JAI KONDESHWAR NAGARI SAHAKARI BADNERAPAT SANSTHA MARYADIT ,AMRAVATI V. INCOME TAX OFFICER, WARD 3, AMRAVATI, AMRAVATI

ITA 275/NAG/2025

AI Insights

The case involves Jai Kondeshwar Nagari Sahakari Badnerapat Sanstha Maryadit, a cooperative society, appealing against the order of the Commissioner of Income Tax (Appeals) which affirmed the denial of deduction under section 80P(2)(d) of the Income Tax Act, 1961, by the Assessing Officer. The deduction in question pertained to interest income received from Cooperative Banks. The Tribunal referenced several precedents, including a significant judgment by the Supreme Court and various High Courts, which supported the assessee's position that such interest income should be deductible under section 80P(2)(d). The Tribunal found that the issue was squarely covered in favor of the assessee by these judgments and allowed the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669290 (ITAT-NAGPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2022-2023
• Other Referred Cases: Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO, Mavilayi Service Cooperative Bank Ltd. Vs CIT, Calicut, Kaliandas Udyog Bhavan Premises Coop Society Ltd vs ITO, Pr.CIT v/s Totagars Co-operative Sales Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PANKAJ KUMAR; LD.
• Keywords: Set aside

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR “SMC” BENCH : NAGPUR BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER I.T.A.No. 275/NAG/2025 (Assessment Year 2022–23) Jai Kondeshwar Nagari Sahakari Badnerapat Sanstha Maryadit Baripura Old Town, Badnera Amravati 444 601 PAN : AAATJ 7671 E vs. Income Tax Officer Ward–3, Amravati. (Appellant) (Respondent) For Assessee : None For Revenue : Shri Pankaj Kumar, Ld. Sr.DR Date of Hearing : 24.06.2025 Date of Pronouncement : 24.06.2025 ORDER This appeal has been preferred by the assessee against the order dated 07/01/2025 impugned herein passed by the Ld. ADDL/ JCIT (A)–12, Delhi [in short, “Ld.Commissioner”] u/sec. 250 of the Income Tax Act, 1961 (for short, “the Act”) for the Assessment Year (for short, “AY”) 2022-23. 2 ITA.No.275/NAG/2025 2. At the outset, it is observed that there is a delay of 26 days in filing the instant appeal. Considering the reasons stated by the assessee in the application filed along with duly sworn affidavit, the delay is condoned. 3. In the instant case, the CPC/A.O. vide intimation/order dated 16/01/2023 denied the deduction claimed by the assessee u/sec. 80P(2)(d) of the Act, therefore the assessee being aggrieved challenged the order of CPC/A.O. mentioned above, in the first appellate proceedings. However, in spite of affording two opportunities, made no compliance before the Ld. Commissioner and, therefore, Ld. Commissioner was constrained to dismiss the appeal of the assessee by affirming the order/intimation issued by the CPC/A.O. Though, the order is ex–parte, but issue is covered in favour of the assessee qua deduction claimed u/sec. 80P(2)(d) of the Act, as the identical issue has been tested by various Courts all across India and by the coordinate Bench of the Tribunal at Mumbai in the case of Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO (ITA No.1346 & 1347/M/2023 decided on 27.07.2023)/(2023) 153 taxmann.com 714 (Mum. - Trib.) by observing and concluding as under: \"8. We have considered the submissions of both sides and perused the material available on record. The only dispute raised by the assessee is against the disallowance of deduction under section 80P(2)(d) of the Act in respect of interest income received from the Co-operative Banks. The assessee is a registered Co-operative Housing Society and during the assessment year 2018-19 earned interest income of Rs. 50,39,861 from the investments made in various Co-operative Banks. 9. Before proceeding further, it is relevant to note the provisions of section 80P of the Act under which the assessee has claimed the deduction in the present case. As per the provisions of section 80P(1) of the Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an assessee 3 ITA.No.275/NAG/2025 being a Co-operative Society. Further, section 80P(2)(d) of the Act, reads as under: \"80P. Deduction in respect of income of co-operative societies. (1) ...... (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;\" 10. Thus, for the purpose of provisions of section 80P(2)(d) of the Act, two conditions are required to be cumulatively satisfied- (i) income by way of interest or dividend is earned by the Co-operative Society from the investments, and (ii) such investments should be with any other Co- operative Society. Further, the term „co-operative society• is defined under section 2(19) of the Act as under: \"(19) \"co-operative society\" means 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 ; 11. In the present case, there is no dispute that the assessee is a CoOperative Housing Society. Thus, if any income as referred to in sub- section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as a deduction. It is pertinent to note that since the assessee is registered under the Maharashtra Co-operative Societies Act, 