Parshuram Nagri Vs ITO (ITAT Pune)
The ITAT Pune allowed two appeals filed by a credit cooperative society against the orders of the CIT(A) sustaining the denial of deduction under Section 80P(2)(d) of the Income-tax Act on interest earned from deposits with cooperative banks. Delay of 34 days in filing the appeals was condoned after considering the affidavit filed by the assessee.
For AY 2015-16, the Assessing Officer reopened the assessment after noticing that the assessee had not filed its return despite substantial cash deposits in cooperative banks. The assessee subsequently filed its return claiming deduction under Section 80P. The Assessing Officer denied deduction under Section 80P(2)(d) on interest received from cooperative banks, and the CIT(A) affirmed the denial.
The Tribunal noted that the issue had already been considered in ITO Ward.-5, Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit, wherein it was held that a primary credit cooperative society is entitled to deduction under Section 80P(2)(d) on interest and dividend earned from investments with cooperative banks that are themselves cooperative societies. The Tribunal also referred to the Bombay High Court decision in Annasaheb Patil Mathadi Kamgar Sahkari Pathpedhi Ltd., which was subsequently approved by the Supreme Court, holding that a credit cooperative society cannot be treated as a cooperative bank merely because it grants credit to its members and is entitled to exemption under Section 80P(2).
Following these judicial precedents, the Tribunal set aside the CIT(A)’s order and directed the Assessing Officer to allow deduction under Section 80P(2)(d) in respect of interest and dividend income earned from cooperative banks. Since the facts for AY 2017-18 were identical except for the figures involved, the Tribunal applied the same reasoning and allowed that appeal as well. Both appeals were allowed.
Cases Discussed
- ITO Ward.-5, Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit (ITAT Pune), ITA No.2375/PUN/2025 & C.O. No.49/PUN/2025
- Gurudatta Gramin Bigersheti (ITAT Pune), ITA No.502/PUN/2025 order dated 28-07-2025
- Pune Jila Madhyawarti Sahkari Bank Sevakanchi Sahkari Patsanstha Maryadit (ITAT Pune), ITA No.1086/PUN/2025 order dated 23-06-2025
- Sharadchandra Nagari Sahakari Patsanstha Maryadit (ITAT Pune), ITA No.1041/PUN/2025 order dated 04-06-2025
- Annasaheb Patil Mathadi Kamgar Sahkari Pathpedhi Ltd. (Bombay High Court), ITA No.933/2017 order dated 14-10-2019
- Civil Appeal No.8719 of 2022 (Supreme Court), order dated April 20, 2023
FULL TEXT OF THE ORDER OF ITAT PUNE
These two appeals are filed by the assessee against the separate orders of NFAC/ CIT(A) passed u/sec 147 r.w.s. 144B and u/sec 250 of the Income Tax Act. The assessee has raised the grounds of appeal challenging the order of the CIT(A) sustaining the denial of claim of deduction of interest on deposits with cooperative banks u/sec 80P(2)(d) of the Act made by the Assessing Officer.
2. Since the issues involved in these two appeals are common, identical and similar and for the sake of convenience, shall take up ITA 1659/PUN/2026 for the Assessment Year 2015-16 as a lead case and facts narrated.
3. It the time of hearing, it was found that there is a delay of 34 days in filing the appeals before Hon’ble Tribunal and the assessee has filed the affidavit for condonation of delay. On consideration of facts and information mentioned in the affidavit, there is a reasonable cause explained and the Ld. DR. has no specific objections. Accordingly, the delay is condoned and the appeals are admitted.
4. The brief facts of the case are that, the assessee is a credit cooperative society and is engaged in the business of providing credit facilities to its members. The Assessing Officer based on the information of Non-filing of Return (NMS) found that assessee’s society has made huge cash deposits in various co-operative banks in the financial year 2014-15 and the assessee has not filed the return of income for the Assessment Year 2015-16. Whereas the A.O has reason to believe that income has escaped assessment and issued notice u/sec 148 A(b) and u/sec148 of the Income Tax Act. Subsequently, the assessee has filed return of income on 22.08.2023 disclosing a total income of Rs. 9,41,319/- after claiming deduction u/sec 80P of the Act. The AO on perusal of the financial statements found that the assessee has received interest income from investment/deposits with the cooperative banks and has called for the various details and explanations in respect of the claims. whereas the assessee has filed submissions on these aspects and the Assessing Officer, after considering information and submissions filed in the course of hearing was not satisfied with the explanations and observed that the assessee has received interest from cooperative banks and is not entitled to deduction u/sec. 80P(2)(d) of the Act and denied the claim. Finally the A.O assessed the total income of Rs.2,51,427/- and passed the order u/sec.147 r.w.s.144 of the Income Tax Act dated 14.03.2024.
5. Aggrieved by the order, the assessee has filed the appeal with the CIT(A), whereas the CIT(A) has considered the grounds of appeal, submissions of assessee, finding of the Assessing Officer but has sustained the action of the AO that the interest income earned by the assessee from the Cooperative Banks is not eligible for deduction u/sec 80P(2)(d) of the Act and dismissed the assessee’s appeal.
6. Aggrieved by the order of the CIT(A), the assessee has filed the appeal before the Hon’ble Tribunal. None appeared on behalf of assessee and the Ld. DR supported the order of CIT(A).
