TaxTMI 
TaxTMI 
2026 (3) TMI 1760
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....4 Order of first-appeal dated 25.01.2024 passed by CIT(A), NFAC Assessment-order dated 26.11.2019 passed by DCIT/ACIT-1(1), Bhopal ["AO"] u/s 143(3) 2017-18 4 329/Ind/2024 Order of first-appeal dated 21.02.2024 passed by CIT(A), NFAC Assessment-order dated 12.03.2021 passed by National e- Assessment Centre ["AO"] u/s 143(3) 2018-19 5 330/Ind/2024 Order of first-appeal dated 24.01.2024 passed by CIT(A), NFAC Assessment-order dated 20.09.2022 passed by Assessment Unit ["AO"] u/s 143(3) 2020-21 2. Since the main issue involved in these appeals is identical, they were heard together at the request of parties and are being disposed of by this consolidated order for the sake of convenience, brevity and clarity. 3. The assessee is a co-operative society engaged in managing dams of the State Govt. and fisheries work through its members. For the relevant AYs 2014-15, 2015-16, 2017-18, 2018-19 & 2020-21 under consideration, the assessee earned interest income from co-operative banks amounting to Rs. 1,79,26,310/-, 3,02,73,908/-, 5,92,55,175/-, 4,92,94,660/- and 5,59,74,888/- and claimed the same as eligible f....
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....om 314 (Gujrat) (ii) Hon'ble Sikkim High Court - Sikkim State Co-operative Supply and Marketing Federation Ltd. Vs. DCIT (2025) 181 taxmann.com 494 (Sikkim) (iii) Hon'ble Madras High Court - Thorapadi Urban Co-op Credit Society Ltd. Vs. ITO (2023) 156 taxmann.com 419 (Madras) (iv) ITAT, Indore - Indore Sahakari Dugdh Sangh Maryadit Dairy Compound Vs. ACIT/ITO - ITA No. 293 & 294/Ind/2024, order dated 17.09.2024. (v) ITAT, Mumbai - Pathare Prabhu Co-operative Housing Society Ltd. Vs. ITO (2023) 153 taxmann.com 714 (Mum - Trib.) (vi) ITAT, Mumbai - Shree Raj Crystal Co-op. Housing Society Ltd. Vs. ADIT, ITA No. 5769/Mum/2025, order dated 27.11.2025 7. Ld. AR referred relevant paras of decisions and demonstrated that in the Hon'ble Courts have analysed the decision of Hon'ble Supreme Court in Totagars Co-operative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) / (2010) 188 Taxman 282 (SC) relied by AO and come to a conclusion that the said decision was concerned with section 80P(2)(a)(i) and not with section 80P(2)(d) with which we are concerned in present appeals. Finally, after analysis of provisions of section 80P(2....
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....ave been passed by the ACIT, Circle 5(2)(1), Ahmedabad u/s. 143(3) r.w.s. 147/263 of the Act, disallowing the interest income earned by the assessee by way of FD investment in other Co-op. Society, i.e. Gujarat State Co-op. Bank Ltd. (GSCB) and the rental income from HUDCO and SHARK Systems, which were claimed by the assessee u/s 80P(2)(d) of the Act. 4. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the additions made by the Assessing Officer in these assessment years, relying the order of the Hon'ble High Courts in the cases of Totgar's Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and State Bank of India (2016) 389 ITR 578 (Guj.). 5. Aggrieved by the order of the ld. CIT(A), the Revenue is now in appeal before the Tribunal. 6. The provisions of section 80P(2)(d) of the Act are as under :- "Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in su....
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....ooperative banks by section 80P(4) would not disentitle assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in said section - Held, yes - Whether thus, provisions of section 80P(2)(d) would be applicable to instant case and Principal Commissioner was not justified in invoking revisional powers under section 263 which was rightly reversed by Tribunal - Held, yes [In favour of assessee) *** ● The controversy sought to be canvassed with regard to deduction under section 80P(2)(d) is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v Asstt. Commissioner of Income Tax [2022] 140 taxmann.com 602 (Guj.) as well as in case of State Bank of India v Commissioner of Income Tax (2018) 389 ITR 578 (Guj.) wherein it was held that the deduction under section 80P(2)(d) is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. [Para 28] ● Reliance placed by the revenue on decisions of the Karnataka High Court in Totgars' Cooperative Sale Society (2....
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....a 31] ● In view of the above the provisions of section 80P(2)(d) would be applicable in the facts of the case and the Principal Commissioner was not justified in invoking revisional powers under section 263 which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. [Para 33] i. In view of the foregoing reasons the question is answered in favour of the assessee and against the revenue. Tax Appeals being devoid of any merit are dismissed [Para 34]." 10. Similar view has been taken by this Tribunal in the case of :- (i) Ratneshwari Co. Op. Credit Society Limited Vs. ACIT [ITA No. 1409/Ahd/2024 dated 29.11.2024], (ii) Shree Vivekanand Co-op. Cr....
