housing Society Ltd in ITA No.3566/Mum/2014 dated 15 January, 2016, considered the decision of the honourable Supreme Court in the case of Totagars cooperative sales Society Ltd. The relevant portion is reproduced below 8.3 We have heard the rival submissions and perused the material on record We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u/s 80P(2)(d) of the Act of Rs.14,88,107/- being interest on investment with other Coop. banks by following the decision in the case of Bandra Samruddihi Co-operative Housing Society Ltd. (Supra) which was passed on the basis of the decision passed by the Hon'ble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. In the case of Totagar's Co-operative Sale Society Ltd v/s ITAT (supra) the Hon'ble Supreme Court while interpreting the section 80P(2)(a)(i) of the Act held that surplus funds not immediately required in the business and invested in the short term deposit would be assessable under the head \"income from other sources where the Cooperative society is engaged in carrying on business of banking or providing credit facilities to its members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative banks is entitled to deduction u/s 80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on investments made with other Cooperative society. For the purposes of better proper understanding of these two provisions the relevant extract of the section are reproduced below: 80P Deduction in respect of income of co-operative Societies. 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:- (a)In the case of a co-operative society engaged in- Printed from counselvise.com 4 ITA No. 2695/PUN/2025, AY 2018-19 (i) Carrying on the business of banking or providing credit facilities to its members. The whole of the amount of profits and gains of business attributable to any one or more of much attributes. (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.\" From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) is clear that the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect of its income assessable as business income and not from other sources if it carries on business of the banking or providing credit facilities to its members and has income assessable under the head business whereas for claiming us 80P(2)(d) it must have income of interest and dividend on investments with other Co-operative society may or may not be engaged in the banking for providing credit facilities to its members and the head under which the income is assessable is not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. (Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this, the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop society if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/- in respect of interest received/derived by it on deposits with coop, banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A) The AO is directed accordingly. The Hon'ble ITAT, \"B\" BENCH, PUNE in the case of Rena Sahakari Sakhar Karkhana Ltd in order dated 07.01.2022 in ITA No. 1249//PUN/2018 for AY:2013-14 held that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec 80P would no more be entitled for claim of deduction under Sec. 80P of the Act but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co- operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. The relevant portion is extracted below: 8........ On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived Printed from counselvise.com 5 ITA No. 2695/PUN/2025, AY 2018-19 from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardize the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term co-operative society\" had been defined under Sec. 2(19) of the Act. as under:- \"(19) \"Co-operative society means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;\" We are of the considered view, that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. In the instant case, the appellant received net interest income of Rs. 2,37,86,964/-from investments in co-operative banks during the impugned F.Y. 2017-18 Respectfully following the jurisdictional ITAT decision and other decisions discussed above, I hereby direct the AO to allow deduction u/s 80P(2)(d) of Rs. 2,37,86,964/-The grounds on the issue allowed. 6. In result, the appeal is allowed.” 4. Dissatisfied, the Revenue is in appeal before the Tribunal raising the following grounds of appeal : “i) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s 56 of the Act by the Assessing Officer on account of other income earned from deposits/investments held in the banks of Rs. 2,37.86.964/ without appreciating the fact that the deduction u/s 80P(2)(a) is available to only the operational income from business, but not to the other income which accrues to the assessee-society. ii) Whether on the facts and in the circumstances of the case and in law, the Ed. CIT(A) 15 justified in not appreciating the fact that the assessee earned interest and dividend income on surplus funds invested in co-operative banks and similar other institutions which cannot be said to be attributable to the activity mentioned in Section 80P(2)(a)(i) of the Act and therefore, the interest and dividend income are not eligible for deduction u/s 80P(2)(a)(i) of the Act. iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) 15 justified in granting relief to the assessee Co- operative society without appreciating the facts that the above interest income does not satisfy the ingredients of mutuality having been earned by commercial activities carried out by the assessee with the non-member Co-operative banks and hence, such interest income Printed from counselvise.com 6 ITA No. 2695/PUN/2025, AY 2018-19 needs to be charged as income from other sources under section 56 of the Income Tax Act, 