Case Law Details
Narayandas Ramdas Sevak Sahakari Patsanstha Maryadit Vs ITO (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeals for Assessment Years 2018-19 and 2020-21 against separate orders of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre. The assessee, a co-operative society engaged in accepting deposits and granting credit to its members, had claimed deduction under Section 80P of the Income-tax Act in respect of interest and dividend income earned from investments. In Assessment Year 2018-19, the Assessing Officer, while completing assessment under Section 143(3) read with Sections 143(3A) and 143(3B), disallowed deduction on interest income of ₹3,60,122 and dividend income of ₹2,10,000. The CIT(A) allowed deduction on interest earned from co-operative societies, co-operative banks and members under Sections 80P(2)(d) and 80P(2)(a)(i), but upheld the disallowance of deduction on dividend income. Similar issues arose for Assessment Year 2020-21 involving interest of ₹10,86,523 and dividend of ₹4,14,002.
The Tribunal noted that the only surviving issue was the allowability of deduction under Section 80P(2)(d) in respect of dividend received from investments in co-operative banks. It observed that the issue was covered in favour of the assessee by earlier decisions of the Pune Bench, including Yashwant Nagari Sahakari Patsanstha Maryadit v. ITO and Kolhapur Z P K S P S M v. ITO, wherein it had been held that dividend income earned from co-operative banks qualifies for deduction under Section 80P(2)(d). Referring to the reasoning adopted in Kolhapur Z P K S P S M v. ITO, the Tribunal noted that Section 80P(2)(d) allows deduction of interest and dividend earned by a co-operative society from investments with another co-operative society and that co-operative banks are basically co-operative societies. Respectfully following the coordinate bench decisions, the Tribunal held that the assessee was entitled to deduction under Section 80P(2)(d) on dividend income received from co-operative banks. As the CIT(A) had already decided the issue relating to deduction under Section 80P(2)(a)(i) on interest income from co-operative banks in favour of the assessee, no further adjudication was required on that aspect. Accordingly, the Tribunal allowed the appeals for both assessment years.
Cases Discussed:
- Kolhapur Z P K S P S M v. ITO, ITA No. 153/PUN/2025, order dated 25.04.2025 (A.Y. 2018-19)
- Yashwant Nagari Sahakari Patsanstha Maryadit v. ITO, ITA No. 644/PUN/2024, order dated 04.06.2024 (A.Y. 2017-18)
- Kolhapur District Central Co-operative Banks Kanista Sevakanchi Sahakar Pat Sanstha Ltd. v. ITO, ITA No. 1365/PUN/2023, order dated 01.01.2024
FULL TEXT OF THE ORDER OF ITAT PUNE
The above two appeals filed by the assessee are directed against the separate orders dated 07.10.2025 and 10.09.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment years 2018-19 and 2020-21. Since identical grounds have been raised by the assessee in both the appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.
2. First we take up ITA No.2861/PUN/2025 for assessment year 2018-19. Facts of the case, in brief, are that the assessee is a Co-operative Society engaged in the business of accepting deposits and granting credit to its members. The assessee was utilizing surplus funds in investments to earn income. The assessee filed its return of income on 23.07.2018 declaring Nil income. The case of the assessee was selected for limited scrutiny assessment on the following issues:
S.No. Issues
i. Investments/Advances/Loans
ii. Deduction from total income under Chapter VI-A
3. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 17.03.2021 wherein he disallowed an amount of Rs.3,60,122/- out of interest income and Rs.2,10,000/- as dividend income by rejecting the claim of deduction u/s 80P of the Act.
4. So far as the interest income earned by the assessee from the institutions other than its members is concerned, the Ld. CIT(A) / NFAC allowed the same. So far as the dividend income received by the assessee is concerned, he upheld the action of the Assessing Officer. The relevant observations of the Ld. CIT(A) / NFAC at para 7.2 and 7.3 of the order read as under:
“7.2 Hence, respectfully following the decision of the Hon’ble ITATs discussed above, the AO is directed to allow the deduction u/s.80P(2)(d) of the Income Tax Act, 1961 to the extent of interest earned from the Co-operative Societies and Cooperative Banks. For the interest received from members of the society, the AO is directed to allow deduction u/s.80P(2)(a)(i) of the act.
7.3 he dividend income received does not fall under the legal interpretations of the case laws and the statutory provisions. Therefore the additions made on dividend income earned to the extent of Rs.2,10,000/- by the Assessing Officer is upheld.”
5. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:
1. Under the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in holding that, the assessee is not eligible for deduction u/s 80P(2)(a)(i) with respect to Interest on deposits held in Co-operative Banks of Rs.3,60,122/- and Dividend earned on Investment in Co-operative Banks shares of Rs.2,10,000/-.
