Vaibhavwadi Gramin Bigarsheti Sahakari Patsanstha Maryadit Vaibhavwadi Vs ITO (ITAT Pune)
Interest From Nationalised and Co-operative Banks Eligible for Section 80P(2)(a)(i) Deduction: Pune ITAT
Background of the Case
The assessee was a credit co-operative society engaged in accepting deposits from its members and providing credit facilities to them.
It filed its return of income on 26 September 2018, declaring nil income after claiming deduction under Section 80P of the Income-tax Act, 1961.
The return was selected for scrutiny, and the Assessing Officer issued notices under Sections 143(2) and 142(1). The dispute concerned the society’s entitlement to deduction in respect of interest earned on investments with banks.
The Assessing Officer denied the deduction of ₹23,25,751, resulting in assessment of an equivalent amount as taxable income against the nil income returned by the society.
Assessing Officer Relies on Totgars
In the assessment order dated 6 April 2021, the Assessing Officer relied on the Supreme Court’s judgment in Totgars Co-operative Sale Society Ltd. v. ITO, (2010) 188 Taxman 282 (SC) to disallow the claim under Section 80P.
The assessee challenged the disallowance before the CIT(A)/NFAC. However, the first appellate authority dismissed the appeal in the assessee’s absence.
The society thereafter approached the Tribunal, contesting the denial of deduction on interest earned from deposits with other co-operative banks.
There was a delay in filing the Tribunal appeal. After examining the condonation application supported by an affidavit, the Tribunal accepted that the society had been prevented by sufficient and reasonable cause from filing within the prescribed period. The delay was accordingly condoned.
Tribunal Examines Both Clauses of Section 80P
The Tribunal considered the claim in the context of Section 80P(2)(a)(i), dealing with income attributable to the business of providing credit facilities to members, and Section 80P(2)(d), concerning qualifying interest income from investments with other co-operative societies.
It observed that the issues had already been considered in several coordinate Bench decisions.
The principal decision followed was Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha v. ITO, ITA No. 1858/PUN/2024, dated 29 October 2024.
That decision had examined interest earned by a credit co-operative society from deposits with co-operative societies, co-operative banks, scheduled banks and nationalised banks. The Tribunal reproduced the relevant findings and applied the coordinate Bench’s reasoning to the present appeal.
Earlier Pune Bench Decisions Support the Claim
In Chandraprabhu, the first appellate authority had allowed deduction on interest from co-operative societies and co-operative banks but denied relief on interest from other scheduled and nationalised banks.
The Tribunal had allowed the society’s appeal by following earlier decisions, including Sharad Nagari Sahakari Patsanstha Maryadit.
The quoted reasoning in Sharad Nagari referred to The Vaveru Co-operative Rural Bank Ltd. v. CCIT, (2017) 396 ITR 371 (AP) in support of deduction on interest derived from nationalised and other banks.
The Tribunal also reproduced the discussion concerning Yogiraj Nagari Sahakari Patsanstha Maryadit v. ITO, ITA No. 1152/PUN/2023, dated 6 June 2024. That decision had, in turn, followed The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society v. ITO, dated 27 May 2022.
These authorities formed the basis for accepting the deduction claim rather than sustaining the lower authorities’ disallowance.
Deduction Allowed Under Section 80P(2)(a)(i)
Following Chandraprabhu, the Tribunal held that the assessee credit co-operative society was entitled to deduction under Section 80P(2)(a)(i) on interest earned from investments with nationalised and co-operative banks.
It consequently set aside the CIT(A)/NFAC’s order and directed the Assessing Officer to allow the entire deduction of ₹23,25,751.
Although the appeal ground specifically referred to deposits with co-operative banks, the Tribunal’s concluding findings and operative direction expressly covered both nationalised and co-operative banks.
The appeal was therefore allowed on merits, with a direct instruction to grant the deduction.
Significance of the Decision
The decision supports the assessee’s position that interest earned by a credit co-operative society from bank investments can qualify for deduction under Section 80P(2)(a)(i) in the circumstances considered by the Pune Bench.
