Yashwant Nagari Sahakari Patsanstha Maryadit Vs ITO (ITAT Pune)
The ITAT Pune allowed the assessee’s appeal against the NFAC order dated 24.01.2024 for Assessment Year 2017-18. The assessee, a co-operative society registered under the Maharashtra State Co-operative Societies Act, 1960 and engaged in providing credit facilities to its members, had claimed deduction under Sections 80P(2)(a)(i) and 80P(2)(d) in respect of interest and dividend income. The Assessing Officer denied the deduction after treating the assessee as a co-operative bank based on its paid-up share capital, reserves and activities, and relying on the Supreme Court decision in Totagars Co-operative Sale Society Ltd., resulting in an addition of Rs.1,17,59,141/-. The CIT(A) upheld the disallowance. Before the Tribunal, the assessee submitted that the issue was covered by several Pune Bench decisions allowing deduction on interest earned from investments with co-operative and scheduled banks. The Tribunal noted that neither the Assessing Officer nor the CIT(A) had found that the assessee possessed a banking licence from the RBI. Referring to the Supreme Court decision in Mavilayi Service Co-operative Bank Ltd., it held that, in the absence of an RBI banking licence, the assessee could not be treated as a co-operative bank under Section 80P(4). The Tribunal further observed that the Assessing Officer had accepted that the investments were made from surplus funds generated from the assessee’s business of providing credit facilities to members. Relying on the Andhra Pradesh and Telangana High Court decision in Vavveru Co-operative Rural Bank Ltd., earlier Pune Bench decisions, and the Madras High Court decision in Thorapadi Urban Co-operative Credit Society Ltd., the Tribunal held that the interest income qualified for deduction under Section 80P(2), and that the dividend earned from investments in PDCC Bank was eligible for deduction under Section 80P(2)(d). The Tribunal rejected the Revenue’s request for remand on the issue of loans to members, observing that no such finding existed in the assessment or appellate orders and that the Revenue could not improve the assessment order at the appellate stage. Accordingly, it directed the Assessing Officer to delete the addition relating to interest income, held the dividend eligible for deduction under Section 80P(2)(d), allowed Grounds 1 to 5, dismissed the general grounds, and allowed the appeal.
