Case Law Details
Shirol Taluka Khajagi Vs ITO (ITAT Pune)
The Pune Bench (SMC) of the ITAT allowed the assessee’s appeal and held that interest income earned by a co-operative credit society from deposits with co-operative banks is fully eligible for deduction under section 80P(2)(d).
The assessee, a registered co-operative credit society providing credit facilities to its members, had earned interest of ₹1,52,829 from deposits placed with various co-operative banks, including the Kolhapur District Central Co-operative Bank and urban co-operative banks. The Assessing Officer treated such interest as income from other sources and denied deduction under section 80P, which was confirmed by the CIT(A).
The Tribunal examined the statutory scheme of section 80P(2)(d) and the definition of “co-operative society” under section 2(19). It reiterated that a co-operative bank is also a co-operative society, and therefore interest or dividend income earned from investments with co-operative banks squarely falls within the ambit of section 80P(2)(d).
Relying on a consistent line of judicial precedents, including decisions of the Madras High Court and multiple ITAT rulings, the Tribunal held that the issue is no longer res integra. Since the interest income was undisputedly earned from deposits with co-operative banks, the disallowance was unsustainable.
Accordingly, the ITAT set aside the order of the CIT(A) and directed the Assessing Officer to delete the addition, allowing the assessee’s claim for deduction under section 80P(2)(d). The appeal was allowed in full.
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 24.10.2025 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 28.03.2023 passed u/s.147 of the Act.
2. Assessee has raised solitary ground which reads as follows:
“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 cooperative banks, not accepting the submission of the appellant in this respect.
The appellant prays that the AO be directed to delete the addition.”
3. Facts in brief as emanating from the record are that the assessee is a registered Cooperative Society engaged in providing credit facilities to its members and has not filed the regular return of income for A.Y. 2015-16. Based on the information gathered by the department that the assessee society has deposited cash of Rs.1,42,19,413/- in ICICI bank Limited and Rs.2,27,020/- in Kolhapur District Central Cooperative Bank, the case of the assessee got reopened by way of issuance of notice u/s.148 of the Act after duly recording the reasons for reopening. In response to notice u/s.148 of the Act, the assessee furnished its return of income on 23.04.2022 declaring Nil income after claiming deduction u/s.80P(2)(a)(i) of the Act at Rs.5,69,127/-. Ld. Assessing Officer issued show cause notice proposing to make addition of Rs.1,77,955/- on account of interest received from Banks. Assessee society furnished its written submissions along with requisite documents. On due consideration of the reply, ld. Assessing Officer observed that the assessee received interest from Banks aggregating to Rs.1,52,829/- and earning of such interest arising from the investments kept with banks cannot be said to be attributable to the activities of the society, thus disallowed the said sum and added back to the total income of the assessee as income from other sources u/s.56 of the Act.
4. Aggrieved assessee preferred appeal before ld.CIT(A) and the ld.CIT(A) upheld the action of the AO in disallowing the interest earned from Cooperative Banks at Rs.1,52,829/-. Now the assessee is in appeal before this Tribunal assailing the impugned order.
5. I have heard the rival contentions and perused the record placed before me. The short issue for my consideration is whether the interest amount of Rs.1,52,829/- earned by the assessee out of the deposits kept with Cooperative Banks is eligible for deduction u/s.80P of the Act.
6. Before me, ld. Counsel drew my attention to the various decisions filed in the paper book allowing the interest earned out of the deposits kept with Cooperative banks u/s.80P(2)(d) of the Act. He submitted that the assessee’s case is squarely covered by plethora of decisions passed by this Tribunal on this very issue and therefore prayed for deleting the disallowance. On the other hand, ld. Departmental Representative supported the orders of the lower authorities.
7. 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. I note that page 7 of the assessment order mentions that the assessee derived interest income from deposits kept with Kolhapur District Central Cooperative Bank Limited, Aman Sahakari Bank, S.S.S. Alase Kurundwad Urban Cooperative Bank respectively.
8. 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. In light of the above, interest income of Rs.1,52,829/- earned from deposits with other co operative bank u/s.80P(2)(d) of the Act deserves to be allowed. I therefore set aside the impugned order passed by the ld.CIT(A) and direct the Assessing Officer to delete the addition made towards interest income. The solitary ground raised by the assessee is thus allowed.
9. In the result, the appeal of the assessee is allowed.
Order pronounced on this 27th day of January, 2026.
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