1961? iv) Whether, on the facts and in circumstances of the case and in law, the Ld. CII(A) is justified in holding that the cooperative banks are also another specie of a cooperative society and therefore, interest income earned on investments and on deposits made with other cooperative banks qualifies for deduction under section 80P(2)(d) of the Income Tax Act, 1961? v) Whether the Ld. CIT(A) is justified in allowing deduction under section 801(2)(d) despite the fact that with effect from 01.04.2007, section 801(4) has been inserted in the Income Tax Act which clearly states that provisions of section 80P shall not apply in relation to any Co operative bank other than primary agricultural society or a co- operative primary agricultural and rural development bank? vi) The appellant craves to add, amend, alter or delete the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.” 5. At the outset, the Ld. AR submitted that the impugned issue is squarely covered in favour of the assessee by catena of decisions of various judicial forums including the decision(s) of the Pune Bench of the Tribunal. Placing reliance on the various decisions pronounced in favour of the assessee relating to the impugned issue, he submitted that the assessee is duly eligible for its claim of deduction u/s 80P(2)(a)(i) of the Act. Supporting the order of the Ld. CIT(A)NFAC, he also raised an alternate contention that the interest income earned from Co-operative Banks by the assessee during the relevant AY is eligible income for claim of deduction u/s 80P(2)(d) of the Act. In support thereof, the Ld. AR relied on the decision of the Co-ordinate Bench of the Pune Tribunal in the case of Deeplaxmi Nagari Sahakari Patsanstha Maryadit Vs. ITO in ITA Nos. 2322 & 2323/PUN/2024 for AYs 2018-19 and 2020-21, order dated 19.12.2025 and The Karad Urban Sevak Sahakari Patsanstha Maryadit Karad Vs. ITO in ITA No. 2985/PUN/2025 for AY 2020-21, order dated 03.02.2026. 6. The Ld. DR, on the other hand, relied on the order of the Ld. AO, however, he could not brought on record any contrary decision to rebut the above submissions of the Ld. AR. 7. We have heard the Ld. Representatives of the parties and perused the material on record and judicial precedents cited by the Ld. AR as well as the paper book filed by the Ld. AR on behalf of the assessee. The facts of the case are not in dispute. Admittedly, during the relevant AY 2018-19, Printed from counselvise.com 7 ITA No. 2695/PUN/2025, AY 2018-19 the assessee has received interest from Co-operative Banks amounting to Rs.2,37,86,964/-. In respect of the said interest income, the assessee claimed deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act which has been disallowed by the Ld. AO and at the appellate stage allowed by the Ld. CIT(A)/NFAC for the reasons reproduced above. It is the submission of the Ld. Counsel for the assessee before us that the interest income earned by the assessee is eligible for deduction u/s 80P(2)(a)(i) as well as 80P(2)(d) of the Act. We find that the impugned issue is no more res-integra and is covered in favour of the assessee by catena of decisions of various judicial forums including the Co-ordinate Bench of the Pune Tribunal. 8. The Ld. AR has placed reliance on the decision of the Co-ordinate Bench of the Pune Tribunal in the case of Deeplaxmi Nagari Sahakari Patsanstha Maryadit (supra) in support of its claim. We have perused the order of the Tribunal in the said case and find that the Tribunal under similar set of facts has allowed the appeal of the assessee holding that the assessee is entitled to claim deduction u/s 80P(2)(a)(i) of the Act in respect of interest income from the deposits held with the Co-operative Banks. The relevant observations and findings of the Tribunal re reproduced below: “10. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case, relying on the decision of Hon‟ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. Vs. ITO and various other decisions, rejected the claim of deduction u/s 80P(2)(a)(i) of the Act in respect of interest income of Rs.61,83,470/- received by the assessee from various cooperative banks. We find the Ld. CIT(A) / NFAC sustained the disallowance made by the Assessing Officer. It is the submission of the Ld. Counsel for the assessee that in view of various decisions filed in the paper book, the interest income received by the assessee from various cooperative banks is allowable as deduction u/s 80P(2)(a)(i) of the Act. 11. We find some force in the above arguments of the Ld. Counsel for the assessee. We find the issue of allowability of deduction u/s 80P(2)(a)(i) in respect of income from cooperative banks and cooperative societies stands decided in favour of the assessee by various decisions. 12. We find the Hon‟ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. Vs. CIT reported in (2021) 431 ITR 1 (SC) has held that where the assessee was registered as primary agricultural credit society, it was entitled to benefit of deduction under section 80P(2)(a)(i) notwithstanding that it was also giving loans to its members which were not related to agriculture. The relevant observations of Hon‟ble Supreme Court read as under: “45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and Printed from counselvise.com 8 ITA No. 2695/PUN/2025, AY 2018-19 promote the credit of the cooperative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now 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 the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm‟s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, „nominal members‟ are „members‟ as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions‟ Federation Ltd., Lucknow v. Commissioner of Income Tax, Lucknow-I (1997) 11 SCC 287 referred to section 80P of the IT Act and then held: “8. The expression “members” is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression “members” in Section 80-P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression “members” in Section 80-P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: “2. (n) „Member‟ means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to „members‟ anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty;”” Considering the definition of „member‟ under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i). 