Sagara Town House Building Cooperative Society Ltd. Vs ITO (ITAT Bangalore)
The ITAT Bangalore held that eligibility for deduction under section 80P cannot be denied merely based on the name or selective reading of objects of a co-operative society; the actual activities and full scope of byelaws must be examined.
In this case, the AO denied deduction under section 80P(2)(a)(i) on the ground that the society’s primary object was land-related activities, and not providing credit facilities. The CIT(A) upheld this view.
However, the Tribunal noted that the byelaws (specifically clause permitting loans to members) clearly showed that the society was also engaged in providing credit facilities. It held that the authorities erred in relying only on the name and selective clauses without examining the byelaws in entirety.
Further, the Tribunal held that once the income is derived from providing credit facilities to members, the entire income—including additions such as provisions disallowed by the AO—would qualify for deduction under section 80P.
Accordingly, the Tribunal directed that deduction under section 80P be allowed on the enhanced income as well, and deleted the additions made by denying such deduction. The appeal of the assessee was fully allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal has been instituted by the assessee against the order of the Ld. CIT(A) passed u/s 250 of the Act dated 07.08.2025.
