KATTERIKUPPAM PRIMARY AGRI COOP CREDIT SOCIETY LIMITED P 120,PUDUCHERRY V. INCOME TAX OFFICER, WARD 3, PUDUCHERRY, PUDUCHERRY

ITA 2787/CHNY/2025

AI Insights

The case involves Katterikuppam Primary Agri Cooperative Credit Society Limited, which appealed against the order of the National Faceless Appeal Centre (NFAC) confirming the addition of Rs. 50,86,408 to its income for the assessment year 2020-21. The addition was initially made by the Assessing Officer (AO) on the grounds that the interest income from investments in cooperative banks did not qualify for deduction under section 80P(2)(a)(i) of the Income Tax Act. The Tribunal, referencing decisions from the Madras High Court, overturned the NFAC's decision, ruling that the interest income was indeed deductible under section 80P(2)(d).

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 830713 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 09-10-2025
• Other Referred Cases: Thorapadi Urban Cooperative Credit Society Ltd Vs Income Tax Officer, CIT v. Salem Agricultural Producers Co-operative Marketing Society Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Assessee Lawyers: V.MEENAKSHI SUNDAR; C.A
• Keywords: Set aside
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI BEFORE HON’BLE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SS VISWANETHRA RAVI, JUDICIAL MEMBER ITA No.2787/Chny/2025 Assessment Years: 2020-21 Katterikuppam Primary Agri Cooperative Credit Society Limited P 120, No.1, Suthukeni Road, Katterikuppam, Pondicherry-605 502. [PAN: AAAAK4242K] Income Tax Officer, Ward-3, Puducherry Appellant Respondent Assessee by : Mr.V.Meenakshi Sundar, C.A Revenue by : Ms.R.Anitha, Addl.CIT Date of Hearing : 13.01.2026 Date of Pronouncement : 19.01.2026 O R D E R PER INTURI RAMA RAO, A.M : This appeal filed by the assessee - society is directed against the order of the NFAC, (herein after called CIT(A)’ in short], Delhi, dated 11.08.2025 for AY-2020-21. 2.0 Briefly, the facts of the case are that the appellant is a Cooperative Society incorporated under the provisions of the Tamil Nadu Cooperative Society Act, 1983. The return of income for assessment year 2020-21 was filed by the appellant on 28.12.2020 disclosing a total income of Rs. nil Printed from counselvise.com ITA No.2787/Chny/2025 Page - 2 - of 5 after claiming deduction of Rs.39,49,608 u/s 80P(2)(a)(i) of the Act. Against the said return of income, the assessment was completed by NFAC vide the order dated 27.09.2022 passed u/s 143(3) r.w.s. 144B of the Act at a total income of Rs. Rs.50,86,408/-. While doing so, the AO had disallowed the claim for deduction of interest income earned on investments, FDRs by holding that the same does not qualify for deduction u/s. 80P(2)(a)(i) of the Income Tax Act. 3.0 Being aggrieved by the above assessment order, the appellant society preferred an appeal before the NFAC, who vide the impugned order confirmed the action of the AO. Being aggrieved, the appellant is in appeal before us in the present appeal. 4.0 We heard the rival submissions and perused the material on record. The issue that arises for our consideration is whether the interest income earned by cooperative society on investment with the cooperative banks qualifies for deduction u/s 80P(2)(a)(i) or not. The issue is no longer “res integra” as settled by the Hon’ble Madras High Court in the case of Thorapadi Uraban Cooperative Credit Society Ltd Vs Income Tax Officer, wherein it was held as under vide paras 8 to 13:- “….8 The main issue is to decide in the present case is as to whether the petitioner Co-operative Society is entitled for a deduction for the interest income received from the Co-operative Bank? Printed from counselvise.com ITA No.2787/Chny/2025 Page - 3 - of 5 9. It would be appropriate to extract hereunder the relevant portion of section 80P(2)(d). \"80 P. 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) to (c) ** (d) \"in respect of any income by way of interest or dividends derived by the co- operative society from its investment with any other co-operative society, the whole of such income\" 9.1 A reading of the above said provision makes it clear that in the event if any Co- operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term 'Co-operative Society'. In the present case, the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20-5-2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co- operative Bank registered under the Co-operative Societies Act. The Income Tax Act, 1961 has also defined 'Co-operative Society' under section 2(19) as follows: 2(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.\" 10. A reading of the above definition would make it clear that 'Co-operative Society' means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank. 11. The learned counsel for the respondent referred to the judgment of the Hon'ble Supreme Court rendered in Totgars Co-operative Sale Society Ltd. (supra), wherein the issue came up for consideration as to whether the interest income received by a Co-operative Bank from its members by way of providing the credit facilities to Its members is eligible for deduction or not. Ultimately the Hon'ble Supreme Court found that under section 80P(2)(0)(1), the same is eligible for deduction. Therefore, the law laid down by the Hon'ble Supreme Court is not applicable for in the present case as the eligibility of deduction of interest has to be decided under section 80P(2)(d) and not under section 80P(2)(a)(1). The learned counsel has also relied upon other judgments which are not applicable for the present facts of the present case. Printed from counselvise.com ITA No.2787/Chny/2025 Page - 4 - of 5 12. At this juncture, it would be appropriate to refer a judgment passed by a Division Bench of this Court in CIT v. Salem Agricultural Producers Co-operative Marketing Society Ltd. [2016] 76 taxmann.com 225 (Mad.) [Tax Case Appeal No. 5 of 2015), wherein, apart from other substantial issues, the following issue has been framed for consideration, which reads as under: \"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 with respect to the interest received from Class B members who were involved in non- agricultural society?\". While answering to the above, the Division Bench held that the respondent therein, which is a Co-operative society, is entitled to avail the benefit under 80P(2)(d) of the Act. The judgment was rendered on 10-8-2016, where the judgement rendered by the Hon'ble Supreme Court in 2010 was considered. 13. In such view of the matter, since the impugned orders are passed without considering all these aspects, this Court is of the view that the same are liable to be set aside. Accordingly, the Writ Petitions are allowed and all the impugned notices are set aside. No costs. Consequently, all the connected miscellaneous petitions are closed….” 5.0 In the present case, there is no dispute that the appellant received interest income of Rs.50,86,408/- from Cooperative Bank. The ratio of decision of Hon‘ble Madras High Court in the case of Thorapadi Urban Coop Credit Society Ltd cited supra and CIT Vs Salem Agricultural Producers Cooperative Marketing Society Ltd 76 taxmann.com 225 (Mad) is squarely applicable to the facts of the present case. Respectfully following the Hon’ble Madras High Court, we direct the AO to delete the addition of Rs.50,86.408/-. Printed from counselvise.com ITA No.2787/Chny/2025 Page - 5 - of 5 6.0 In the result, the appeal of the assessee stands allowed. Order pronounced on 19th , January-2026 at Chennai. Sd/- (SS VISWANETHRA RAVI) Judicial Member Sd/- (INTURI RAMA RAO) Accountant Member Chennai, Dated: 19th , January-2026. KB/- Copy to: 1. Appellant 2. Respondent 3. CIT - Chennai/Coimbatore/Madurai/Salem. 4. DR 5. GF Printed from counselvise.com "