Sharada Credit Cooperative Society Limited Vs ITO (ITAT Bangalore)
Delay Condoned, 80P Restored: ITAT Allows 80P(2)(a)(i) Deduction on Interest Income of Credit Co-op Society
Bangalore ITAT has condoned a delay of 247 days and allowed deduction u/s 80P(2)(a)(i) to Shree Sharada Credit Cooperative Society Ltd. for AYs 2018-19 & 2020-21, reversing the orders of AO & NFAC-CIT(A).
The delay occurred as the CIT(A) orders were served on an old email ID after change of authorised CA; the Society came to know of the orders only in May 2025 while finalising accounts. Holding this to be a “sufficient cause”, the Tribunal condoned the delay, relying on recent SC jurisprudence on liberal interpretation of Section 5 of the Limitation Act.
On merits, the issue was eligibility of deduction u/s 80P(2)(a)(i) on interest income earned from deposits with cooperative societies/banks. The AO & CIT(A) had denied the claim by treating such interest as “income from other sources”, relying on Totgars (SC).
The ITAT held that:
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The Assessee is a credit cooperative society engaged in lending to members.
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Interest earned on deployment of surplus funds is attributable to the business of providing credit facilities.
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The case is squarely covered by Tumkur Merchants Souharda Credit Cooperative Ltd. (Karnataka HC) and allied Karnataka HC rulings.
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Totgars (SC) is fact-specific and does not bar deduction where funds are not members’ liabilities.
Accordingly, the ITAT directed the AO to allow deduction u/s 80P(2)(a)(i) of ₹26.80 lakh (AY 2018-19) & ₹26.23 lakh (AY 2020-21), holding that Section 80P, being a beneficial provision, must be construed liberally in favour of cooperative societies. Appeals were allowed in full.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 1315/Bangalore/2025 for assessment year 2018 – 19 in ITA No. 1316/Bangalore/2025 for assessment year 2020 – 21 is filed by Shreesharda credit cooperative society Ltd (The Assessee/Appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi (the learned CIT – A) dated 31 July 2024 for both the years separately wherein the assessee is denied deduction under section 80 P of the act.
