Datta Nagari Sahakari Pat Sanstha Vs ITO (ITAT Pune)
Pune Tribunal Follows Consistent View – Deduction u/s 80P Restored to Credit Society- Interest on Deposits with Co-op Banks Eligible u/s 80P – ITAT Pune Grants Full Relief
Assessee, a co-operative credit society registered under the Maharashtra Co-operative Societies Act, engaged in providing credit facilities to its members, claimed deduction u/s 80P on interest income earned from deposits with co-operative banks. For AY 2018-19, AO disallowed deduction of ₹1,56,70,940 earned from such deposits, treating it as “income from other sources” taxable u/s 56. Reliance was placed on Supreme Court decision in Totagar’s Co-operative Sale Society Ltd. & the insertion of Section 80P(4) to argue that interest from co-operative banks does not qualify for deduction.
CIT(A)/NFAC upheld the disallowance, relying on Mavilayi Service Co-op Bank Ltd. v. CIT (SC), PCIT v. Totagar’s Co-op Sale Society (Kar HC), Katlary Kariyana (Guj HC), & Secunderabad Club v. CIT (SC), holding that surplus funds invested in co-operative banks lose the character of mutuality.
Before Tribunal, Assessee argued that deposits with co-operative banks were statutory & operational requirements, hence attributable to its business of providing credit to members, qualifying for deduction u/s 80P(2)(a)(i). Alternatively, deduction u/s 80P(2)(d) was claimed. It relied on numerous precedents of Pune Tribunal & other courts allowing similar claims, including its own earlier AY 2015-16 (ITA No.981/PUN/2019), where Tribunal had accepted the deduction.