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....e in case of Principal Commissioner of Income Tax v. Ashwin kumar Arban Cooperative Society Limited reported in [2024] 168 taxmann.com 314 (Gujarat) wherein this Court held as under: "28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 80P(2)(d) of the Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. 29. Reliance placed by the learned advocate for the revenue on decisions of the Hon'ble Karnataka High Court and Hon'ble Supreme Court in case of Totgars' Cooperative Sale Society Ltd, the Hon'ble Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) of the Act w....
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.... (b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) "banking company" means any company which transacts the business of banking in India. Explanation .-- Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;" 32. After considering the above interpretation of various provisions and the Case laws, the Hon'ble Apex Court has analyzed the provisions as under: "14.1. In Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd., it was categorically held that under Section 56 of the BR Act, 1949 only three co-operative banks have been defined, namely, state cooperative bank, central co-operative bank and primary co-operative bank which are covered under Section 56(cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. Thus, it....
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....ned in sub- sections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section 5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: (i) Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operative societies" is significant as it indicates the general "drift" of the provision. (ii) Secondly, for purposes of eligibility for deduction, the assessee must be a "co-operative society". (iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). (iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being "engaged in", inter alia, carrying on the business of banking or providing credit facilities to its members. (v) Fifthly, the burden is on the ass....
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.... is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6. Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That subsection (4) of Section 80P which is in the nature of a proviso specifically excludes co- operative banks which are co- operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from Reserve Bank of India." 33. In view of the above dictum of law as well as the provisions of the Act which are considered we are of the opinion that the provisions of section 80P(2)(d) would be applica....
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....efully, which bars only co-operative banks (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) from claiming deduction from their own income. Section 80P(4) reads as follows :- "...... (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation .- For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities." 11. A plain reading of the above quoted provision of law reveals that the statute makes a clear distinction between a co-operative bank (other than a primary agricultural credit society or a primary co-ope....
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....0P of the Income Tax Act, 1961. As such, the first substantial question of law is answered in favour of the assessee. 16. So far as the second substantial question of law as framed by us is concerned, we are of the view that the Hon'ble High Court of Gujarat in the case of PCIT v. Ashwin Kumar Urban Co-operative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), has squarely answered this question in favour of the assessee by observing inter alia that the Hon'ble Supreme Court's decision rendered in Totgars' Cooperative Sale Society Ltd. (supra) was not applicable in the facts of that case - which is identical to the instant case - as the eligibility of deduction of interest in the facts of the instant case has to be decided under section 80P(2)(d) and not under section 80P(2)(a)(i). Totgars' Cooperative Sale Society Ltd. (supra) was primarily concerned with section 80P(2)(a)(i) and retained members' funds shown as liability to deny deductions under section 80P(2)(d). The facts of the Totagars' Cooperative Sale Society Ltd (supra) - as well as the applicability of the statutory provisions in so far as in our case is concerned - are factually and....
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.... co-operative society, the whole of such income" 9.1 A reading of the above said provision makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term 'Co-operative Society'. In the present case, the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co- operative Societies Act, 1983 on 20-5-2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co- operative Bank registered under the Co-operative Societies Act. The Income Tax Act, 1961 has also defined 'Co-operative Society' under section 2(19) as follows: '2(19). "Co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912 ), or under any other law for the time being in force in any State for the....
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....ement rendered by the Hon'ble Supreme Court in 2010 was considered. 13. In such view of the matter, since the impugned orders are passed without considering all these aspects, this Court is of the view that the same are liable to be set aside. Accordingly, the Writ Petitions are allowed and all the impugned notices are set aside. No costs. Consequently, all the connected miscellaneous petitions are closed." 14. Lastly, we would like to refer the decision of co-ordinate bench of ITAT, Indore itself in Indore Sahakari Dugdh Sangh Maryadit Dairy Compound Vs. ACIT/ITO - ITA No. 293 & 294/Ind/2024, order dated 17.09.2024: "4.2 Thus, there is no dispute that the interest income received by the assessee for these two years were from the deposit made with the Cooperative Bank which is primarily Cooperative Society registered under M.P. Cooperative Societies Act 1960. At the outset, we note that this Tribunal has considered an identical issue in a series of decision including in case of Pr. CIT vs. Bhopal Dugdh Sangh Sahakari Maryadit (supra) in para 5 to 7 as under: "5. We have considered rival submissions as well as relevant material on record. The AO has....
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....the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely :- (a) ......................... (b) ......................... (c) ......................... (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income;" On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction....