47. Further, unlike the facts in Citizen Cooperative Society Ltd. (supra), the Kerala Act expressly permits loans to non-members under section 59(2) and (3), which reads as follows: “59. Restrictions on loans.- (1) A society shall not make a loan to any person or a society other than a member: Provided that the above restriction shall not be applicable to the Kerala State Co-operative Bank. Provided further that, with the Printed from counselvise.com 9 ITA No. 2695/PUN/2025, AY 2018-19 general or special sanction of the Registrar, a society may make loans to another society. (2) Notwithstanding anything contained in sub-section (1), a society may make a loan to a depositor on the security of his deposit. (3) Granting of loans to members or to non-members under sub- section (2) and recovery thereof shall be in the manner as may be specified by the Registrar.” Thus, the giving of loans by a primary agricultural credit society to non-members is not illegal, unlike the facts in Citizen Cooperative Society Ltd. (supra). 48. Resultantly, the impugned Full Bench judgment is set aside. The appeals and all pending applications are disposed of accordingly.” 13. We find the Hon‟ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. reported in (2015) 230 Taxman 309 (Karnataka) has held that where co-operative society was engaged in business of providing credit facilities to its members, deposited excess amount for short term in bank, interest earned was entitled to be deducted under section 80P. The relevant observations of Hon‟ble High Court read as under: 14. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of ITO vs. M/s. Shri Bhairavnath Multistate Cooperative Credit Society Ltd. vide ITA No.2484/PUN/2017 order dated 27.06.2024 for assessment year 2014-15. The Tribunal has allowed the Printed from counselvise.com 10 ITA No. 2695/PUN/2025, AY 2018-19 claim of exemption u/s 80P(2)(a)(i) of the Act on the interest earned on investments made out of surplus funds with the cooperative banks, cooperative banks and nationalized banks. The relevant observations of the Tribunal from para 5 onwards read as under: “5. We heard the rival submissions and perused the material on record. We find this issue is no more res integra by virtue of catena of decisions passed by the Coordinate Benches of this Tribunal. In the present case, we find that admittedly the interest income was earned from the investments out of surplus funds made with cooperative banks/societies, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s.80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s.80P(2)(a)(i) as held by the Coordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited Vs. ITO in ITA No.1700/PUN/2017 wherein the Tribunal held as under :- “9. We heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act,1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as well as the CIT(A) were of the opinion that the interest earned from third parties or nonmembers does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as „income from other sources‟ There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon‟ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon‟ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon‟ble Delhi High Court in the case of Mantola Cooperative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon‟ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon‟ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon‟ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon‟ble Telangana and Hon‟ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) of the Act. The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12- 2018) has taken view in favour of the assessee following the judgment of Hon‟ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money Printed from counselvise.com 11 ITA No. 2695/PUN/2025, AY 2018-19 with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 & 2 stands allowed.” 6. Thus, the order passed by the ld.CIT(A) is in conformity with the settled position of law by virtue of the above discussion. Therefore, we affirm the impugned order directing the Assessing Officer to allow the claim of exemption u/s.80P(2)(a)(i)/80P(2)(d) on the interest income earned on investments made out of surplus funds made with Cooperative banks, Cooperative Societies and Nationalised banks. 7. In the result, the appeal filed by the Revenue is dismissed.” 15. We find the various other decisions relied on by the Ld. Counsel for the assessee also supports his case to the proposition that the assessee is entitled to claim deduction u/s 80P(2)(a)(i) of the Act in respect of interest income from deposits held with the cooperative banks. Therefore, in the light of the above decisions, we set aide the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer to allow the claim of deduction u/s 80P(2)(a)(i) of the Act of an amount of Rs.61,83,470/- received by the assessee being interest earned on deposits with the cooperative banks. The grounds raised by the assessee are accordingly allowed.” 