SHARAD GRAMIN BIGARSHETI SAHAKARI PATSANSTHA MARYADIT,NIRGUDSAR V. INCOME TAX OFFICER, WARD 10(5). PUNE, AKURDI

ITA 435/PUN/2025

AI Insights

The case revolves around the denial of a deduction claimed by Sharad Gramin Bigarsheti Sahakari Patsanstha Maryadit under section 80P of the Income Tax Act, 1961, for interest income earned from cooperative banks. The Assessing Officer initially disallowed the deduction, treating the cooperative banks as entities not eligible under the mutuality principle, which is a requirement for the deduction under section 80P. The CIT(A)/NFAC upheld this decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, referencing a similar case, reversed the lower authorities' decisions, allowing the deduction and setting a precedent for the treatment of cooperative banks as cooperative societies under the Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397960 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: Sharadchandra Nagri Sahakari Patsanstha Maryadit vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR MANISH SINHA
• Assessee Lawyers: DHIRAJ S. DANDGAVAL
• Keywords: Principle of natural justice
• Section: 143(3); 142(1); 234B

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.435/PUN/2025 िनधाᭅरण वषᭅ / Assessment Year : 2020-21 Sharad Gramin Bigarsheti Sahakari Patsanstha Maryadit, At Post Nirgudsar, Dist.- Pune- 412406. PAN : AABAS8790H Vs. ITO, Ward-10(5), Pune. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 28.11.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2020-21. 2. The appellant has raised the following grounds of appeal :- “1. On the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals), NFAC was not justified in denying the claim of deduction claimed u/s 80P of the Act holding that Co-operative banks are not co-operative societies. The deduction be allowed deleting the addition made by the AO. Assessee by : Shri Dhiraj S. Dandgaval Revenue by : Shri Kumar Manish Sinha Date of hearing : 09.04.2025 Date of pronouncement : 03.06.2025 ITA No.435/PUN/2025 2 2. On the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals), NFAC was not justified in holding that by making the investments of the surplus funds in Co-operative banks or other banks, those funds are removed from the arena of mutuality. 3. On the facts and in the circumstances of the case and in law the observations of the Learned Commissioner of Income Tax (Appeals), NFAC regarding interest on deposits with co- operative banks and/or other banks is outside the purview of deduction u/s 80P of the Income Tax Act, 1961 is unwarranted. 4. On the facts and circumstances of the case and in law the levy of interest u/s 234A, 234B and 234C is not justified. 5. The appellant craves to leave, add/amend, delete or withdraw any of the above grounds of appeal during the appellate proceedings in the interest of natural justice.” 3. Facts of the case, in brief, are that the assessee is a credit co- operative society duly registered under Maharashtra State Co-operative Societies Act and is engaged in the activities of providing credit facilities to its members and also accepting deposits from them. The return of income was furnished on 11.11.2020 declaring total income at Rs.Nil, after claiming deduction of Rs.56,83,369/- u/s 80P of the IT Act. The case was selected under scrutiny, accordingly statutory notices u/s 143(2) and 142(1) respectively were issued and served upon the assessee. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee co-operative society has earned interest income of Rs.56,83,369/- from cooperative banks. Considering this ITA No.435/PUN/2025 3 fact the Assessing Officer was of the view that as per section 80P(2)(d) of the IT Act interest income derived from other cooperative societies is only deductible. Since in the instant case the interest income was derived by the assessee credit co-operative society from other cooperative banks and therefore according to the Assessing Officer deduction u/s 80P(2)(d) of the IT Act was not allowable. Accordingly, the Assessing Officer completed the assessment u/s 143(3) of the IT Act determining taxable income of Rs.56,83,370/- as against Nil income returned by the assessee. The above said income includes an amount of Rs/56,83,370/- addition made on account of disallowance of deduction claimed by the assessee u/s 80P 2 d of the IT Act. 4. After considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee. It is this order against which the assessee is in appeal before the Tribunal. 5. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR further submitted before us that the disallowance / addition was made by treating the assessee as co-operative bank who is not entitled to claim deduction u/s 80P(2)(a)(i) or u/s 80P(2)(d) of the ITA No.435/PUN/2025 4 IT Act. Secondly, it was also presumed that the cooperative banks are not cooperative societies therefore deduction u/s 80P(2)(d) is not allowable on interest income earned from them. Ld. AR contended before the bench that to do banking business license from Reserve Bank of India is required and the assessee credit co-operative society do not have any such license, therefore the assessee is simply a credit co-operative society entitled to claim deduction either u/s 80P(2)(a)(i) or under section 80P(2)(d) of the IT Act. Ld. AR further submitted that the assessee credit co-operative society has parked its funds with other cooperative banks and earned interest from these banks. Ld. AR submitted that cooperative banks are also registered under Maharashtra State Co- operative Societies Act and for this purpose they remain as co-operative societies and therefore interest earned on investment with them qualifies for deduction u/s 80P(2)(d) of the IT Act. In support of this contention, Ld. AR relied on coordinate bench decision passed in the case of Sharadchandra Nagri Sahakari Patsanstha Maryadit, ITA No.1391/PUN/2024 order dated 24.03.2025, wherein it has been held that cooperative banks are cooperative societies and therefore interest earned from them ITA No.435/PUN/2025 5 qualifies for deduction under section 80P(2)(d) of the IT Act. Ld. AR accordingly requested before the bench to allow the appeal filed by the assessee. 6. Ld. DR appearing from the side of the Revenue supported the orders passed by subordinate authorities and requested to confirm the same. 7. We have heard Ld. counsels from both the sides and perused the material available on record. In this regard, we find the assessee is a credit co-operative society and has earned interest on its deposit made with other cooperative banks. The Assessing Officer by treating the cooperative banks not as a co-operative society disallowed the deduction claimed u/s 80P(2)(d) of the IT Act. Ld. CIT(A)/NFAC also confirmed the order passed by the Assessing Officer. It was the contention of Ld. AR that the assessee is a credit co-operative society and does not possess any license issued by the Reserve Bank of India and therefore is entitled to claim deductions u/s 80P(2) of the IT Act. At the same time, it was also the contention of Ld. AR of the assessee that the cooperative banks are also co-operative societies and they are certainly not entitled to claim deduction under section 80P(2) of the IT Act but the assessee ITA No.435/PUN/2025 6 being a credit co-operative society is entitled to claim deduction u/s 80P(2)(d) of the IT Act on interest income earned from its investment with other cooperative banks. In support of this contention, Ld. AR relied on the decision passed in the case of Sharadchandra Nagri Sahakari Patsanstha Maryadit (supra) wherein coordinate bench of this Tribunal allowed the appeal filed by other credit co-operative 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.” ITA No.435/PUN/2025 7 8. Therefore respectfully following the above decision passed in the case of Sharadchandra Nagri Sahakari Patsanstha Maryadit (supra), we set-aside the order passed by Ld. CIT(A)/NFAC and direct the Assessing Officer to allow the deduction of Rs.56,83,370/- claimed by the assessee u/s 80P(2)(d) of the IT Act with respect to interest income earned on its investments with other cooperative banks. Accordingly, the grounds raised by the assessee are allowed. 9. 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. "