7. Heard the Ld. DR submissions and perused the material on record. The assessee in the grounds of appeal submitted that the CIT(A) has erred in observing that the interest and dividend income from the cooperative Banks is ineligible for deduction u/s.80P(2)(d) of the Act. Whereas the Hon’ble Tribunal in the revenue appeal ITO Ward.-5,Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit (ITA No.2375/PUN/2025 & C.O. No.49/PUN/2025) held as under:
“15. We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that all the grounds raised by the Revenue revolves around the issue of allowability of deduction u/s 80P(2)(d) of the IT Act to primary credit cooperative society. In this regard, we find that in number of decisions passed by coordinate benches of this Tribunal it has been held that a primary credit cooperative society is eligible to claim deduction u/s 80P(2) of the IT Act on interest and dividend income earned from its investment with other cooperative banks which are also cooperative societies duly registered under Maharashtra State Cooperative Societies Act. In this regard, following decisions are relevant :-
(i) Gurudatta Gramin Bigersheti, ITA No.502/PUN/2025 order dated 28-07-2025.
(ii)Pune Jila Madhyawarti Sahkari Bank Sevakanchi Sahkari Patsa nstha Maryadit, ITA No.1086/PUN/2025 order dated 23-062025.
(iii) Sharadchandra Nagari Sahakari Patsanstha Maryadit, ITA No.1041/PUN/2025 order dated 04-06-2025.
16. We further find that the core issue of allowance of deduction u/s 80P(2) of the IT Act to a primary credit cooperative society was also decided by Hon’ble Jurisdictional Bombay High Court in the case of Anna saheb Patil Mathadi Kamgar Sahkari Path pedhi Ltd.in ITANo.933/2017 order dated 14-10-2019 wherein deduction u/s 80P(2) of the IT Act was allowed to a primary credit cooperative society. Subsequently, this Judgement was also approved by Hon’ble Supreme Court in Civil Appeal No.8719 of 2022 order dated April 20, 2023 by observing as under :-
“1. Feeling aggrieved and dissatisfied with the impugned order dated 14-10-2019 passed by the High Court of Judicature at Bombay in ITA No. 933/2017, by which the High Court has dismissed the said appeal preferred by the Revenue, relying upon its earlier decision in the case of Quepem Urban Co-operative Credit Society Ltd. v. Asstt. CIT [2015] 58 taxmann.com 113/232 Taxman 510/377 ITR 272 (Bom.), the Revenue has preferred the present appeal.
2. The High Court considered the following question of law –
“Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified as claimed by the assessee on the ground that the assessee, a co- operative credit society and is not a bank for the purpose of Section 80P(4) of the Act?”
3. Apart from the fact that against the relied upon decision in the case of M/s. Quepem Urban Co-operative Credit Society Ltd. (supra),the Special Leave Petition has been dismissed, having heard learned counsel appearing on behalf of the respective parties, the issue involved in the present appeal is squarely covered against the Revenue in view of the decision of this Court in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 com 161/279 Taxman 75/431 ITR 1/[2021] 7 SCC 90. This Court, in the aforesaid decision has specifically observed and held that primary Agricultural Credit Societies cannot be termed as Co-operative Banks under the Banking Regulation Act and, therefore, such credit societies shall be entitled to exemption under section 80(P)(2) of the Income-tax Act, 1961.
4. Ms. Aakansha Kaul, learned counsel appearing on behalf of the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Cooperative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also.
5. There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under section 80(P)(2) of the Income-tax Act. Such finding of fact is not required to beinterfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under section 80(P)(2) of the Income-tax Act.
6. In view of the above and for the reasons stated hereinabove, the present appeal deserves to be dismissed and is accordingly dismissed, answering the question against the Revenue and in favour of the Assessee.”
17. Respectfully following the above latest decision passed by Hon’ble Supreme Court cited supra, we are of the considered opinion that the issue of allowance of deduction u/s 80P(2) of the IT Act in favour of primary credit cooperative society has attained finality & therefore we do not find any error in the order passed by Ld. CIT(A)/NFAC with regard to allowance of deduction u/s 80P(2)(d) of the IT Act to the assessee on interest income earned from its investment from cooperative banks which are also cooperative societies.
18. In the result, the appeal filed by the Revenue is dismissed.
19. To sum up, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is partly allowed, as indicated above.”
8. Therefore considering the facts, circumstances and ratio of the judicial decisions dealt above and follow the judicial precedence. Accordingly, set aside the order of the CIT(A) on this disputed issue and direct the Assessing Officer to allow the deduction u/sec.80P2(d) of the Act in respect of interest and dividend income earned from the cooperative banks. And allow the grounds of appeal in favour of the assessee.
9. In the result, the appeal filed by the assessee is allowed.
ITA No.1660/PUN/2026 (A.Y.2017-18)
10. As the facts and circumstances in this appeal is identical to ITA No.1659/PUN/2026 for the A.Y 2015-16 (except variance in figures) and the decision rendered in above paragraphs 7 to 9 would apply mutatis mutandis for this appeal also. Accordingly, the grounds of appeal are allowed in favour of the assessee.
11. In the result, the two appeals filed by the assessee are allowed.
Order pronounced in the open Court on 02nd July, 2026.
