Aurangabad Divison Life Insurance Employees Co-op Credit Society Ltd. Vs ITO (ITAT Pune)
ITAT Pune Allows Sec 80P Deduction – Interest on Bank Deposits by Co-operative Credit Society Held Eligible as Business Income
In Aurangabad Division Life Insurance Employees Co-op Credit Society Ltd. vs ITO (AY 2020-21), the ITAT Pune allowed the assessee’s appeal and deleted disallowance of ₹35.43 lakh made by the AO by treating interest income as “income from other sources.” The society, formed by LIC employees, had claimed deduction u/s 80P(2)(a)(i) on interest earned from bank deposits maintained as part of statutory and operational requirements.
The Tribunal held that a co-operative credit society engaged in providing credit facilities to members is entitled to deduction on interest income earned from deployment of surplus funds, as such income is attributable to business activity. Relying on Supreme Court rulings in Mavilayi Service Co-operative Bank Ltd. and Karnataka State Co-operative Apex Bank, ITAT observed that interest earned from deposits made in the course of business retains the character of business income.
The decision distinguished Totagars Co-operative Sale Society Ltd., noting that in that case the interest arose from temporarily invested sale proceeds belonging to members, whereas the present assessee invested its own funds derived from credit activities. Accordingly, ITAT directed the AO to allow deduction u/s 80P(2)(a)(i) and delete the addition.
FULL TEXT OF THE ORDER OF ITAT PUNE
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 the A.Y.2020-21 dated 24.09.2025 emanating from the Assessment Order passed under section 143(3) read with section 144B of the Income Tax Act, 1961, dated 06.09.2022. The Assessee has raised the following grounds of appeal :
“On the facts and in the prevailing circumstances of the case and in Law, the learned Assessing Officer erred in disallowing the deduction under section 80P(2)(a)(i) without appreciating the submission made by the assessee and the covered judgements of the Jurisdictional Hon’ble Pune ITAT. Hence, such disallowance of Rs. 35.43.169 may please be deleted and allowed to be deducted to the assessee society
2. On the facts and in the prevailing circumstances of the case and in Law, the learned Assessing Officer erred in making disallowance following the decision of Honourable Supreme Court in the case of S.C. Totagars Co-op. Sale Society Ltd. VS ITO. Karnataka (2010) 188 Taxman 282(SC) even though the same is not applicable to the case of the assessee. Thus, the Ld. Assessing Officer has erred in applying the decision of the Hon’ble Apex Court wrongly. Hence, such disallowance of Rs. 35,43.169 made wrongly may please be deleted and allowed to be deducted to the assessee society.
3: The Appellate craves the permission to add, amend, modify, alter, revise. substitute, delete any or all grounds of the appeal, if deemed necessary of the time of hearing of the appeal”
Findings & Analysis :
