Nashik Road Nagari Sahkari Patsanstha Limited Vs ITO (ITAT Pune)
The assessee, a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960 and engaged in providing credit facilities to its members, filed its return of income for AY 2013-14 declaring nil income. The Assessing Officer completed the assessment under Section 143(3) of the Income-tax Act, 1961 by making additions aggregating to ₹44,01,002. The additions included treating interest earned on fixed deposits with Bank of Baroda and interest on Government/RBI securities as income from other sources, thereby denying deduction under Section 80P(2), along with disallowances relating to building fund provision, investment fluctuation, MSEB commission expenses and Section 14A. The CIT(A) further held that the assessee was a co-operative bank hit by Section 80P(4), denied deduction under Section 80P(2)(a)(i), enhanced the disallowance under Section 14A applying Rule 8D, and confirmed the other disallowances.
Before the Tribunal, the assessee contended that it was a co-operative society and not a co-operative bank, as it had not been granted a banking licence by the RBI. It argued that once the CIT(A) accepted the interest on fixed deposits as business income, deduction under Section 80P(2)(a)(i) could not be denied. Reliance was placed on the Supreme Court decision in The Mavilayi Service Co-Operative Bank Ltd. and Another v. CIT (2021) 431 ITR 1. The Revenue maintained that interest earned on investments with Bank of Baroda was not business income derived from lending to members and therefore was not eligible for deduction under Section 80P(2).