1960, it is required to invest or deposit its funds in one of the modes provided in section 70 of the aforesaid Act, which includes investment or deposit of funds in the District Central Co-operative Bank or the State Cooperative Bank. Accordingly, the assessee kept the deposits in Co-operative Banks registered under the Maharashtra Co-operative Societies Act and earned interest, which was claimed as a deduction under section 80P(2)(d) of the Act. The AO denied the deduction under section 80P(2)(d) of the Act on the basis that the Co- operative Bank is covered under the provisions of section 80P(4) of the Act. We find that the Hon’ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. Vs CIT, Calicut, [2021] 431 ITR 1 (SC) while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Cooperative Banks, which are Co-operative Societies and also possesses a 4 ITA.No.275/NAG/2025 licence from RBI to do banking business. The Hon’ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, we are of the considered view that section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co- operative Bank, claims a deduction under section 80P of the Act which is not the facts of the present case. Therefore, we find no merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the assessee. 12. As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) of the Act. In Kaliandas Udyog Bhavan Premises Coop Society Ltd vs ITO, in ITA No. 6547/ Mum./2017, vide order dated 25/04/2018, while dealing with the provisions of section 80P(2)(d) vis-à-vis section 80P(4) of the Act, the coordinate bench of the Tribunal observed as under: \" \"7. ......Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society Sai Ankur Co-Operative Housing Society ... vs Income Tax Office- Ward 41(3)(4), ... on 22 January, 2025 Indian Kanoon - http://indiankanoon.org/doc/81566930/ 3 from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. 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 though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, 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, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a cooperative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co- operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other cooperative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term 'co- 5 ITA.No.275/NAG/2025 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 Cooperative 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 bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced 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.\" 13. We find that the learned CIT(A) has placed reliance upon the decision of the Hon’ble Karnataka High Court in Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 395 ITR 611 (Karn.), wherein it was held that interest earned by the assessee, a Co-operative Society, from surplus deposits kept with a Cooperative Bank, was not eligible for deduction under section 80P(2)(d) of the Act. We find that in an earlier decision the Hon’ble Karnataka High Court in Pr.CIT v/s Totagars Co- operative Sales Society, [2017] 392 ITR 74 (Karn.) held that according to section 80P(2)(d) of the Act, the amount of interest earned from a Co- operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Thus, there are divergent views of the same Hon’ble High Court on the issue of eligibility of deduction under section 80P(2)(d) of the Act in respect of interest earned from Co-operative Bank. No decision of the Hon•ble jurisdictional High Court was brought to our notice on this aspect. We have to, with our highest respect to both the views of the Hon'ble High Court, adopt an objective criterion for deciding as to which decision of the Hon'ble High Court should be followed by us. We find guidance from the judgment of the Hon'ble Supreme Court in CIT v. Vegetable Products Ltd., [1972] 88 ITR 192. In the aforesaid decision, the Hon'ble Supreme Court has laid down a principle that \"if two reasonable constructions of taxing provisions are possible, that construction which favours the assessee must be adopted\". 14. Therefore, in view of the above, we uphold the plea of the assessee and direct the AO to grant the deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with Cooperative Banks. Accordingly, we set aside the impugned order passed by the learned CIT(A) for the assessment year 2018-19. As a result, grounds raised by the assessee are allowed.\" 6 ITA.No.275/NAG/2025 4. As the issue involved is squarely covered in favour of the assessee by the aforesaid judgment referred to above, thus, the appeal of the assessee is allowed, however subject to verification of the claim by the Jurisdictional Assessing Officer qua deduction claimed u/sec. 80P(2)(d) of the Act. 5. In the result, appeal of the Assessee is allowed in the aforesaid terms. Order pronounced in the open Court on 24.06.2025. /- Sd/- (Narender Kumar Choudhry) Judicial Member vr/- Copy to 1. The appellant 2. The respondent 3. The CIT(A), Nagpur concerned. 4. D.R. ITAT, Nagpur Bench, Nagpur. 5. Guard File. By Order //True Copy // Sr. Private Secretary, ITAT, Nagpur Bench. "