INCOME TAX OFFICER WARD-1 PANDHARPUR, INCOME TAX OFFICE PANDHARPUR V. YASHODA MAHILA NAGARI SAHAKARI PATSANSTHA , MANGALWEDHA DISTRICT SOLAPUR

ITA 2741/PUN/2024

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the CIT(A)/NFAC which allowed a cooperative society, Yashoda Mahila Nagari Sahakari Patsanstha, to claim deductions under sections 80P(2)(a)(i) and 80P(2)(d) of the IT Act for the assessment year 2022-23. The primary contention was whether the interest income earned from other cooperative banks qualifies for deduction under section 80P(2)(d). The Assessing Officer had initially disallowed the deduction, but the CIT(A) reversed this decision, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397955 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2022-2023
• Other Referred Cases: Totgars Sale Society vs. ITO, ANNAPURNA NAGARI SAHKARI PATHSANSTHA MARYADIT vs. ITO, N Sai Multi State Cooperative Credit Society Ltd vs. ITO, Swa Ashokrao Bankar Nagari Sahakari Patsantha vs. ITO, Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd vs. ITO, Rena Sahakari Sakhar Karkhana Ltd. vs. ITO, Shrikrupa Nagari Sahakari Pathsanstha Maryadit vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND DESAI
• Assessee Lawyers: GIRISH LADDA
• Keywords: Set aside; Assessment record; Revision of order; Application of stay
• Section: 143(3); 142(1); 263

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.2741/PUN/2024 िनधाŊरण वषŊ / Assessment Year : 2022-23 ITO, Ward-1, Pandharpur. Vs. Yashoda Mahila Nagari Sahakari Patsanstha, Taluka- Mangalwedha, Dist.- Solapur- 413305. PAN : AAAAY7354C Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the Revenue is directed against the order dated 29.10.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2022-23. 2. Facts of the case, in brief, are that the assessee is a credit cooperative society engaged in the activities of providing loan and accepting deposits from its members. The return of income after claiming deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the IT Act was furnished by the assessee which was selected for scrutiny and Revenue by : Shri Arvind Desai Assessee by : Shri Girish Ladda Date of hearing : 26.03.2025 Date of pronouncement : 03.06.2025 ITA No.2741/PUN/2024 2 accordingly statutory notices u/s 143(2) and 142(1) respectively were issued to the assessee and the assessee furnished its reply by submission dated 12.08.2023. The assessee co-operative society earned an overall profit of Rs.3,10,90,382/- which also includes an amount of Rs.2,01,47,581/- interest income earned from other cooperative banks. After considering the reply of the assessee the Assessing Officer taxed the entire interest income received from cooperative banks of Rs.2,01,47,581/- as income from other sources and accordingly disallowed the deduction claimed by the assessee u/s 80P of the IT Act. The Assessing Officer completed the assessment u/s 143(3) of the IT Act by determining total income at Rs.2,01,47,581/- as against the income returned by the assessee at Rs.Nil. 3. In first appeal after considering the submissions of the assessee co-operative society, Ld. CIT(A)/NFAC allowed the appeal filed by the assessee by relying on various decisions passed by a coordinate bench of this Tribunal. It is this order against which the Revenue is in appeal before the Tribunal. 4. Ld. DR appearing from the side of the Revenue submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. ITA No.2741/PUN/2024 3 Ld. DR further submitted that Ld. CIT(A)/NFAC has not followed the judgement passed by Hon’ble Supreme Court in the case of Totgars Sale Society, 322 ITR 283. Accordingly, it was requested that the order passed by Ld. CIT(A)/NFAC may kindly be set-aside and the order passed by the Assessing Officer may kindly be restored. 5. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is justified. Ld. AR further submitted before us that the issue of deduction of interest income from other cooperative societies u/s 80P(2)(d) is no more res integra in the light of various decisions passed by coordinate bench of jurisdictional Tribunal. Ld. AR further relied on following coordinate bench decisions wherein the issue of deduction of interest income u/s 80P(2)(a)(i) or deduction u/s 80P(2)(d) of the IT Act was decided in favour of various cooperative credit societies. The decisions referred by Ld. AR are as follows :- 1. ANNAPURNA NAGARI SAHKARI PATHSANSTHA MARYADIT, ITA No.2741/PUN/2024, dated 24.03.2025. 2. N Sai Multi State Coopeartive Credit Society Ltd, ITA No.1109/PUN/2024 dated 24.09.2024. 3. Swa Ashokrao Bankar Nagari Sahakaro Patsantha, ITA No.58/PUN/2024 dated 14.05.2024 ITA No.2741/PUN/2024 4 4. Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd, ITA No.1365/PUN/2023 dated 01.01.2024. 5. Rena Sahakari Sakhar Karkhana Ltd., ITA No.1249/PUN/2018 dated 07.01.2022. 6. Shrikrupa Nagari Sahakari Pathsanstha Maryadit, ITA No.1252/PUN/2023 dated 02.02.2024. 6. Accordingly, it was requested by Ld. AR to dismiss the appeal filed by the Revenue. 