9. We find that in the case of The Karad Urban Sevak Sahakari Patsanstha Maryadit Karad (supra), the Tribunal allowed the assessee’s claim of deduction u/s 80P(2)(d) of the Act in respect of interest income earned from the investments held with Co-operative Banks by observing as under : “4. I have heard the rival contentions and perused the records placed before me. I observe that the assessee is a Cooperative society and Nil income declared in the return of income for A.Y. 2020-21 furnished on 23.12.2020. After the case being selected for Complete Scrutiny valid statutory notices were served upon the assessee. During the source of assessment proceedings, ld. Assessing Officer has observed that assessee has earned interest income of ₹39,69,439 from the investments held with Cooperative Banks namely The Satara District Central Cooperative Bank Ltd. And The Karad Urban Cooperative Bank Ltd. Ld. Assessing Officer concluded the proceedings making addition of ₹39,69,439 and assessed the income at ₹39,69,439. Thereafter, assessee preferred appeal before ld.CIT(A) but failed to succeed. 5. Before me, ld. Counsel for the assessee has demonstrated that sum of ₹39,69,439 has been earned from deposits held with Cooperative Banks and that this interest income is eligible for deduction u/s.80P(2)(d) of the Act. 6. The issue under consideration is no longer res integra by virtue of catena of decisions taking consistent view that interest income earned from deposits with Cooperative Banks is eligible for deduction u/s.80P(2)(d) of the Act. Recently, this Bench in the case of Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal Vs. ITO in ITA No.313/PUN/2025, order dated 07.05.2025 has allowed the deduction claimed by the appellant u/s.80P(2)(d) of the Act observing as under : “5. We have heard the rival submissions and perused the record placed before us. There is no dispute to the fact that appellant has earned interest income of Rs.1,02,95,103/- from deposits/investments with Cooperative Banks. This fact has been accepted by the Assessing Officer in the assessment order also. Printed from counselvise.com 12 ITA No. 2695/PUN/2025, AY 2018-19 Admittedly, appellant has not filed the requisite details before ld.CIT(A). We however considering the fact that the issue regarding allowability of deduction u/s.80P(2)(d) of the Act for the interest earned from Cooperative Banks is no longer res integra as the very same issue has been decided by this Tribunal in catena of decisions and in assesse‟s own case for A.Y. 2020-21 holding that the appellant is eligible for deduction u/s.80P(2)(d) of the Act as the Cooperative Banks are basically Cooperative Societies. For the sake of brevity, the finding given in ITA No.2471/PUN/2024 is reproduced below: “7. We have heard both the sides and perused the record placed before us. In the instant case, the Assessing Officer disallowed the interest income of Rs.1,63,98,998/- earned out of the Fixed deposits/Investments made with Cooperative Banks treating the same as Income from Other Source. Ld.CIT(A) dismissed the appeal in limine without discussing anything on merits of the issues and on the ground that the appellant has not provided plausible explanation for admission of additional evidences. 8. Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s.80P of the Act. we find that this issue is no more res integra as the Coordinate Benches of this Tribunal has been consistently holding that the interest income earned out of the FDs/Investments kept with Cooperative Banks is allowable u/s.80P(2)(d) of the Act. We find that this Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., Vs. ITO in ITA No.1365/PUN/2023, dated 01.01.2024 dealing with similar issue after placing reliance on another decision of this 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, dated 27.05.2022 has held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s.80P(2)(d) of the Act as Cooperative Banks are basically Cooperative Societies only but have turned into Bank on getting necessary banking license. 9. Respectfully following the above referred decisions taking consistent view along with considering the facts of the case, where the appellant made investment with the Cooperative Banks we hold that the appellant is eligible for deduction u/s.80P(2)(d) of the Act for the interest income earned from Cooperative Banks at Rs.1,63,98,998/-. Findings of the ld. CIT(A) is set-aside and the Assessing Officer is directed to allow the claim made by the appellant. Effective grounds of appeal raised by the appellant are allowed.” 6. Respectfully following the same, we hold that deduction of Rs.1,02,95,103/- u/s.80P(2)(d) of the Act claimed by the appellant on the interest earned from deposits/Investments with Cooperative Banks deserves to be allowed. Relevant finding of ld.CIT(A) on merits is set aside and grounds of appeal No.5 to 8 raised by the appellant are allowed.” 7. In light of the above decision and other judicial precedents consistently followed by this Tribunal, I hold that the assessee is eligible for deduction u/s.80P(2)(d) of the Act for the interest income of ₹39,69,439 earned from the Printed from counselvise.com 13 ITA No. 2695/PUN/2025, AY 2018-19 investments held with Cooperative Banks. Ground No.2 raised by the assessee s allowed.” 10. Based on the above discussion and respectfully following the decision(s) (supra) of the Co-ordinate Bench of the Tribunal, we do not find any infirmity in the order of the Ld. CIT(A)/NFAC which is hereby upheld. The grounds raised by the Revenue are accordingly dismissed. 11. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 24th February, 2026. Sd/- Sd/- (R.K. Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 24th February, 2026. 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, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि// True Copy// आिेश नुस र / BY ORDER, सहायक पंजीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune Printed from counselvise.com "