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....Indore Bench of this Tribunal in case of Indore Pragatishil Sahakari Sakh Sanstha Maryadit vs. ITO in ITANo. 317/Ind/2023 vide order dated 10.01.2024 has considered and decided this issue in para 9 to 12 as under: "9. We have considered the facts, rival submissions and perused the record placed before us. The assessee is a Credit Cooperative Society and during the year under consideration, it has earned interest income of Rs. 10,77,910/- on FDRs. The assessee has shown the interest income on FDR under the head "income from other sources" and against such interest income has claimed incidental expenses including interest paid to depositors at Rs. 5,38,955/-, commissioner paid to Collection Agent at Rs. 4,71,586/- and stationery and printing expenses at Rs. 28,450/-. Both the lower authorities have held that the incidental expenses claimed are in the nature of business expenditure and needs to be allowed against business receipts and have also observed that FDR interest being income from other sources is not eligible for deduction u/s 80-P of the Act. 10. We, however, on perusal of computation of income filed in the paper book at page no.11 noticed that the alleged ....
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.... attributable to such activities as does not exceed 1[fifteen thousand rupees]; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society, or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities chargeable under section 18 or any income from house property chargeable under section 22. Explanation .- For the purposes of this section, an urban consumers' co- operative society means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified ar....
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....#39;ble Supreme Court in case of Totgar's Co-operative Sale Society Ltd. Vs. Income Tax Officer, 188 Taxman 282(SC) and by discussing the decision rendered by Hon'ble Bombay High and Hon'ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act by returning following findings: "8. We have given a thoughtful consideration to the contentions advanced by the Id. Authorized representatives for both the parties in context of the aforesaid issue under consideration. As stated by the ld. A.R, and rightly so, the issue that interest received by a co-operative society on its deposits with co- operative banks would be eligible for deduction w/s 80P(2)(d) of the Act is covered in assessee's favour by orders of the various coordinate benches of the Tribunal in the following cases: (i). M/s Solitaire CHS Ltd. Vs. Pr.CIT-26, Mumbai, ITA No.3155/Mum/2019, dated 29.11.2019 (ii) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum.) (iii) M/s C. Green Cooperative Housin....
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....ty or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not co-operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2) (d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2) (d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2). The sums referred to in sub- section (1) shall be the following, namely :- (a) .................... (b) ) ......................
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....or the registration of co- operative societies, therefore, the interest income derived by a cooperative society from its investments held with a cooperative bank would be entitled for claim of deduction under Sec.80P(2) (d) of the Act. 8. We shall now advert to the judicial pronouncements that have been relied upon by the Id. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH $2 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2). Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. (iv). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon&#....
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....e High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Co-operative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with cooperative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ....
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....am of the consider view that Ld. CIT(A) has erred in upholding the denial of deduction claimed by the Assessee Society u/s. 80P (2)(d) of the Act, hence Assessing Officer is directed to allow the same." 12. On examination of facts of the instant case, we find that the above referred decision is squarely applicable and, therefore, respectfully following the same, we are inclined to hold that the assessee is eligible for deduction u/s 80P(2)(d) of the Act at Rs. 10,77,910/- in respect of FDR interest received from Cooperative Bank. Thus, the finding of the Ld. CIT(A) is set-aside and the impugned addition/disallowance stands deleted. Ground nos. 1, 2 & 3 of the assesse's appeal stand allowed. " 7. Accordingly in view of the decision of this Tribunal referred above we do not find any error or illegality in the impugned order of the CIT(A) in allowing deduction u/s 80P(2)(d) of the Act on the interest received by the assessee from the deposit made in Bhopal Co-operative Central Bank. The revenue is devoid of any merits." 4.3 Accordingly to maintain the rule of consistency this issue is decided in favour of the assessee and against the revenue and the clai....
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....e foregoing discussion and respectfully following the judicial precedents cited above, we too hold that the interest income earned by the assessee, being a "co-operative society" from "co-operative banks" is eligible for deduction under section 80P(2)(d) of the Act. However, for the sake of completeness, we may also add here even if it is said that there are two views on this issue, the assessee shall be entitled to favourable view as per decision of Hon'ble Supreme Court in CIT Vs. Vegetable Products Ltd. (1972) 88 ITR 192. In this decision, the Hon'ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provision are possible, that construction which favours the Assessee must be adopted." Accordingly, the issue is decided in favour of assessee. The additions made by the Ld. AO and sustained by the Ld. CIT(A) are hereby deleted. With this, the grounds raised by the assessee on this issue are allowed for all five years under consideration. Issue of disallowance u/s 14A read with Rule 8D (in AY 2020-21): 17. The AO has dealt this issue on Page 5 of assessment-order. He has observed that the assessee earned share profit of Rs. 46,75....