PARAMPARA VIVIDHODESHA SAHAKARA SANGHA,KARKALA V. INCOME TAX OFFICER-WARD-3, UDUPI

ITA 382/BANG/2025

AI Insights

The case involves Parampara Vividhodesha Sahakara Sangha, a cooperative society, appealing against the decision of the Commissioner of Income Tax (Appeals) which upheld the disallowance of a deduction claimed under section 80P(2)(d) for interest income from investments with other cooperative societies and banks. The Income Tax Officer had initially disallowed the deduction, citing precedents that interest income from such sources should be taxed under 'income from other sources'. The Tribunal, referencing a Supreme Court decision, found that the society was entitled to the deduction as the interest income was derived from other cooperative societies, aligning with the objectives of promoting the cooperative movement.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717229 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 25-02-2025
• Other Referred Cases: Citizen Co-operative Society Ltd. v. ACIT [2017] 84 Taxman 114 (SC), Totagars Co-op. Sale Society, 322 ITR 282 (SC), Mavilayi Service Co-operative Bank Ltd. vs. Commissioner of Income Tax, Calicut [TS-12-SC-2021], Kerala State Co-Operative Agricultural & Rural Development Bank Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GANESH R GHALE
• Assessee Lawyers: PRASANNA SHENOY
• Section: 143(3); 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “ SMC” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT ITA No.382/Bang/2025 Assessment year : 2017-18 Parampara Vividhodesha Sahakara Sangha, S S Nayak Building, Mangalore Road, Karkala – 574 104. PAN: AADAP 1568L Vs. The Income Tax Officer, Ward 3, Udupi. APPELLANT RESPONDENT Appellant by : Shri Prasanna Shenoy, CA Respondent by : Shri Ganesh R Ghale, Advocate Date of hearing : 12.06.2025 Date of Pronouncement : 11.08.2025 O R D E R 1. The captioned appeal is filed by Parampara Vividhodesha Sahakara Sangha (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the CIT(Appeals)-2, Nagpur [ld. CIT(A)] dated 31.12.2024 wherein the appeal filed by the assessee against the assessment order passed u/s. 143(3) / of the Income-tax Act, 1961 [the Act] dated 16.12.2019 by the ITO, Ward 3, Udupi [ld. AO] was partly allowed. 2. The assessee is aggrieved and preferred this appeal raising the following grounds of appeal:- Printed from counselvise.com ITA No.382/Bang/2025 Page 2 of 7 “ 1. The learned Commissioner of Income Tax (Appeals) has erred not only on facts but also in law and other judicial authorities by disallowing the deduction claimed under section 80P(2)(d) of Rs. 13,08,189/- in respect of whole of the income by way of interest derived by the appellant co-operative society from its investments with other co-operative societies. 2. The learned Commissioner of Income Tax (Appeals) has erred not only on facts,.7: but also in law and other judicial authorities by disallowing the deduction claimed under section 80P(2)(d) of Rs. 7,214/- in respect of whole of the income by way of interest derived by the appellant co-operative society from its investments with co-operative banks which is a co-operative society under law. 3. Alternatively, the learned Commissioner of Income Tax (Appeals) has erred not only on facts but also in law and other jurisdictional authorities by making addition of gross interest income of Rs. 7,214/- under income from other sources without allowing deduction of cost of funds and other proportionate administrative expenses incurred for the purposes of earning this income. 4. The learned Commissioner of Income Tax (Appeals) has erred by allowing levy of interest under section 234A and 234B for furnishing the return of income after the due date, which is without the support of facts and bad in law and other judicial authorities. 5. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the above addition by indulging in surmises only based on presumption and assumption and without appreciation of the facts of the case. 6. The above grounds are independent and without prejudice to each other. 7. The appellant craves leave to add, alter or delete any of the grounds at any stage of the proceeding.” Printed from counselvise.com ITA No.382/Bang/2025 Page 3 of 7 3. The only grievance of the assessee is disallowance of deduction of Rs.13,08,189 u/s. 80P(2)(d) of the Act being interest income derived from its investment with other cooperative societies and further the addition is made of Rs.7,214 to the total income of the assessee. 4. Ground Nos.3 to 7 are general and are dealt with in other grounds, therefore same are dismissed. 5. The brief facts of the case show that assessee is a registered as a cooperative society vide Certificate dated 26.11.2012. It filed its return of income on 27.10.2017 declaring gross total income at Rs.18,33,997 claiming the same as deduction u/s. 80P(2)(a)(i) of the Act deriving total income at Nil. The case was selected for limited scrutiny and notices were issued. 6. The facts show that assessee was issued a show cause notice on 30.10.2019 for the reason that it is doing banking business and further having different class of members. The decision in the case of Citizen Co-operative Society Ltd. v. ACIT [2017] 84 Taxman 114 (SC) of Hon’ble Supreme Court squarely applies to the assessee to the assessee and no deduction u/s. 80P of the Act is allowable. 