SWAMI VIVEKANANAD NAGARI SAHAKARI PATPEDHI MARYADIT,PUNE V. ITO WARD - 12(1), PUNE, PUNE

ITA 1190/PUN/2025

AI Insights

The case involves Swami Vivekanand Nagari Sahakari Patpedhi Maryadit, a cooperative credit society, which appealed against the order of the Principal Commissioner of Income Tax, Pune-4 under section 263 of the Income Tax Act, 1961. The dispute centered on the deduction claimed under section 80P for the assessment year 2020-21. The Assessing Officer had allowed the deduction, considering the interest income from cooperative banks as eligible under section 80P. However, the Principal Commissioner of Income Tax contended that the assessment was erroneous as the cooperative society should not be treated as a cooperative bank, referencing decisions from the Karnataka High Court and other precedents. The Tribunal, after reviewing the submissions and relevant case laws, including decisions from the Andhra Pradesh and Kerala High Courts, concluded that the Assessing Officer's decision was within the permissible legal views and thus quashed the revisionary order under section 263.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653140 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: PCIT Vs. Totgars Co-operative Sales Society Ltd., Vavveru Co-operative Rural Bank Ltd. vs. ITO, Pr.CIT Vs. Sahyadri Co-operative Credit Society Ltd., CIT Vs. Amitabh Bachchan, CIT v/s Mepco Industries Ltd., CIT Vs. Future Corporate Resources Ltd., Pr.CIT Vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT BOBDE
• Assessee Lawyers: DEEPA KHARE
• Keywords: Set aside; Business income; Question of law; Revision of order; Co-operative Credit Society
• Section: 143(3); 142(1); 263; 63; 14A

Judgement Text

" आयकर अपीलीय अिधकरण ”बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE MS.ASTHA CHANDRA, JUDICIAL MEMBER AND DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1190/PUN/2025 िनधाᭅरण वषᭅ / Assessment Year: 2020-21 Swami Vivekanand Nagari SahakariPatpedhiMaryadit, 412, Amit Residency, Mehunpura, Shaniwar Petha, Pune – 411030. Maharashtra. V s. The Income Tax Officer, Ward-12(1), Pune. PAN: AACAS8068F Appellant/ Assessee Respondent / Revenue Assessee by Smt.Deepa Khare – AR Revenue by Shri Amit Bobde –CIT(DR) Date of hearing 12/06/2025 Date of pronouncement 18/06/2025 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee against the order of ld.Principal Commissioner of Income Tax, Pune-4 under section 263 of the Income Tax Act, 1961 for A.Y.2020-21 dated 04.03.2025 emanating from the assessment order under section 143(3) of the Act, dated 28.09.2022. The Assessee has raised the following grounds of appeal : ITA No.1190/PUN/2025 [A] 2 “1. The Id. PCIT erred on facts and in law in failing to consider that the Assessment Order was passed by the Id. AO after having conducted an inquiry on the deduction claimed Chapter VIA i.e. deduction u/s. 80P and 80P(2)(d). 2. The Id. PCIT erred on facts and in law in failing to consider THAT the Id. AO had adopted a plausible course of action in view of the prevailing law regarding deduction under Chapter VIA vis-a-vis the precedents set by the Supreme Court and High Courts passed the Assessment Order. 3. The Appellate craves the permission to add, amend, modify, alter, revise, substitute delete any or all grounds at the time of hearing of appeal.” Findings & Analysis : 2. We have heard both the parties and perused the records. Admittedly, Assessee is a Co-operative Credit Society registered under Maharashtra Co-operative Societies Act, carrying on the business of providing credit facility to its members. Copy of the Certificate issued under Maharashtra Co-operative Societies Act, 1960 by Assistant Registrar-Co.operative Societies, Pune dated 24.04.1972 is on record and was also filed by assessee during Assessment Proceedings. ITA No.1190/PUN/2025 [A] 3 2.1 Assessee filed Return of Income for A.Y.2020-21 declaring total income at Rs.NIL and claimed exemption under section 80P of the Act. The assessee’s case was selected for scrutiny to verify the Chapter-VIA deductions. The Assessing Officer issued notices u/s.142(1) of the Act and Assessee filed reply, copies of documents in response to the said notices. Assessing Officer assessed the income of the Assessee u/s.143(3) at total income Rs.NIL. However, ld.Principal Commissioner of Income Tax issued a notice u/s.263 of the Act, on the ground that Assessee had earned interest income of Rs.1,76,89,629/- from investments made with Co- operative Banks and Assessing Officer has allowed 80P. Ld.Pr.CIT held that assessment order u/s.143(3) dated 28.09.2022 was erroneous and prejudicial to the interest of Revenue. Ld.Pr.CIT in Paragraph 7 of his order held that “the claim of the assessee to treat the Co-operative Bank as Co-operative Society cannot be accepted. Further, the Hon’ble Karnataka High Court again in the case of PCIT Vs. Totgars Co-operative Sales Society Ltd. (395 ITR 611) (2017) held that a co-operative society would not be eligible for deduction u/s 80P(2)(d) on the interest income earned by it on account of deposit of its surplus funds in a co-operative bank. In the ITA No.1190/PUN/2025 [A] 4 said case, it has also been held by the High Court that the banking business, even though run by a Co-operative bank is sought to be excluded from the beneficial provisions of exemption or deduction under section 80P of the Act, by bringing on the statute book sub- section (4) in section 80P”. 2.2 Ld.Pr.CIT relied on the decision of Hon’ble Karnataka High Court in the case of Totagars Co-operative Sales Society Ltd., Vs. ITO 322 ITR 283(KAR). 2.3 In this case, admittedly, assessee has received interest from Co-operative Banks. Assessee has invested the surplus amount as per the Provisions of Maharashtra Co-operative Societies Act. 3. It is observed that Assessing Officer had verified this issue and arrived at a conclusion that Assessee was eligible for deduction u/s.80P of the Act. It is noted that vide notice u/s.142(1) dated 06.12.2021, the Assessing Officer had asked specific questions. In response to the said notice, Assessee vide letter dated 17.01.2022 filed an elaborate submission including copy of registration certificate issued under Maharashtra Co-operative Societies Act. ITA No.1190/PUN/2025 [A] 5 The relevant paragraphs of the said letter are reproduced here as under : “3. Note on deduction u/s 80P- The primary object of the assessee is to receive the deposits and to meet all of the financial requirements of its members and to provide credit facilities to its members under the concept of mutuality The society accepts deposits from its members & grants loans to its members. Interest is collected on the said loans granted to its members & interest is paid on said deposits kept by its members. Surplus, if any is being utilized as per the provisions of the Maharashtra Co-operative Societies Act and for the benefit of its members. An audit under the Maharashtra Co-operative Societies Act is conducted by the Co-operative Department of Maharashtra each year to ensure the proper working of the society Since the society is working for the benefit of its members and under the concept of mutuality, its entire income is deductible u/s 80P of the Income Tax Act, 1961. Following these principles the assessee has claimed deduction amounting to Rs.46218330/- u/s 80P(2)(a)(i) of the Income Tax Act, 1961. 4. Details of Bank accounts held in the name of Society during FY 19-20: Sr.No. Bank Name Account No. 1 Dombivali Nagari Sahakari Bank Ltd. 50010100001212 2 Pune Peoples Co-operative Bank Ltd. 100210001020875 3 Pune Peoples Co-operative Bank Ltd 100220601000056 4 Janata Sahakari Bank 1539/00000065 5 Janata Sahakari Bank 15220100024782 6 Udyam Vikas Bank 23/690 7 Pune District Central Co-operative Bank 161000200000137 Bank statements for the above accounts are attached herewith. ITA No.1190/PUN/2025 [A] 6 5. Details of interest income earned from its members & other(banks) is as below: Sr.No. Particulars Interest Earned (Rs.) 1. Interest received from Members 10,39,41,403.00 2. Interest received from Scheduled Co- operative Banks 1,76,89,629.00 Total 12,16,31,032.00 4. Copies of the letter dated 17.01.2022 and the notice under section 142(1) of the Act, was made available to the Bench by ld.Departmental Representative at the request of the Bench. Similarly, assessee has filed submission vide letter dated 07.08.2021 explaining the rationale of claiming deduction u/s.80P of the Act. Thus, it is clear from the record that Assessing Officer had conducted enquiries and Assessee had filed requisite details before the Assessing Officer during Assessment Proceedings. Therefore, the finding of Ld.Pr.CIT, Pune-4 in Paragraph-6 of the order u/s.263 that Assessing Officer has not asked any specific question, is blatantly incorrect and inappropriate. 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 ITA No.1190/PUN/2025 [A] 7 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. …………………… 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 ITA No.1190/PUN/2025 [A] 8 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. 5.1 Thus, the Hon’ble High Court of AP &TS held that Interest Income earned by investing Income derived from Business of ITA No.1190/PUN/2025 [A] 9 providing credit facilities, Loans by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) of the Act. 6. In the case of Sahyadri Co-operative Credit Society Limited, the Sahyadri Co-operative Credit Society had deposited excess funds in the Banks or Institutions permitted by the Co-operative Societies Act. In that context, the Hon’ble Kerala High Court in the case of Pr.CIT Vs. Sahyadri Co-operative Credit Society Ltd., [2024] 301 Taxman 36 (Kerala) vide order dated 04.09.2024 has held as under : Quote “7. On a consideration of the rival submissions, we are of the view that for the reasons stated hereinafter, the question of law that arises for consideration before us must be answered against the Revenue and in favour of the assessee. The permissible deduction that is envisaged under Section 80P(2) of the I.T. Act for a Co-operative Society that is assessed to tax under the head of 'Profits and Gains of Business or Profession' is of the whole of the amount of profits and gains of business attributable to any one or more of its activities. Thus, all amounts as can be attributable to the conduct of the specified businesses by a Co-operative Society will be eligible for the deduction envisaged under the statutory provision. The question that arises therefore is whether, merely because the assessee chooses to deposit its surplus profit in a permitted bank or financial institution, and earns interest on such deposits, such interest would cease to form part of its profits and gains attributable to its business of providing credit facilities to its members? In our view that question must be answered in the negative, since we cannot accept the contention of the Revenue that the interest earned on those deposits loses its character as profits/gains ITA No.1190/PUN/2025 [A] 10 attributable to the main business of the assessee. It is not as though the assessee in the instant case had used the surplus amount [the profit earned by it] for an investment or activity that was unrelated to its main business, and earned additional income by way of interest or gain through such activity. The assessee had only deposited the profit earned by it in the manner mandated under Section 63 of the Multi-State Co- operative Societies Act, or permitted by Section 64 of the said Act. In other words, it dealt with the surplus profit in a manner envisaged under the regulatory Statute that regulated, and thereby legitimized, its business of providing credit facilities to its members. Under those circumstances, if the assessee managed to earn some additional income by way of interest on the deposits made, it could only be seen as an enhancement of the profits and gains that it made from its principal activity of providing credit facilities to its members. The nature and character of the principal income [profits earned by the assessee from its lending activity] does not change merely because the assessee acted in a prudent manner by depositing that income in a bank, instead of keeping it in hand. The provisions of the I.T. Act cannot be seen as intended to discourage prudent financial conduct on the part of an assessee.” Unquote 6.1 Thus, even Hon’ble Kerala High Court has held that the character of income does not change. The Hon’ble Kerala High Court held that interest earned from deposits in permitted banks will be eligible for deduction u/s.80P of the Act. The Hon’ble Kerala High Court’s decision is dated 04.09.2024 means, after the decision of Hon’ble Supreme Court in the case of Totagar’s Co.operative Sales Society Ltd. ITA No.1190/PUN/2025 [A] 11 7. Therefore, even for argument’s sake, if it is presumed that this issue is a debatable issue, the Assessing Officer has adopted the one of the possible views, therefore, it cannot be held that Assessing Officer has erred. However, ITAT Pune which is the jurisdictional ITAT for the Assessing Officer, had consistently held that interest earned by Co-operative Credit Society from Co-operative Banks is eligible for deduction u/s.80P of the Act. Therefore, the Assessment Order is not prejudicial to the interest of the Revenue. 8. The Hon’ble Supreme Court in the case of CIT Vs. Amitabh Bachchan, 384 ITR 200(SC) observed as under : “21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from.” 9. The Hon’ble Jurisdictional High Court in the case of CIT v/s Mepco Industries Ltd. 294 ITR 121 (Madras) held as under : Quote, “8. Therefore, on the facts of the case, when two views are possible and it is not the case of the Revenue that the view taken by the ITA No.1190/PUN/2025 [A] 12 Assessing Officer is not permissible in law, the CIT is not justified in invoking the jurisdiction under section 263 of the Act. ” Unquote. 10. The Hon’ble Bombay High Court in the case of CIT Vs. Future Corporate Resources Ltd., in IT Appeal No.1275 of 2017 vide order dated September 29, 2021 held as under : Quote ,“ 7. In the order of PCIT it is stated \"in paragraph 4.3 of the assessment order, the Assessing Officer has recorded that from the details submitted by the assessee and the explanation given by him, it was observed that assessee had regular business connection with the company in which investment had been made and also there was business income to the assessee from the same. Therefore, interest expense debited by the assessee has not been considered for the calculation of disallowance under section 14A because the same has been incurred for the purpose of business.\" The PCIT therefore agrees that the Assessing Officer has recorded from the details submitted by respondent and the explanation given by respondent that the assessee had regular business connection with the company in which investment has been made and also there was a business income to the assessee from the same. He notes that the Assessing Officer, therefore did not consider the calculation of disallowance under section 14A the interest expense debited by the assessee because the same has been incurred for the purpose of business. The PCIT though was unhappy with the view of the Assessing Officer, the PCIT himself does not say why it should have been considered for the calculation of disallowance under section 14A. Even if one assumes that he has, after reading of the order expressed his views, but still the position is two views therefore were possible. Therefore, if one of the two possible views was taken by the Assessing ITA No.1190/PUN/2025 [A] 13 Officer, the PCIT could not have exercised his powers under section 263 of the Act.”Unquote . 10.1 Thus, the principal of the law emanating from the above decision of the Hon’ble Supreme Court, Hon’ble Jurisdictional High Court is that when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s 263 of the Act. 11. The Hon’ble Supreme Court in the case of Pr.CIT Vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., 454 ITR 117 (SC) has held as under : Quote. “5. There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under section 80(P)(2) of the Income-tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4)shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under section80(P)(2) of the Income-tax Act. 6. In view of the above and for the reasons stated hereinabove, the present appeal deserves to be dismissed and is accordingly dismissed, ITA No.1190/PUN/2025 [A] 14 answering the question against the Revenue and in favour of the Assessee.” Unquote 11.1 The above order of Hon’ble Supreme Court was rendered in the context of the appeal filed by the Revenue against the order dated 14-10-2019 passed by the Hon’ble High Court of Judicature at Bombay in ITA No.933/2017, by which the High Court has dismissed the said appeal preferred by the Revenue. 6. The Hon’ble Bombay High Court’s order in ITA No.933/2017 vide order dated 14.10.2019 in the case of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., emanates from the ITAT order in ITA No.2515/MUM/2014 dated 20.05.2016. The facts recorded in the ITAT order in ITA No.2515/MUM/2014 are that Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd.,is a Co-operative CreditSociety registered under the Maharashtra Co-operative Society Act, had claimed deduction under section 80P(2)(d) of the Income Tax Act, 1961 as well as Rs.5,85,57,676/- claimed under section 80P(2)(a)(i) of theAct. The Assessing Officer disallowed the claim of deduction u/s.80P(2) in the case of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd.The Revenue in the appeal ITA No.1190/PUN/2025 [A] 15 filed before ITAT in ITA No.2515/MUM/2014 has raised following questions: “(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO amounting to Rs.5,85,57,676/- u/s.80P(2)(a)(i) and Rs.1,39,23,333/- u/s.80P(2)(d) of the I.T. Act even though assessee was carrying on banking business. (ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the fact that amendment to Sec.80P(4) inserted w.e.f. 1.4.2007 by Finance Act, 2006 clearly bans all the co-operative banks other than primary agricultural credit society or a primary co-operative agricultural and rural development banks from claiming exemption under this section”. 12. The appeal filed by Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., travelled up to Hon’ble Supreme Court and the Hon’ble Supreme Court has decided the appeal in favour of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., regarding deduction u/s.80P(2) of the Act. Therefore, this issue has attained finality. 13. In these facts and circumstances of the case, the order under section 263 passed by ld.Pr.CIT is not maintainable. Accordingly, we quash the order under section 263 of the Act. Accordingly, grounds of appeal raised by the assessee are allowed. ITA No.1190/PUN/2025 [A] 16 14. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 18 June, 2025. Sd/- Sd/- (ASTHA CHANDRA) (DIPAK P.RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 18 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, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune. "