Chhatrapati Nagri Sahkari Patsanstha M Vs ITO (ITAT Pune)
Interest from Private Banks Also Eligible for 80P Deduction; Totgars Distinguished – ITAT Pune
The Pune SMC Bench of the ITAT, in Chhatrapati Nagri Sahkari Patsanstha Maryadit vs. ITO, Ward-1, Jalna (ITA No.1919/PUN/2025, AY 2022-23, order dated 18-12-2025), allowed the appeal of the co-operative credit society and held that interest income earned from deposits with ICICI Bank & HDFC Bank also qualifies for deduction u/s 80P(2)(a)(i).
The Tribunal noted that the Assessee is a credit co-operative society engaged in providing credit facilities to its members and had temporarily parked surplus funds with private banks due to lack of immediate loan demand. The AO and CIT(A)/NFAC denied deduction on such interest of ₹19.73 lakh, treating it as “income from other sources” and holding that deduction, if any, could be claimed only u/s 80P(2)(d).
ITAT rejected this approach and held that the character of income does not change merely because surplus business funds are prudently parked with banks, even if they are private banks. Relying heavily on the AP & Telangana HC decision in Vavveru Co-operative Rural Bank Ltd. (396 ITR 371) and the Kerala HC decision in Pr.CIT vs. Sahyadri Co-operative Credit Society Ltd. (2024), the Tribunal distinguished the Supreme Court ruling in Totgars, noting that Totgars dealt with retention of members’ funds and not surplus business profits.
It was held that since the interest income was attributable to the core business of providing credit facilities, and the statute uses the wider expression “attributable to”, deduction u/s 80P(2)(a)(i) could not be denied. The AO was accordingly directed to allow full deduction u/s 80P, and the appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the Assessee against the order of ld. Commissioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Income Tax Act, 1961 for A.Y.2022-23 dated 07.07.2025 emanating from assessment order u/s143(3) read with section 144B of the Act, dated 21.03.2024. The Assessee has raised the following grounds of appeal :
“1. The Learned A.O. has erred is not appreciating that the appellant being Co-Operative Societies Act with engaged into business of providing credit facility to its members was eligible to claim to claim deduction under section 80(P)(2)(a) (i) of the Act in respect entire business income and accordingly, the disallowance was completely void which needs to be quashed.
2. Interest Income is added Rs.19,73,718/-. The income of interest is not acceptable by A.O.
3. The appellant craves leave to add, alter, amend or delete any of the above ground of appeal.”
Findings & Analysis :
