2026 (6) TMI 208

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....e by the AO by way of disallowance of deduction u/s 80P(2) in respect of interest of Rs. 9,48,787 earned from FDRs placed with three Cooperative Banks and interest of Rs. 25,574 earned from Savings Bank Ac with Cooperative Bank without appreciating that the said disallowance was not justified on facts of the case and in law 2) The learned CITA failed to appreciate that the entire interest income of Rs. 9,74,361 earned on investments made with Cooperative Banks was deductible u/s 80P(2)(d) of the Act as per the consistent view expressed by Hon'ble Jurisdictional ITAT Mumbai in various cases and hence the addition made by the AO was not justified 3) Without prejudice to ground no 2 the learned CITA erred in not appreciating ....

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....ed deduction claimed u/s 80P amounting to Rs. 9,74,361/-. Aggrieved by the order passed by Ld.AO assessee preferred appeal before Ld.CIT(A). 2.1. The Ld.CIT(A) upheld the disallowance made by the AO by holding that deduction u/s 80P(2)(a)(i) is available only in respect of profits attributable to activities of providing credit facilities to members and not in respect of interest income earned from investments/deposits made with co-operative banks. The Ld.CIT(A), relying upon the decision of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd. (supra), held that the interest earned on fixed deposits and savings bank accounts maintained with Saraswat Co-operative Bank, KJ Sahakari Bank and Thane Janata Sahaka....

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.... various decisions of the co-ordinate benches of the Tribunal including the decision of the Hon'ble Jurisdictional ITAT Mumbai holding that interest income earned from investments/deposits with co-operative banks is eligible for deduction u/s 80P(2)(d) of the Act. It was thus submitted that the authorities below erred in denying the deduction claimed by the assessee. 3.3. The Ld.DR strongly relied upon the orders of the lower authorities. He submitted that the interest income earned on deposits placed with co-operative banks is not operational income arising from the business activities carried on by the assessee with its members and therefore the same cannot be allowed as deduction u/s 80P(2)(a)(i) of the Act. 3.4. The Ld.DR further ....

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.... consistently held that interest earned from investments made with co-operative banks qualifies for deduction u/s 80P(2)(d) of the Act. 4.2. We further note that the reliance placed by the authorities below on the decision of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd. (supra) is misplaced in the facts of the present case. In the said decision, the Hon'ble Supreme Court was dealing with deduction claimed u/s 80P(2)(a)(i) in respect of surplus funds invested in short term deposits by a co-operative sale society engaged in marketing agricultural produce. The issue relating to deduction u/s 80P(2)(d) in respect of investments made with co-operative societies/co-operative banks was not under consideration....