7. We have heard Ld. counsel from both the sides and perused the material available on record including the paperbook furnished by the assessee. In this regard, we find that the coordinate bench of this jurisdictional Tribunal in number of decisions has already taken a view that the interest income earned by a cooperative credit society from other cooperative banks qualifies for deduction u/s 80P(2)(d) of the IT Act. Regarding the claim of Ld. DR that the judgement passed by Hon’ble Supreme Court in the case of Totgars Sale Society Ltd, we find that in all the decisions referred by Ld. AR the above judgement passed by Hon’ble Supreme Court has already been considered. Ld. AR also relied on the decision passed by a coordinate bench of this Tribunal in the case of N Sai Multi State Coopeartive Credit Society Ltd, ITA No.1109/PUN/2024 order dated 24.09.2024 wherein coordinate ITA No.2741/PUN/2024 5 bench of this Tribunal allowed the appeal filed by the assessee by observing as under :- “9. After hearing both the sides, we find an identical issue had come up before the Tribunal in the case of Shrikrupa Nagari Sahakari Pathsanstha Maryadit vs. ITO vide ITA No.1252/PUN/2023 for assessment year 2017-18 order dated 02.02.2024, where the Tribunal after considering various decisions has held as under: “3. It is in this factual backdrop that we have heard the department as well regarding correctness of the impugned disallowance itself during the course of hearing today and find that the instant issue is no more res integra in light of Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT (ITA No.1249/PUN/2018) decided on 07-01-2022 as follows : “3. After culmination of the assessment proceedings, the Pr. CIT called for the assessment records of the assessee. It was observed by the Pr. CIT that the assessee had during the year shown interest income from FDs with Cooperative Banks amounting to Rs.75,38,534/-, against which it had claimed deduction under Sec.80P(2)(d) of the Act. It was observed by the Pr. CIT, that the A.O while framing the assessment had allowed the aforesaid claim of deduction raised by the assessee. Observing, that as cooperative banks were commercial banks and not a cooperative society, therefore, the Pr.CIT was of the view that the assessee was not eligible for claim of deduction under Sec.80P(2)(d). In the backdrop of his aforesaid conviction, the Pr. CIT was of the view that the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016, therein allowing the assesses claim for deduction under Sec. 80P(2)(d), had therein rendered his order as erroneous, insofar it was prejudicial to the interest of the revenue. Accordingly, the Pr.CIT not finding favour with the reply of the assessee, wherein the latter had tried to impress upon him that it was duly eligible for claim of deduction under Sec.80P(2)(d) of the Act, therein “set aside” the order of the A.O with a direction to redecide the issue afresh and reframe the assessment. 4. The assessee being aggrieved with the order of the Pr.CIT has carried the matter in appeal before us. As the present appeal involved a delay of 52 days, therefore, the ld. A.R took us through the reasons leading to the same. It was submitted by the ld. A.R that as the then counsel of the assessee society who was looking after its tax matters, viz. Shr. Ravikiran Pandurang Todkar, Chartered Accountant was taken unwell due to kidney failure and had undergone kidney transplant, therefore, due to his unavailability the appeal could not be filed within the ITA No.2741/PUN/2024 6 stipulated time period. Our attention was drawn towards the „affidavit‟ of the assessee society wherein the aforesaid facts were deposed. On the basis of the aforesaid facts, it was submitted by the ld. A.R that the delay involved in filing of the present appeal in all fairness may be condoned. Per contra, the ld. D.R did not object to the seeking of condonation of the delay in filing of the appeal by the assessee society. After giving a thoughtful consideration, we are of the considered view, that as there were justifiable reasons leading to delay on the part of the assessee in filing of the present appeal before us, therefore, the same merits to be condoned. 5. On merits, it was submitted by the ld. A.R, that as the A.O while framing the assessment had after making necessary verifications taken a plausible view, therefore, the Pr. CIT had exceeded his jurisdiction by seeking to review the order passed by him in the garb of the revisional powers vested with him under Sec.263 of the Act. It was submitted by the ld. A.R, that the issue as regards the eligibility of the assessee for claim of deduction under Sec.80P(2)(d) on interest income derived from investments/deposits lying with co-operative banks was squarely covered by the various orders of the coordinate benches of the Tribunal viz., (i). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated 29.11.2019 ( ITAT “G” Bench, Mumbai); Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO21(2)(1), Mumbai, ITA No. 6547/Mum/2017 (ITAT Mumbai); and (iii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune). On the basis of his aforesaid contentions, it was averred by the ld. A.R that as the Pr. CIT had exceeded his jurisdiction and had not only sought to review the plausible view that was taken by the A.O after necessary deliberations which was in conformity with the order of the jurisdictional bench of the Tribunal, therefore, his order may be vacated and that of the A.O be restored. 6. Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the order passed by the Pr. CIT under Sec.263 of the Act. It was submitted by the ld. D.R, that as the assessee was not eligible for claim of deduction under Sec.80P on the interest income received on the investments/deposits lying with the co-operative banks, therefore, the Pr. CIT finding the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016 as erroneous, insofar it was prejudicial to the interest of the revenue, had rightly „set aside‟ his assessment with a direction to readjudicate the issue therein involved. Our attention was also drawn by the ld. D.R to his written ITA No.2741/PUN/2024 7 submissions and certain judicial pronouncements in support of his aforesaid contention. 7. We have heard the ld. authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether or not the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order. In our considered view, the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative bank, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 8. After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2)(d) (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. (2). The sums referred to in sub-section (1) shall be the following, namely:- (a)................................................................................. (b)................................................................................. (c).................................................................................. .......... (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income;” On a ITA No.2741/PUN/2024 8 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 from the investments made by the assessee co-operative society with any other cooperative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of subsection (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 cooperative 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 cooperative banks pursuant to the insertion of subsection (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. 9. In so far the judicial pronouncements that have been relied upon by the ld. A.R are concerned, we find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its ITA No.2741/PUN/2024 9 investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated 29.11.2019 ( ITAT “G” Bench, Mumbai); (ii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune) (iiii). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006 also makes it clear beyond any scope of doubt that the purpose behind enactment of subsection (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), as had been relied upon by the ld. D.R before us, had held, that a co-operative society would not be entitled to claim deduction under Sec. 80P(2)(d); but then, the Hon'ble High Court in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. Backed by the aforesaid conflicting judicial pronouncements, we may herein observe, that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non- jurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and that of the Hon’ble High Court of Gujarat in the ITA No.2741/PUN/2024 10 case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 10. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and allowed the assessee‟s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co- operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same. Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec. 143(3), dated 07.03.2016.” 4. We adopt the foregoing detailed discussion mutatis mutandis to accept the assessee’s arguments in it’s main appeal ITA.No.1252/PUN./2023 itself in the larger interest of justice. The same stands accepted. Stay application SA.No.6/PUN./2023 is rendered infructuous very terms. 5. This assessee’s stay application SA.No.6/PUN./ 2023 is dismissed as rendered infructuous and it’s main appeal ITA.No.1252/PUN./2023 is allowed in above terms. A copy of this common order be placed in the respective case files.” 10. Since the facts of the instant case are identical to the facts of the case already decided by the Tribunal, therefore, respectfully following the decision of the Coordinate Bench of the Tribunal (supra), we hold that the CIT(A) / NFAC was not justified in denying the claim of deduction u/s 80P(2)(d) of the Act in respect of the interest income earned from the banks on investments. We, therefore, set aside the order of the CIT(A) / NFAC and the Assessing Officer is directed to delete the addition. The grounds raised by the assessee are accordingly allowed.” 8. Accordingly respectfully following the above decision passed by a coordinate jurisdictional bench of this Tribunal we do not find any error in the order passed by Ld. CIT(A)/NFAC wherein he allowed the deduction under section 80P(2)(d) of the IT Act ITA No.2741/PUN/2024 11 regarding interest income earned from other cooperative banks and therefore we do not hesitate to dismiss the appeal filed by the Revenue. Thus, grounds raised by the Revenue are dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. Order pronounced on this 03rd day of June, 2025. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 03rd June, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "