INCOME TAX OFFICER, WARD 6(3), PUNE V. MAHARASHTRA BANK EMPLOYEES COOP CREDIT SOCITEY LIMITED, PUNE

ITA 208/PUN/2025

AI Insights

The case involves the Income Tax Department appealing against the decision of the CIT(A) which allowed the Maharashtra Bank Employees Co-op Credit Society Limited a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 for interest income from deposits with Bank of Maharashtra. The Revenue contended that the interest income should be taxed under 'Income from other sources' as per section 56 of the Act, citing the Supreme Court's decision in Totgars Co-operative Sales Society Ltd. vs. ITO. However, the CIT(A) and the Tribunal found that the issue was settled in favor of the assessee by earlier ITAT decisions and Supreme Court rulings, leading to the dismissal of the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397108 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: Totgars Co-operative Sales Society Ltd. Vs. ITO, Pr. Commissioner of Income Tax vs. Totagars Cooperative Sale Society
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P. MURKUNDE
• Assessee Lawyers: BHAGWAT; CATENA OF DECISIONS
• Keywords: Business income
• Section: 143(3); 56

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.208 & 209/PUN/2025 धििाारण वर्ा / Assessment Years : 2013-14 & 2017-18 Income Tax Officer, Ward – 6(3), Pune Vs. Maharashtra Bank Employees Co-op Credit Society Limited, 93/2, 3rd Floor, Bank of Maharashtra Building, Laxmi Road, Budhwar Peth, Pune-411002 PAN : AAAAM0401C अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri MR Bhagwat Department by : Shri Ramnath P. Murkunde Date of hearing : 14-05-2025 Date of Pronouncement : 29-05-2025 आदेश / ORDER PER ASTHA CHANDRA, JM : Two appeals filed by the Revenue are directed against the separate order(s) both dated 26.11.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Years (“AYs”) 2013-14 and 2017-18. Since the issue(s) involved are identical, these were heard together and are being disposed of by this common order. ITA No. 208/PUN/2025, A.Y. 2013-14 2. The Revenue has raised the following grounds of appeal:- “1. On the facts and circumstances of the care and in law, the learned CIT(A) has erred in deleting the disallowance made by the Assessing Officer of the deduction of Rs.2,99,19,650/- claimed under section 80P of the Income-tax Act, 1961 being Interest earned from the investments with scheduled banks, Ignoring the decision of the Hon'ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO, (SC) (322 ITR 283) (2010) wherein the Hon'ble Court clearly held that the interest income which has been earned by a co-operative society by investing surplus funds would come in the category of 'Income from other sources' taxable u/s 56 of the Act and would not qualify for deduction as business income w/s 80P(2)(a) (i) of the Act. 2 ITA Nos.208 & 209/PUN/2025, AYs 2013-14 & 2017-18 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in granting relief to the assessee Co-operative society without appreciating the fact 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 banks/Co-operative banks and hence, such interest income needs to be charged as income from other sources under section 56 of the Income Tax Act, 1961. 3. On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate the fact that the entire deposits accepted from the members was a facility to the members, instead they were put into the cooperative bank as deposits to earn interest, the income of which cannot be considered to be attributable to the business of providing credit facility to its members. 4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that interest earned by the assessee on its surplus investments with co-operative banks is eligible for deduction u/s.80P(2) (d) of the Income Tax Act, 1961 despite the fact that the provisions of Sec.80P(4) of the Act specifically provides that the provisions of Sec.80P shall not apply in relation to a cooperative bank and therefore, the benefit of deduction under the said provisions could not have been extended to interest received on deposits kept in such cooperative banks. 5. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not giving due consideration to the decision of the Hon'ble Karnataka High Court in the case of Pr. Commissioner of Income Tax vs. Totagars Cooperative Sale Society (2017). (395 ITR 611 Kar 2017), wherein, based on the decision of the Hon'ble Apex Court in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO, (SC) (322 ITR 283) (2010), it was held that a co-operative society would not be eligible for deduction u/s 80P(2)(d) on the interest income earned by it on account of deposit of its surplus funds in a co- operative bank. 6. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the assessee is entitled to 100% of deduction under section 80P(2)(a)(i) in respect of whole of its income, without appreciating that not all of the income of the assessee were not earned from the business of offering credit facilities to its members. 7. The appellant craves leave to add to, amend, alter any of the above grounds of appeal.” 