A distinction in reporting this ruling is necessary. While the Tribunal discussed precedents referring to both Sections 80P(2)(a)(i) and 80P(2)(d), its operative relief in the present case was expressly granted under Section 80P(2)(a)(i). The order should therefore not be presented as holding that interest from a nationalised bank qualifies under Section 80P(2)(d).
Further, although the Assessing Officer relied on Totgars, the Tribunal did not undertake a detailed independent examination of that Supreme Court judgment. It resolved the dispute by following the cited coordinate Bench decisions.
The concrete outcome is that the society’s entire claim of ₹23,25,751 was allowed under Section 80P(2)(a)(i), including interest from investments with nationalised and co-operative banks.
List of Cases Discussed:
1. Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha Vs ITO (ITAT Pune); ITA No. 1858/PUN/2024; 29/10/2024. Followed. The coordinate Bench considered deduction on interest earned from deposits with co-operative societies, co-operative banks, scheduled banks and nationalised banks.
2. Yogiraj Nagari Sahakari Patsanstha Maryadit Vs ITO (ITAT Pune); ITA No. 1152/PUN/2023; 06/06/2024. Relied upon in the quoted Chandraprabhu decision. The Tribunal had followed an earlier coordinate Bench ruling while allowing deduction on bank interest.
3. The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society Vs ITO (ITAT); ITA No. 84/PAN/2018; 27/05/2022. Followed in Yogiraj Nagari and reproduced in the Chandraprabhu reasoning.
4. Sharad Nagari Sahakari Patsanstha Maryadit (ITAT Pune). Relied upon in Chandraprabhu for allowing deduction on interest from nationalised and other banks.
5. The Vaveru Co-operative Rural Bank Ltd. Vs CCIT (Andhra Pradesh High Court); (2017) 396 ITR 371. Relied upon in the quoted Sharad Nagari reasoning concerning interest earned on investments with nationalised and other banks.
6. Totgars Co-operative Sale Society Ltd. Vs ITO (Supreme Court); (2010) 188 Taxman 282 (SC). Relied upon by the Assessing Officer to deny the deduction. The Tribunal resolved the appeal by following coordinate Bench decisions.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 06.03.2026 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19.
2. There is delay in filing of the present appeal. After going through the application for condonation of delay, we are satisfied with the reasons mentioned in the application for condonation of delay duly supported by an affidavit that the applicant was prevented by sufficient & reasonable cause for not filing the appeal within the prescribed time limit. After hearing Ld. DR, we condone the delay and proceed to adjudicate the appeal.
3. The appellant has raised the following grounds of appeal :-
“1. On the facts and circumstances of the case and in law the CIT(A), NFAC erred in confirming the action of the AO of denying deduction under section 80P in respect interest earned by the appellant society on deposits with other co-operative banks, not accepting the submission of the appellant in this respect.
The appellant prays that the AO be directed to delete the addition.
The appellant craves leave to add, amend, alter, modify, delete or add a new ground of appeal before or at the time of hearing.”
4. Facts of the case, in brief, are that the assessee is a credit cooperative society engaged in the activity of providing credit facilities to its members and also accepting deposits from them and has furnished its return of income on 26.09.2018 by declaring income of Rs.Nil after claiming deduction u/s 80P of the IT Act. The case was selected for scrutiny and notices u/s 143(2) and 142(1) respectively were issued to the assessee. After considering the reply and submissions of the assessee, the Assessing Officer vide order dated 06.04.2021 by placing reliance on judgement of Hon’ble Supreme Court passed in the case of Totgars Cooperative Sales Society Ltd. vs. ITO [2010] 188 Taxman 282 (SC) completed the assessment proceedings u/s 143(3) r.w.s. 144B r.w.s. 143(3B) of the IT Act by determining the income of the assessee at Rs.23,25,751/- as against the income of Rs.Nil returned by the assessee. The above assessed income includes addition of Rs.23,25,751/- being disallowance u/s 80P of the IT Act.
5. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A)/NFAC. Since the assessee remained absent, Ld. CIT(A)/NFAC dismissed the appeal.
6. It is the above order against which the assessee is in appeal before this Tribunal.
7. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the issue of deduction u/s 80P(2)(a)(i) with regard to income attributable to business of providing credit facility & the issue of deduction u/s 80P(2)(d) with regard to interest income from other cooperative banks being cooperative society is no more res integra in the light of various decisions of coordinate benches of this Tribunal including the case of Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha vs ITO ITA No No.1858/PUN/2024 order dated 29-10-2024 wherein the Tribunal allowed the deduction u/s 80P(2)(a(i) & 80P2(d) of the IT Act by observing as under :-
“9. We have heard the Ld. Representative of the parties and perused the records. We find that the impugned issue is no more res-integra by virtue of catena of decisions passed by the Co-ordinate Benches of the Tribunal and the Hon’ble High Courts. Admittedly, the facts are not in dispute. During the relevant AY 2018-19 it is noticed that the assessee has earned interest income amounting to Rs.45,81,847/- from investments/deposits made in Co-operative Societies/Co-operative banks/Scheduled banks/ Nationalized banks which it claimed as deduction u/s 80P(2)(a)(i)/ 80P(2)(d) of the Act. The Ld. CIT(A)/NFAC has allowed the claim of the assessee with respect to the interest income from investments/deposits made in Co-operative Societies and Co-operative banks amounting to Rs.7,62,162/- and disallowed the assessee’s claim of deduction with respect to the interest income from investments/deposits made in other Scheduled / Nationalized banks. The Pune Bench of the Tribunal in the case of Sharad Nagari Sahakari Patsanstha Maryadit (supra) has decided the impugned issue in favour of the assessee under the similar set of facts by holding as under :
“3. Even the latter limb of interest income of Rs.96,000/- derived from investments made in nationalized/other bank(s), the Revenue could hardly dispute that case law The Vaveru Cooperative Rural Bank Ltd., vs. CCIT [2017] 396 ITR 371 (AP) that interest income(s) derived from such nationalized/other bank(s) also qualifies for sec.80P deduction and thereby declined it’s very stand. Faced with this situation, I adopt the foregoing detailed discussion mutatis mutandis to accept the assessee’s sec.80P(2)(a)(i)/80P(2)(d) deduction claim(s) in very terms. Ordered accordingly.”
10. Identical issue was considered and decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Yogiraj Nagari Sahakari Patsanstha Maryadit Vs. ITO in ITA No. 1152/PUN/2023, dated 06.06.2024 wherein the Tribunal in turn relying on the decision of the Co- ordinate Bench in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018, dated 27.05.2022 held as under :
“9. Following the decision of the Co-ordinate Bench of this Tribunal (supra), we are of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule banks qualify for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Thus, we direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from other cooperative banks. The grounds of appeal filed by the assessee stands allowed.”
11. Respectfully following the decision(s) (supra) of the Co-ordinate Bench of the Tribunal and in the absence of any material brought on record to enable us to take a different view, we set aside the order of the Ld. CIT(A)/NFAC on the issue and allow the appeal of assessee.”
8. Respectfully following the above decision passed in the case of Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha vs ITO ITA No No.1858/PUN/2024 order dated 29-10-2024, we are of the considered opinion that the assessee credit cooperative society is entitled to claim deduction u/s 80P(2)(a)(i) of the IT Act with regard to interest income earned from its investments with other nationalised & cooperative banks.
9. Considering the totality of the facts of the case & in view of our above discussion, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and direct the Assessing Officer to allow deduction of Rs.23,25,751/- claimed by the assessee u/s 80P(2)(a)(i) of the IT Act with regard to interest income earned from its investments with other nationalized & co-operative banks. Accordingly, the grounds raised by the assessee credit co-operative society are allowed.
10. In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 12th day of October, 2026.
