Case Law Details
Amrapur Vikas Seva Vs ITO (ITAT Pune)
The Pune Bench (SMC) of the ITAT held that interest income earned by a co-operative credit society from investments with co-operative banks / co-operative societies is eligible for deduction under section 80P(2)(d), and remanded the matter to the Assessing Officer for limited factual verification.
The assessee, a primary agricultural credit society, had claimed deduction u/s 80P(2)(d) on interest income earned from investments with the Kolhapur District Central Co-operative Bank and other co-operative entities. The Assessing Officer disallowed the deduction on the presumption that part of the interest was earned from “other banks”, and the CIT(A) confirmed the disallowance.
Before the Tribunal, it was contended that proper bifurcation of interest income was already available, showing that interest was largely earned from co-operative banks/societies, which squarely qualifies for deduction under section 80P(2)(d). Reliance was placed on binding precedents including Mavilayi Service Co-op Bank Ltd. (SC), Quepem Urban Co-op Credit Society Ltd. (Bom HC), and consistent ITAT rulings.
The Tribunal reiterated that the term “co-operative society” in section 80P(2)(d) includes co-operative banks, and therefore interest earned from investments with such entities is eligible for deduction. Since the Assessing Officer had not properly verified the bifurcation of interest income, the matter was remanded back for limited verification, with a direction to allow the deduction in accordance with law after due examination.
Accordingly, the appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to the Assessment Year 2015-16 is directed against the order dated 25.07.2025 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 13.03.2023 passed u/s.147 r.w.s.144 r.w.s.144B of the Act.
2. When the case called for, none appeared on behalf of the assessee despite due service of notice of hearing. Even on the previous dates of hearing fixed on 03.09.2025, 25.09.2025 and 27.10.2025 there is no representation from the side of assessee. Today also, there is no one to represent the assessee. I therefore proceed to adjudicate the appeal with the assistance of ld. Departmental Representative and available material on record.
3. Facts in brief as emanating from the record are that the assessee is a Primary Credit Society registered under The Maharashtra State Cooperative Act, 1960 and is engaged in providing Agricultural loans to its Members. Its main source of income is interest earned on loans given to Members and interest on deposits made with Cooperative Banks and other Cooperative Societies. Return of income for A.Y. 2015-16 has been furnished declaring Nil income after claiming deduction u/s.80P of the Act at Rs.2,67,412/-. Case selected for scrutiny and statutory notices u/s.148/142(1) of the Act were served and assessee furnished the requisite information. During the course of assessment proceedings, ld. Assessing Officer observed that assessee has invested with Kolhapur District Central Cooperative Bank and with other Banks and has earned interest of Rs.6,18,874/- from the investments so made. In the absence of furnishing of any details by the assessee, ld. Assessing Officer disallowed the deduction claimed u/s.80P(2)(d) of the Act on account of interest earned from investments made with other Banks at Rs.2,67,412/-.
4. Aggrieved assessee filed appeal before ld.CIT(A) and ld.CIT(A) confirmed the disallowance made by the Assessing Officer. Now the assessee is in appeal before this Tribunal.
5. I have heard the ld. Departmental Representative and perused the record placed before me. The short issue for my consideration is whether the authorities are justified in disallowing the deduction u/s.80P(2)(d) of the Act. On perusal of the grounds of appeal, assessee claimed that it has submitted documentary evidence showing the exact bifurcation of interest income of Rs.11,83,347/- and ld. Assessing Officer despite the availability of factual data has incorrectly presumed Rs.6,18,874/- as proportionate interest income from other banks. Actually, Rs.3.00 lakhs pertains to reversal of Interest Provision and interest earned from Investments with Kolhapur District Central Cooperative Bank at Rs.8,06,158/- and interest on Fixed Deposits with other banks at Rs.77,189/-. It is therefore claimed that entire interest income from Cooperative Banks is eligible for deduction u/s.80P(2)(d) of the Act in light of Judgment of Hon’ble Apex Court in the case of Mavilayi Service Coop. Bank Ltd. Vs. CIT (2021) 1 TMI 488 (SC), decision of ITAT, Pune in the case of Vaibhav Nagari Sahakari Patsanstha Maryadit Vs. ITO and Judgment of Hon’ble Bombay High Court in the case of Quepem Urban Coop. Credit Society Ltd. (2021) 5 TMI 406 (Bom HC).
6. There is no dispute that the assessee is a registered cooperative society and is providing credit facilities to its Members and derived interest income on investments kept with Cooperative Societies/Banks. The provisions of section 80P(2)(d) of the Act, provides for deduction towards any income by way of interest or dividend derived by a co-operative society from its investment with any other co-operative society. The term Cooperative Society has been defined u/s. 2(19) of the Act, which includes a co-operative society registered under the Cooperative Societies Act, 1912 or under any other law for the time being in force in any state for the registration of co operative societies. Perusal of the aforesaid definition would make it clear that cooperative Society means a cooperative society registered under Cooperative Societies Act, 1912 as defined under the Act, be it a co-operative society carrying on banking business or cooperative society carrying on the other business or a cooperative bank. Interest/dividend income earned from a cooperative society from its investment with other cooperative societies, whether such society is cooperative bank or not is to be considered for allowing deduction u/s.80P(2)(d) of the Act.
7. This issue is no longer res integra by virtue of catena of decisions passed by this Tribunal on this very issue and the assessee’s case is squarely covered in its favour. In the case of Thorapadi Urban Co- op Credit Society Ltd & Others vs ITO in W.P. Nos. 11172 and others, judgment dated 10.10.2023 which the assessee relied upon, the Hon’ble High Court of Madras following the decision of Division Bench of Hon’ble High Court of Madras in the case of CIT vs The Salem Agricultural Producers Co-operative Marketing Society Ltd in Tax Case Appeal No. 5 of 2015 held that a cooperative society is entitled to avail the benefit u/s.80P(2)(d) of the Act.
8. However, since the assessee claims that it has provided bifurcation of the interest income earned by the assessee from the investments made with Cooperative Banks/Societies and the same has not been considered by the ld. Jurisdictional Assessing Officer, therefore, in light of the observations made hereinabove, the issue is remitted back to the file of ld. Jurisdictional Assessing Officer for the limited purpose of verification of the interest income earned from Cooperative Banks. Needless to mention that ld. JAO in the set aside proceedings shall afford reasonable opportunity to the assessee and on due verification of the details, shall allow the deduction u/s.80P(2)(d) of the Act in accordance with law. Impugned order is set aside the grounds raised by the assessee are allowed for statistical purposes.
9. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on this 27th day of January, 2026.
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