2. Under the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in holding that the dividend of Rs.2,10,000/- earned on investment in co-operative banks shares is not eligible for deduction u/s 80P(2)(d).
3. The appellant craves the permission to add, amend, modify, revise, substitute, delete or alter any/all of the above grounds of appeal if deemed necessary at the time of hearing of the appeal.
6. Similar grounds have been raised by the assessee in ITA No.2862/PUN/2025 which read as under:
1. Under the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in holding that, the assessee is not eligible for deduction u/s 80P(2)(a)(i) with respect to Interest on deposits held in Co-operative Banks of Rs.10,86,523/- and Dividend earned an investment in Co-operative Banks shares of Rs.4,14,002/-.
2. Under the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in holding that the dividend of Rs.4,14,002/- earned on investment in co-operative banks shares is not eligible for deduction u/s 80P(2)(d).
3. The appellant craves the permission to add, amend, modify, revise, substitute, delete or alter any/ell of the above grounds of appeal if deemed necessary at the time of hearing of the appeal.
7. After hearing both the sides, we find the only issue to be decided in the present appeal is regarding the allowability of deduction u/s 80P(2)(d) on account of dividend received on investments made with the Co-operative Banks. We find the issue stands covered in favour of the assessee by the decisions of the Pune Bench of the Tribunal in the case of Yashwant Nagari Sahakari Patsanstha Maryadit vs. ITO vide ITA No.644/PUN/2024 order dated 04.06.2024 for assessment year 2017-18 and in the case of Kolhapur Z P K S P S M vs. ITO vide ITA No.153/PUN/2025 order dated 25.04.2025 for assessment year 2018-19 where the Tribunal has held that dividend income earned from the Co-operative Banks is eligible for deduction u/s 80P(2)(d) of the Act.
8. We find the Co-ordinate Bench of the Tribunal in the case of Kolhapur Z P K S P S M vs. ITO (supra) at para 5 of the order has held as under:
“5. We have heard rival contentions and perused the record placed before us. The assessee has been denied deduction u/s 80P(2)(a)(i) of Rs. 9,14,916/- which includes interest and dividend from Co-operative Banks and Form fees. The alternate ground is that the assessee is entitled for its deduction u/s 80P(2)(d) of the Act for the interest and dividends earned from Co-operative Banks. From the perusal of written submissions filed by the assessee out of the alleged sum of Rs. 9,14,916/-, Rs. 9,12,640/- is interest and dividend received from Kolhapur District Central Co-operative Banks Kanista Sevakanchi Sahakar Pat Sanstha Ltd. and NKGSB Co-operative Bank. Section 80P(2)(d) provides that interest on dividend earned by the Cooperative Society from its investment from any other Cooperative Society is eligible for deduction u/s 80P(2)(d) the Act. We further notice that a consistent view has been taken in Plethora of decisions including that of Kolhapur District Central Co-operative Banks Kanista Sevakanchi Sahakar Pat Sanstha Ltd. vs. ITO in ITA No. 1365/PUN/2023 dated 01.01.2024 that since the co-operative Banks are basically Co-operative Societies, therefore even the interest and dividends earned from Co-operative Banks is eligible for deduction u/s 80P(2)(d) of the Act. Taking consistent view we are inclined to up hold that in the instant case interest and dividend from Co-operative Bank at Rs. 8,72,600/- and Rs. 40,040/- respectively total Rs. 9,12,640/- is to be allowed as deduction u/s 80P(2)(d) of the Act. Finding of Ld. CIT(A) is partly affirmed. Effective grounds of appeal raised by the assessee are partly allowed.”
9. Respectfully following the decision of the Co-ordinate Bench of the Tribunal cited (supra), we hold that the assessee is entitled to claim deduction in respect of dividend income from the Co-operative Banks. The grounds raised by the assessee are accordingly allowed.
10. So far as the allowability of deduction u/s 80P(2)(a)(i) in respect of interest income from the Co-operative Banks is concerned, we find the Ld. CIT(A) / NFAC has already decided the issue in favour of the assessee. Therefore, it does not require any adjudication.
11. In the result, the appeal filed by the assessee is allowed.
ITA No.2862/PUN/2025 (A.Y. 2020-21)
12. After hearing both sides we find the grounds raised by the assessee are identical to the grounds raised in assessment year 2018-19 vide ITA No.2861/PUN/2025. We have already decided the issue and allowed the appeal filed by the assessee. Following similar reasonings, we allow the grounds raised by the assessee.
13. In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open Court on 23rd January, 2026.
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