SHREE VISHWESHWAR NAGARI SAHAKARI PATH SANSTHA,PUNE V. ITO, PUNE

ITA 1095/PUN/2025

AI Insights

The case involves Shree Vishweshwar Nagari Sahakari Path Sanstha, a Co-operative Credit Society, appealing against the decision of the Income Tax Officer and the Commissioner of Income Tax (Appeals), which disallowed deductions under section 80P of the Income Tax Act for the assessment year 2020-21. The primary contention was whether the interest income received from Co-operative Banks qualifies for deduction under section 80P(2)(a) and section 80P(2)(d). The Tribunal considered previous rulings and the specific business activities of the society, ultimately deciding in favor of the assessee based on judicial precedents and the nature of the society's business.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669048 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Other Referred Cases: Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371, CIT v. Andhra Pradesh State Co-operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE
• Assessee Lawyers: PRAMOD S SHINGTE
• Keywords: Set aside; Reasonable cause; Co-operative Credit Society

Judgement Text

" आयकर अपीलीय अिधकरण ”एस एम सी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1095/PUN/2025 िनधाᭅरण वषᭅ / Assessment Year: 2020-21 Shree Vishweshwar Nagari Sahakari Path Sanstha, 1st Floor, A Wing, New Sangvi Pune Pimpale Gurav, Pune - 411061, Maharashtra. V s The Income Tax Officer, PAN: AADAS2824C Appellant/ Assessee Respondent / Revenue Assessee by Shri Pramod S Shingte – AR Revenue by Smt Sonal L Sonkavde – Addl.CIT(DR) Date of hearing 04/06/2025 Date of pronouncement 23/06/2025 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Income Tax Act, 1961 for A.Y.2020-21 on 07.06.2024 emanating from the Assessment Order u/s.143(3) r.w.s 144B of the Act, dated 12.09.2022. The Assessee has raised the following grounds of appeal : ITA No.1095/PUN/2025 [A] 2 “1. On the facts and in the circumstances of the case and in law the learned Assessing Officer erred in rejecting deduction under section 80P (2)(a)(1) for a sum of Rs. Rs.41,85,956/- being Gross total income of appellant society without appreciating the fact that earning of interest is an integral part of society's business and appellant prays for allowing such deduction 2. On the facts and in the circumstances of the case and in law the learned Assessing Officer erred in treating the interest received from investment as income from other sources by rejecting appellant's contention that said interest income is integral part of business activity and your appellant prays for cancellation of Assessing officer's action 3. Without prejudice to above ground on the facts and circumstances of the case and in the law Learned Assessing Officer erred in not allowing the deduction under section 80P(2)(d) on interest income received from other co-operative society. Your appellants pray for allowing of the same 4. Without prejudice to above ground. On the facts and circumstances of the case and in the law Learned Assessing Officer erred in treating entire interest income as interest income received from other co- operative society or bank without allowing deduction on account of interest/administrative expenses. Your appellant prays for such deduction.” Submission of ld.AR : 2. Ld.AR for the Assessee filed a paper book. Ld.AR submitted that Assessee is a Co-operative Credit Society. The Assessing Officer has disallowed assessee’s claim for deduction u/s.80P of the Act, stating that interest earned needs to be taxed as income from other sources. Ld.AR invited our attention to ITAT order in the case of Assessee for A.Y.2018-19 in ITA No.342/PUN/2024 wherein, ITAT has allowed assessee’s claim for deduction u/s.80P of the Act. Ld.AR also invited our attention to orders passed by ld.CIT(A) for ITA No.1095/PUN/2025 [A] 3 A.Y.2016-17 and A.Y.2017-18 wherein, Assessee’s claim for 80P has been allowed. Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of Assessing Officer and Ld.CIT(A). Findings & Analysis : 4. We have heard both the parties and perused the material placed before us. 4.1 There is a delay of 229 days in filing appeal before this Tribunal. We have perused the Affidavit filed by the assessee and are convinced that there is sufficient and reasonable cause for Delay. Accordingly, the Delay is condoned. 4.2 Admittedly, Assessee is a Co-operative Credit Society duly registered under Maharashtra Co-operative Societies Act. The copy of the Registration Certificate is at page no.1 of the paper book. During the year, Assessee had filed Return of Income on 30.12.2020 declaring total income at Rs.NIL and claiming deduction u/s.80P of the Act. Assessing Officer(AO) noted that Assessee has earned ITA No.1095/PUN/2025 [A] 4 interest income from Co-operative Banks on the surplus, hence, AO concluded that Assessee is not eligible for deduction u/s.80P(2)(a) of the Act, as Assessing Officer was of the opinion that interest income earned is not derived from business of the assessee. Assessing Officer also disallowed assessee’s alternate claim of deduction u/s.80P(2)(d) of the Act, on the ground that Co-operative Banks are not Co-operative Societies. The ld.CIT(A) confirmed the assessment order. Aggrieved by the order of the ld.CIT(A), assessee filed appeal before this Tribunal. 4.3 We wish to note here that ld.CIT(A) has erred in not following the consistency and judicial precedence. In the case of assessee, for A.Y.2017-18 the ld.CIT(A) vide order dated 02.12.2021 on same facts allowed the appeal of the assessee. Similarly, ld.CIT(A) in assessee’s own case, for A.Y.2016-17 vide order dated 20.03.2020 had allowed appeal of the assessee. For A.Y.2012-13, in assessee’s own case, ld.CIT(A) vide order dated 04.09.2020 had allowed appeal of the assessee. Similarly, ITAT in assessee’s own case for A.Y.2018-19 in ITA No.342/PUN/2024 vide order dated 16.04.2024 had allowed assessee’s claim for deduction u/s.80P(2)(a) and 80P(2)(d) of the Act. The ITAT’s order was pronounced on ITA No.1095/PUN/2025 [A] 5 16.04.2024 whereas, ld.CIT(A)’s order for A.Y.2020-21 is dated 07.06.2024. Therefore, ld.CIT(A) was duty bound to follow judicial precedence. Rather reference to ld.CIT(A)’s order allowing assessee’s claim for deduction u/s.80P is available in the assessment order itself. 4.4 Be it as it may be, the issue before us is whether assessee is eligible for deduction under section 80P(2)(a) of the Act, on the interest earned from Co-operative Banks or not! 4.5 The Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371 analysed the provisions of Section 80P, succinctly distinguished the decision of Hon’ble Supreme Court in the case of Totagars Cooperative Sale Society, and held as under : Quote,“8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub-section (2) of section 80P or not. 9. While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Co- operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. …………………… ITA No.1095/PUN/2025 [A] 6 34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression \"attributable to\" and not any one of the two expressions, namely, \"derived from\" or \"directly attributable to\". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside.” Unquote. ITA No.1095/PUN/2025 [A] 7 4.6 Thus, the Hon’ble High Court of AP & TS held that Interest Income earned by investing Income derived from Business of providing credit facilities, Loans by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) of the Act. 4.7 Be it as it may be, no distinguishing factor has been brought to our notice by ld.DR for the Revenue, hence, respectfully following order of ITAT in assessee’s own case in ITA No.342/PUN/2024, we allow the appeal of the assessee. Accordingly, grounds of appeal raised by the assessee are allowed. 5. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 23 June, 2025. Sd/- Sd/- (VINAY BHAMORE) (DIPAK P.RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 23 June, 2025/ SGR आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकरअपीलीयअिधकरण, “एस एम सी” बᱶच, पुणे / DR, ITAT, “SMC” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. ITA No.1095/PUN/2025 [A] 8 आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune. "