3. Briefly stated, the facts of the case are that the assessee is a Co- operative Society registered under the Maharashtra Co-operative Societies Act, 1960. It is engaged in the business of providing credit facilities to its members. The assessee society’s membership is restricted to the employees of the Bank of Maharashtra, which is a Nationalized Bank. The assessee filed its return of income for A.Y. 2013-14 on 28.09.2013 declaring a total income of Rs. Nil. The return was duly processed u/s 143(1) of the Income Tax Act, 1961 (the “Act”). Subsequently, the case was selected for scrutiny under CASS. Statutory notice u/s 143(2) of the Act was issued to 3 ITA Nos.208 & 209/PUN/2025, AYs 2013-14 & 2017-18 the assessee by DCIT, Circle-11(2), Pune on 01.09.2014 calling for various details. The notice was duly served on the assessee. The case was then transferred to ITO, Ward-6(3), Pune (“AO”). The Ld. AO completed the assessment on 03.03.2016 assessing the total income at Rs. 2,99,19,646. Thereafter, the Assessee preferred an application to the Ld. PCIT, Pune under section 264 of the Act and pursuant to the directions of the Ld. PCIT, the assessment was completed by the Ld. AO at assessed income of Rs. 2,99,19650/- by making an addition of Rs. 2,99,19,650/- to the Nil income returned by the assessee on account of disallowance of deduction under section 80P(2)(a)(i) of the Act claimed by the assessee in respect of interest income earned from fixed deposits with Bank of Maharashtra amounting to Rs. 2,95,80,110/- and interest on savings bank account amounting to Rs. 3,99,536/-, thereby aggregating to Rs. Rs. 2,99,19,650/, vide order dated 15.12.2018 passed under section 143(3) r.w.s. 264 of the Act. During the assessment proceedings, the Ld. Assessing Officer (“AO”) found that the assessee claimed deduction of Rs.2,99,19,646/- u/s 80P(2)(a)(i) of the Act. The Ld. AO further found that the assessee has made investments in Fixed Deposits in certain Nationalized Bank(s) and earned interest of Rs.2,95,80,110/- thereon and interest of Rs.3,39,536/- from saving bank account from Nationalized Bank totaling to Rs.2,99,19,646/-. 4. Aggrieved, the assessee carried the matter before the Ld. CIT(A) who allowed the deduction of interest claimed by the assessee u/s 80P(2)(a)(i) of the Act observing that the identical issue has already been decided by the Jurisdictional ITAT Pune in assessee’s own case for earlier years and also placing reliance on the decision(s) of Hon’ble Supreme Court in the case of PCIT vs. Annasaheb Patil Mathadi Kamgar sahkari patpedhi reported in 454 ITR 117 and 454 ITR 528. The relevant observations and findings of the Ld. CIT(A) reads as under : “9. Decision: 9.0. The instant appeal has been filed against order u/s. 143(3) r.w.s.264 of the Income-Tax Officer, dated 15-12-2018 passed by Income-Tax Officer, Ward-6(3) Pune for A.Y.2013-14. 9.1. The brief facts of the case are that the appellant filed return of income for A.Yr.2013-14 declaring total Nil income under AOP status claiming deduction deduction u/s.80P(2)(a)(i) of the I.T.Act. Subsequently the case was selected for scrutiny under CASS and the assessment was completed assessing the total income of Rs.2,99,19,646/- towards the interest income received on fixed deposits and interest received on SB account during the relevant assessment year. 4 ITA Nos.208 & 209/PUN/2025, AYs 2013-14 & 2017-18 9.2. Subsequently, the appellant preferred an application before the Pr.CIT as per the provisions of section 264 and the take was taken up by the Pr.CIT. The Ld.Pr.CIT examined the case and directed the Assessing Officer to give adequate opportunity considering the Apex Court orders and to pass a fresh assessment order in accordance with provisions of law. However the AO, for the reasons discussed in the assessment order completed the assessment 143(3) r.w.s., 264 making addition of Rs.2,99,19,650/-. 9.3. During the course of appellate proceedings, notices u/s.250 have been issued on various dates. The written submissions filed by the appellant has been extracted in the preceding paras. 9.4. I have considered the assessment order, written submission filed by the appellant and the grounds of appeal and statement of facts. The grounds of appeal mainly relate to the only issue of addition of Rs.2.99,19,650/-being interest on fixed deposits with Bank of Maharashtra on which the appellant society claimed deducted u/s.80P(2)(a)(i) of the Act. The appellant has stated that it is registered under the Maharashtra Cooperative Societies Act, 1960 and is engaged in the business of credit facilities to its members. It is required to create a reserve fund and invest the same in accordance with the provisions of the Maharashtra Cooperative Societies Act and accordingly the society had invested part of its reserve fund in fixed deposits with Bank of Maharashtra which is the nationalized bank. The appellant society had applied for requisite permission from the registrar of cooperative societies u/s.70 of the Maharashtra Cooperative Societies Act and the registrar vides its letter dated 18-10-1995 in respect the investment of reserve funds had granted permission for investing the funds in Bank of Maharashtra. The appellant has submitted that the issue is already covered in the favour of the appellant society for A. Yr.2007-08 to 2010-11, 2012-13, 2014-15 and 2018- 19 and the copies of the orders of the Hon'ble ITAT, Pune have also been enclosed. Apart from the above, the appellant has also relied upon the decision two latest decisions of the Hon'ble Supreme Court in the case of PCIT vs Anna sahib patel mathadi kamgarh sahkari patpedhi reported as 454 ITR 117 and 454 ITR 528. Considering that the identical issue has already been decided by the jurisdictional ITAT, Pune Bench in appellant's own cases in the earlier years, respectfully following the same, the grounds of appeal are allowed in favour of the appellant. 10. In the result the appeal is allowed for statistical purposes.” 5. Dissatisfied with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal and all the grounds of appeal relate thereto. 6. The Ld. AR reiterated the same submissions made before the lower authorities in support of its claim of deduction of interest income u/s 80P(2)(a)(i) of the Act and submitted that the impugned issue is no more res-integra as it is covered in favour of the assessee by catena of decisions of the coordinate bench(es) of the Tribunal including Pune Tribunal as well as other judicial forums. He submitted that the impugned issue has also been consistently decided by the Pune Tribunal in favour of the assessee in assessee’s own case for AYs 2007-08 to 2010-11, 2012-13, 2024-15 and 2018-19. 7. The Ld. DR, on the other hand relied on the order of Ld. AO. 5 ITA Nos.208 & 209/PUN/2025, AYs 2013-14 & 2017-18 8. We have heard the Ld. Representatives of the parties and perused the material on record. Admittedly, there is no dispute on facts regarding the assessee having derived the impugned interest income from fixed deposits and savings bank account with Bank of Maharashtra, which is a Nationalized Bank. We find some force in the argument of the Ld. AR that the impugned issue is no more res-integra by virtue of catena of decisions passed various judicial forums. We also find that the impugned issue is covered in favour of the assessee by the decision(s) of co-ordinate bench of the Pune Tribunal in assessee’s own case for AYs 2007-08 to 2010-11, 2012-13, 2024-15 and 2018-19 on the basis of which the Ld. CIT(A) has allowed the appeal of the assessee. The facts in the AY 2013-14 under consideration are identical to the facts in preceding AYs as well as in subsequent AY 2018-19 already adjudicated by this Tribunal. Nothing has been brought on record by the Revenue to controvert the findings of Ld. CIT(A)/NFAC and Co-ordinate Bench of the Tribunal in assessee’s own case. 9. We find that the Co-ordinate Bench of the Tribunal in its latest decision in assessee’s own case in ITA No. 302/PUN/2022 for AY 2018-19, dated 20.12.2022 decided the impugned issue in favour of the assessee under the similar set of facts, by observing as under : “4. We have heard both the sides and gone through the relevant material on record. It is seen that similar issue came up for consideration before the Tribunal in assessee’s own case for the A.Y. 2014-15 (ITA No.1763/PUN/2017, order dated 06-08-2019) albeit in the appeal preferred by the Revenue. After examining the relevant points and following other orders passed by the Pune Benches, the Tribunal upheld the eligibility of deduction u/s.80P on such interest income. Both the sides are in agreement that the facts and circumstances are similar. Respectfully following the precedent, we overturn the impugned order and direct to grant the deduction u/s.80P(2)(a)(i) on such interest income.” 10. In the light of the factual and legal position enumerated above and respectfully following the decision of the coordinate bench of the Pune Tribunal in assessee’s own case (supra), for the parity of reasons we uphold the order of the Ld. CIT(A)/NFAC and direct the Ld. AO to allow the deduction claimed by the assessee u/s 80P(2)(a)(i) of the Act in respect of the impugned interest income. We hold and direct accordingly. The grounds raised by the Revenue are accordingly dismissed. 11. In the result, the appeal of the Revenue is dismissed. 6 ITA Nos.208 & 209/PUN/2025, AYs 2013-14 & 2017-18 ITA No. 209/PUN/25, A.Y. 2017-18 12. Both the sides are unanimous in stating that the facts and the ground of appeal in ITA No.209/PUN/2025 for A.Y. 2017-18 is identical to the grounds raised in ITA No. 208/PUN/2025 for AY 2013-14 except for the variance in amounts. Thus, in view of the fact that the issue(s) raised in both the appeals are identical and arising from the same set of facts, the finding given by us while adjudicating the appeal in ITA No. 208/PUN/2025 shall mutatis mutandis apply to the appeal in ITA No. 209/PUN/2025 as well. Accordingly, the grounds of appeal raised by the Revenue in ITA No. 209/PUN/2025 are dismissed in the same terms. 13. To sum up, both the appeals of the Revenue for AY 2013-14 (ITA No. 208/PUN/2025) and AY 2017-18 (ITA No. 209/PUN/2025) are dismissed. Order pronounced in the open court on 29th May, 2025. Sd/- Sd/- (R.K. Panda) (Astha Chandra) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; दिन ांक / Dated : 29th May, 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 "