7. Assessee submitted its reply dated 7.11.2019 submitting that assessee is eligible for deduction u/s. 80P for the reason that it is a cooperative society and decision of Hon’ble Supreme Court is distinguishable on facts. It was further stated that interest income of Rs.13,15,403 is from various co-operative societies and District Central Co-op. Bank. The Printed from counselvise.com ITA No.382/Bang/2025 Page 4 of 7 ld. AO relying upon Citizen Co-operative Society Ltd. decision of Hon’ble Supreme Court and Totagars Co-op. Sale Society, 322 ITR 282 (SC) and Hon’ble Karnataka High Court has held that interest earned from deposit shall be treated as income from other sources and is liable to be brought to tax. Accordingly he held that a sum of Rs.7,214 which is interest received from SCDCC Bank is income from other sources which was to be disallowed. Further it was noted that opening balance for provision of interest is Rs.15,68,945 and closing balance is Rs.17,01,680, therefore there is an excess debit of Rs.1,32,635 and why such interest excess provided should not be disallowed. The assessee submitted that it is the provision made by assessee in terms of regular method of accounting followed and therefore such interest could not have been disallowed. Even otherwise the addition will increase the income of assessee. The ld. AO rejected the same and made addition of Rs.1,32,635 and also did not grant deduction u/s. 80P of the Act while framing assessment order u/s. 143(3) of the Act dated 16.12.2019. 8. The assessee preferred appeal before the ld. CIT(A) who passed an order on 31.12.2024. The ld. CIT(A) passed a 42 page order wherein in para 5 to 16 he held that assessee is not eligible for deduction u/s. 80P of the Act in view of the decision of the Hon’ble High Court in the case of Totagars Co-op. Sale Society as well as decision of the Hon’ble Supreme Court. Deduction u/s. 80P(2)(d) of the Act of Rs.13,15,403 being interest from other co-op. societies was denied. With respect to addition of Rs.1,32,635, same was deleted. Printed from counselvise.com ITA No.382/Bang/2025 Page 5 of 7 9. Assessee aggrieved with the same is now in appeal before us challenging the disallowance of deduction claimed of Rs.13,08,189 being interest received from other co-op. societies. 10. I have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The ld. lower authorities have denied the deduction u/s. 80P(2)(d) of the Act relying upon the decision of Hon’ble Supreme Court in the case of Citizen Co-op. Society as well as decision of Hon’ble Karnataka High Court in the case of Totagars Co- op. Sale Society Ltd. (supra). 11. I now find that the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. Commissioner of Income Tax, Calicut [TS-12-SC-2021] and in Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. has now settled the issue of deduction u/s. 80P at rest. The Hon’ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. (supra) has considered the decision of Citizen Co-operative Society Ltd. In para 22 to 35 it has considered the issue of deduction u/s. 80P of the Act. In para 35 it is specifically stated that the interest or dividend income derived by a co-op. society with other co-op. societies are also entitled to deduction of whole of such income because object of the provision being furtherance of the co-operative movement as a whole. It further held that to whom the provisions of section 80P(4) of the Act applies. It was held that such prohibition does not apply to this assessee. In para 45 it upheld the decision of Citizen Co-operative Society Ltd. and thereafter it held that Printed from counselvise.com ITA No.382/Bang/2025 Page 6 of 7 giving of loans by primary agriculture credit society to non-members is not illegal unlike the facts in Citizen Co-operative Society Ltd. I find that in the present case also, the activities of the assessee were not found to be illegal by the AO. The decision of Hon’ble Supreme Court is of a 3 Judges decision which lays down criteria for allowing deduction u/s. 80P to the co-op. societies. In the present case also I find that the total interest received by the assessee of Rs.13,08,189 extracted at page 13 of the assessment order clearly shows that interest income is received from the co-operative society. This fact is not denied by the Revenue at any stage. As I have followed the decision of Hon’ble Supreme Court rendered by 3 Judges, which binds me, reliance by the Revenue on the decision of Hon’ble Karnataka High Court is not proper. 12. Accordingly I direct the ld. AO to grant assessee deduction u/s. 80P(2)(d) of the Act of Rs.13,15,403 u/s. 80P(2)(d) of the Act. Accordingly ground No.1 of the appeal is allowed. 13. In the result, the appeal of the assessee is partly allowed. Pronounced in the open court on this 11th day of August, 2025. Sd/- ( PRASHANT MAHARISHI ) VICE PRESIDENT Bangalore, Dated, the 11th August, 2025. /Desai S Murthy / Printed from counselvise.com ITA No.382/Bang/2025 Page 7 of 7 Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "