PARAG NAGARI SAHAKARI PATSANSTHA, MARYADIT,PUNE V. ITO, WARD-10(1), PUNE, PUNE

ITA 247/PUN/2025

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The case involves Parag Nagari Sahakari Patsanstha Maryadit, a credit cooperative society, which appealed against the order of the CIT(A) confirming the disallowance of deduction under section 80P of the Income Tax Act on interest income earned from cooperative banks. The Assessing Officer had initially disallowed the deduction based on the Supreme Court's decision in Totagars Cooperative Sale Society Ltd. The Tribunal, however, found that similar cases in the jurisdiction had allowed such deductions, and thus, the interest income from cooperative banks should be eligible for deduction under section 80P(2)(d).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397959 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Other Referred Cases: Totagars Cooperative Sale Society Ltd. vs. ITO, PCIT, Hubli vs. Totagars Cooperative Sale Society, Yashwant Nagari Sahakari Patsanstha Maryadit vs. ITO, Kolhapur District Central Co-op. Bank Kanista Sevakanch Sahakari Pat Sanstha Ltd. vs. ITO, Sharchandra Nagari Sahakari Patsanstha Maryadit vs. ITO, Jakraya Multi-State Co-operative Credit Society Ltd. vs. ITO, ShriKrushna Gramin Bigarsheti Patsanstha vs. ITO, Samarth Nagari Shakari Path Sanstha vs. ITO, The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A.D.KULKARNI
• Assessee Lawyers: ABHAY AVACHAT
• Keywords: Set aside; Opportunity of being heard; Principle of natural justice; Co-operative Credit Society
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.247/PUN/2025 िनधाᭅरण वषᭅ / Assessment Year : 2018-19 Parag Nagari Sahakari Patsanstha Maryadit, At Post Manchar, Taluka Ambegaon, Pune Nasik Road, Manchar, Pune- 410503. PAN : AAEAP1251D Vs. ITO, Ward-10(1), Pune. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 18.10.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19. 2. The appellant has raised the following grounds of appeal :- “Each ground is taken without prejudice to each other. On the facts and in the circumstances of the case and in law and 1. The learned AO has erred in not considering and in not allowing deduction under section 80P of the Income Tax Act in respect of Assessee by : Shri Abhay Avachat Revenue by : Shri A. D. Kulkarni Date of hearing : 01.04.2025 Date of pronouncement : 03.06.2025 ITA No.247/PUN/2025 2 interest earned from coop banks and the learned CIT (A) erred in confirming the same. 2. The learned AO has erred in denying deduction claimed by assessee u/s 80P despite compliance with relevant provisions and the ld. CIT (A) erred in confirming the same. 3. The ld. AO has erred in holding that assessee is not entitled to the benefit of deduction u/s 80P(2)(d) and 80P2ai of the Act in respect of interest income earned out of investments made with cooperative Banks. 4. The ld. AO and CIT A erred in not following judgements of jurisdictional forum on the said issue while passing order. 5. The learned CIT Appeals erred in dismissing Assessee's appeal without affording adequate opportunity of being heard. The appellate proceedings, thus, suffer from principles of natural justice and needs to be set aside. 6. The assessee prays before your honour to afford and allow him an opportunity of being heard in interest of natural justice and on merits of the case as well, before the lower authorities or else to decide the matter if the honourable bench permits. 7. The assessee hereby requests for allowing any other relief as available under the law. 8. The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal.” 3. Facts of the case, in brief, are that the assessee is a credit cooperative society duly registered under Maharashtra State Cooperative Societies Act and is engaged in providing credit facilities to its members and also accepting deposit from them. During the course of assessment proceedings, the Assessing Officer found that the assessee co-operative society has earned interest income of Rs.31,05,626/- from two cooperative banks namely Sharad Sahakari Bank Ltd. and Pune District Central Co-operative ITA No.247/PUN/2025 3 Bank Ltd. and claimed deduction u/s 80P(2)(a)(i)/ 80P2 d of the IT Act. The Assessing Officer in the light of decision of Totagars Cooperative Sale Society Ltd., (2010) 188 taxman.com 282 (SC) disallowed the deduction claimed by the assessee co-operative society u/s 80P(2)(a)(i)/ 80P2 d of the IT Act and made the addition of Rs.31,05,626/- being interest income under the head income from other sources. Accordingly, the assessment was completed u/s 143(3) of the IT Act by determining taxable income at Rs.31,05,626/- as against the income returned by the assessee at Rs.Nil. 4. Since the assessee remained absent, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee, however it is also seen that the Ld. CIT(A)/NFAC has decided the case on merits of the case after relying on various case laws including Totagars Cooperative Sale Society Ltd. vs. ITO, [2010] 188 taxmann.com 282 (SC) and PCIT, Hubli vs. Totagars Cooperative Sale Society, [2017] 83 taxmann.com 140 (Karnataka). It is this order against which the assessee is in appeal before this Tribunal. 5. Ld. AR appearing from the side of the assessee submitted before us that the ex-parte order passed by Ld. CIT(A)/NFAC is ITA No.247/PUN/2025 4 unjustified. Ld. AR furnished written submission before us and requested to delete the addition made on account of disallowance of deduction claimed by the assessee u/s 80P(2) of the IT Act of Rs.31,05,626/-. It was also contended before the bench that the assessee credit cooperative society has invested funds with other cooperative banks which are also registered cooperative societies and therefore the interest income received from those cooperative banks are deductible u/s 80P(2)(d) of The IT Act. Learned AR submitted before us that the reliance place by Ld. CIT(A)/NFAC on Totagars Cooperative Sale Society Ltd’s case, and on the judgement of Gujarat High Court and also on the decision of Ahmedabad Tribunal is not correct since there are number of cases of this coordinate jurisdictional tribunal wherein the issue has already been decided in favour of the various other credit cooperative societies. In this regard, Ld. AR placed reliance on following case laws :- (i) Yashwant Nagari Sahakari Patsanstha Maryadit vs. ITO, ITA No.644/PUN/2024 dated 04.06.2024. (ii) Kolhapur District Central Co-op. Bank Kanista Sevakanch Sahakari Pat Sanstha Ltd. vs. ITO, ITA No.1365/PUN/2023 dated 01.01.2024. (iii) Sharchandra Nagari Sahakari Patsanstha Maryadit vs. ITO, ITA No.1391/PUN/2024 dated 24.03.2025. ITA No.247/PUN/2025 5 (iv) Jakraya Multi-State Co-operative Credit Society Ltd. vs. ITO, ITA No.1423/PUN/2024 dated 01.10.2024. 6. Ld. AR also placed heavy reliance on the decision passed by coordinate bench of jurisdictional Tribunal in the case of ShriKrushna Gramin Bigarsheti Patsanstha wherein the Tribunal has allowed assessee’s claim of deduction u/s 80P(2)(d) despite non- appearance by the assessee before Ld. CIT(A). Accordingly, Ld. AR prayed to delete the addition of Rs.31,05,626/- made by the Assessing Officer on account of disallowance of deduction claimed u/s 80P(2) of the IT Act. 7. Ld. DR appearing from the side of the Revenue relied on the order passed by subordinate authorities and requested to confirm the same. 8. We have heard the Ld. counsels from both the sides and perused the material available on record including the written submission and paper book and copy of decisions produced by the assessee co-operative society. In this regard, we find that the issue raised by the assessee is no more rest integra in the light of various decisions passed by this coordinate bench of jurisdictional Tribunal in the case of other credit cooperative societies including those which are also relied on by the assessee. In this regard, we find that ITA No.247/PUN/2025 6 under identical facts a coordinate bench of this Tribunal in the case of Sharadchandra Nagri Sahkari Patsanstha Maryadit in ITA No 1391/Pun/2024 order dated 24-03-2025 has allowed the deduction u/s 80P(2)(d) claimed by the credit cooperative society by observing as under :- “7. We have heard rival contentions and perused the records placed before us. We observe that the assessee which is a co-operative society has declared income of Rs.3,92,570/- after claiming deduction u/s 80P at Rs.1,33,50,608/-. We also observe that during the year the assessee society has earned interest income of Rs.18,96,95,893/- and has made interest payments of Rs.13,78,57,308/-. Further, the net total income of Rs.1,37,43,180/- has been assessed after considering the interest income earned from surplus funds deposited with cooperative banks at Rs.4,15,27,813/-. We observe that since the cooperative banks are basically cooperative societies, therefore, the interest earned from cooperative banks are clearly eligible for deduction u/s 80P(2)(d) of the Act and this view has been consistently followed by the Co-ordinate Bench of Tribunal in plethora of decisions including that of Samarth Nagari Shakari Path Sanstha Maryadit (supra) and The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018 order dated 27.05.2022. Therefore, in view of the above, the interest income from cooperative banks at Rs.4,15,27,813/- is eligible for deduction u/s 80P(2)(d) of the Act. However, deposit with MSEDCL at Rs.1,09,529/-, Ld. Counsel for the assessee failed to furnish any judicial precedent, therefore, disallowance to the extent of Rs.1,09,529/- is hereby confirmed. In view of the above, against the total disallowance u/s 80P of the Act at Rs.1,33,50,608/-, we allow the deduction u/s 80P of the Act to the extent of Rs.1,32,41,080/- and confirm the disallowance of Rs.1,09,529/-. Effecting grounds of appeal raised by the assessee are partly allowed. 8. In the result, the appeal of the assessee is partly allowed.” 9. Accordingly respectfully following the above decision passed by a coordinate bench of this tribunal in the case of Sharadchandra ITA No.247/PUN/2025 7 Nagri Sahkari Patsanstha Maryadit in ITA No 1391/Pun/2024 order dated 24-03-2025, we hold that the interest income earned on its investments by assessee credit cooperative society from other cooperative banks of Rs.31,05,626/- is eligible for deduction u/s 80P(2)(d) of the IT Act & accordingly we deem it appropriate to set-aside the order passed by LD CIT(A) & direct the AO to delete the addition of Rs 31,05,626/-. Thus, the grounds raised by the assessee are allowed. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 03rd day of June, 2025. Sd/- Sd/- (MANISH BORAD) (VINAY BHAMORE) ACCOUNTANT MEMBER 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. "