Dapodi Workshop Employees Co-operative Credit Society Limited Vs ITO (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal for Assessment Year 2020-21 after condoning the delay in filing. The assessee, a co-operative credit society registered under the Maharashtra State Co-operative Societies Act and engaged in providing credit facilities to its members, had filed its return declaring gross total income of ₹39,43,019 and nil taxable income after claiming deduction under Section 80P of the Income-tax Act. During assessment, the Assessing Officer observed that the assessee had earned interest income from PDCC Bank and other commercial banks and held that such interest, being earned from deposits, was not eligible for deduction under Section 80P(2)(a)(i). The Assessing Officer also denied deduction under Section 80P(2)(d) by relying on the Karnataka High Court decision in PCIT v. Totagars Co-operative Sales Society. The Commissioner of Income Tax (Appeals) upheld the assessment order.
Before the Tribunal, it was submitted that under the Maharashtra State Co-operative Societies Act, the assessee was required to maintain fixed deposits and that the issue of deduction under Section 80P(2)(a)(i) on interest earned from co-operative banks had already been decided in favour of assessees by various decisions of the Pune Bench. The Tribunal referred to the judgment of the Andhra Pradesh and Telangana High Court in Vavveru Co-operative Rural Bank Ltd., which distinguished the Supreme Court’s decision in Totgar’s Co-operative Sale Society Ltd. and held that interest earned from fixed deposits made out of the society’s own business funds retained its character as business income attributable to the activities specified in Section 80P(2)(a). The Tribunal observed that no contrary decision of the jurisdictional High Court had been brought to its notice and therefore treated the Andhra Pradesh and Telangana High Court decision as a binding precedent. It also relied on the Pune Bench decisions in Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. and Yashwant Nagari Sahakari Patsanstha Maryadit, which held that interest earned on deposits with co-operative banks qualified for deduction under Section 80P(2)(a)(i). Respectfully following these judicial precedents, the Tribunal directed the Assessing Officer to allow deduction under Section 80P(2)(a)(i) on the interest amount of ₹39,43,019 and allowed the appeal.
