Gajanan Nagari Sahakari Pat Sanstha Ltd. Vs ITO (ITAT Pune)
Section 80P Relief Survives: Co-operative Bank Interest Gets an Alternative Route
Denial of deduction under Section 80P(2)(a)(i) did not end the matter for a co-operative credit society earning interest from deposits with co-operative banks. In Shri Gajanan Nagari Sahakari Pat Sanstha Ltd. v. ITO, the Pune ITAT accepted the alternative claim under Section 80P(2)(d). However, it expressly restricted the total aggregate deduction to the amount originally claimed in the return, making this limitation an important part of the relief granted.
Background: Deduction of ₹76.54 Lakh Denied
The assessee was a co-operative credit society registered under the Maharashtra Co-operative Societies Act, 1961, engaged in accepting deposits from members and providing credit facilities to them.
For Assessment Year 2018-19, it filed its return on 29 September 2018, declaring total income of ₹3,38,810, after claiming a deduction of ₹76,53,839 under Section 80P(2)(a)(i).
The case was selected for scrutiny on issues concerning expenditure of a personal nature, investments, advances and loans, and deductions under Chapter VI-A. During assessment, the society furnished details of its members and disclosed interest income of ₹93,74,627 from deposits with co-operative banks.
The Assessing Officer examined the submissions and activities but held that the society was not eligible for the deduction claimed under Section 80P(2)(a)(i). The entire deduction of ₹76,53,839 was denied, and total income was assessed at ₹79,92,650.
The order records that the Assessing Officer did not make a separate disallowance of the interest income from co-operative bank deposits.
The Alternative Claim Under Section 80P(2)(d)
Before the CIT(A), the assessee pursued its claim under Section 80P(2)(a)(i) and the alternative claim under Section 80P(2)(d). However, the first appellate authority confirmed the assessment and dismissed the appeal.
Before the Tribunal, the assessee argued that the interest earned from co-operative banks qualified for deduction and that the alternative statutory claim had also been wrongly rejected.
The distinction between the two provisions was material. The original claim concerned deduction for the society’s business of providing credit facilities to members. The alternative claim concerned interest income from investments with other co-operative societies, with the assessee relying on the status of the deposit-taking co-operative banks as co-operative societies.
The Tribunal ultimately granted relief through Section 80P(2)(d).
Earlier Pune Decisions Support the Claim
The Bench relied on the coordinate Bench decision in ITO v. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit, in ITA No.2375/PUN/2025 and C.O. No.49/PUN/2025. TaxGuru’s published case page confirms that the Pune Bench upheld deduction under Section 80P(2)(d) on interest from co-operative banks.
That decision had considered the eligibility of a primary co-operative credit society for deduction on interest earned from investments with co-operative banks which were also co-operative societies registered under the Maharashtra legislation.
The earlier order referred to several supporting Pune Tribunal decisions, including Gurudatta Gramin Bigersheti, ITA No.502/PUN/2025, order dated 28.07.2025, Pune Jila Madhyawarti Sahkari Bank Sevakanchi Sahkari Patsanstha Maryadit, ITA No.1086/PUN/2025, order dated 23.06.2025, and Sharad Chandra Nagari Sahakari Patsanstha Maryadit, ITA No.1041/PUN/2025, order dated 04.06.2025.
Following this line of authority, the present Bench accepted the society’s alternative claim.
Credit Society and Co-operative Bank: The Distinction Matters
The precedent reproduced by the Tribunal also discussed the Bombay High Court’s decision in Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., and the Supreme Court’s decision dated 20 April 2023 in Civil Appeal No.8719 of 2022.
The Supreme Court had emphasised that merely providing credit to members does not make a credit society a co-operative bank. Banking services offered to the public at large differ from lending restricted to a society’s own members.
The quoted decision also referred to Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161 / 279 Taxman 75 / 431 ITR 1 / [2021] 7 SCC 90, while explaining why the exclusion under Section 80P(4) did not apply to the credit society concerned.
This discussion supported the distinction between a claimant credit society and a co-operative bank. Nevertheless, the particular question of deduction on deposit interest was addressed through the Tribunal’s Section 80P(2)(d) precedents.
Relief Granted, but With an Express Ceiling
The Tribunal set aside the CIT(A)’s order and directed the Assessing Officer to allow deduction under Section 80P(2)(d) for interest income on deposits with co-operative banks.
Crucially, it imposed a qualification: the total aggregate claim must remain restricted to the original deduction under Section 80P(2)(a)(i) claimed in the return.
Accordingly, although the disclosed interest income was ₹93,74,627, the order does not grant an unrestricted deduction of that entire amount. The aggregate deduction is capped at ₹76,53,839, subject to implementation of the Tribunal’s direction.
The assessee’s appeal was allowed.
Author’s Comments
The decision demonstrates the importance of pleading an alternative deduction provision. Rejection of the original claim need not defeat relief where the income qualifies under another applicable clause and the claim is properly presented.
At the same time, the ruling must be reported with its express limitation. Eligibility of the interest income and the amount of deduction actually permitted are separate aspects: the Tribunal accepted Section 80P(2)(d), but confined aggregate relief to the amount originally claimed.
The Supreme Court discussion reproduced in the order concerns the distinction between credit societies and co-operative banks under Section 80P(4). It should not be presented as a direct Supreme Court ruling settling every dispute about co-operative bank deposit interest under Section 80P(2)(d).
Cases Discussed
- ITO Ward-5, Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit, ITA No.2375/PUN/2025 & C.O. No.49/PUN/2025 (ITAT Pune) — Direct coordinate-Bench precedent reproduced and followed in the present order. It held that a primary credit co-operative society was eligible for deduction under Section 80P(2)(d) on interest income earned from investments with co-operative banks which were also co-operative societies.
- Gurudatta Gramin Bigersheti, ITA No.502/PUN/2025, order dated 28.07.2025 (ITAT Pune) — Cited in the reproduced coordinate-Bench decision as supporting Section 80P deduction. No exact TaxGuru judgment page was verified.
- Pune Jila Madhyawarti Sahkari Bank Sevakanchi Sahkari Patsanstha Maryadit, ITA No.1086/PUN/2025, order dated 23.06.2025 (ITAT Pune) — Cited as supporting authority. No exact TaxGuru judgment page was verified.
- Sharad Chandra Nagari Sahakari Patsanstha Maryadit, ITA No.1041/PUN/2025, order dated 04.06.2025 (ITAT Pune) — Cited as supporting authority. No exact TaxGuru judgment page was verified.
- PCIT-17, Mumbai Vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited, Civil Appeal No.8719/2022, order dated 20.04.2023 (Supreme Court) — The Supreme Court rejected the Revenue’s challenge and held that merely providing credit to members does not make a credit society a co-operative bank; Section 80P(4) therefore did not apply on the facts.
- Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., ITA No.933/2017, order dated 14.10.2019 (Bombay High Court) — Jurisdictional High Court decision referred to in the reproduced precedent and subsequently considered in the Supreme Court appeal.
- Quepem Urban Co-operative Credit Society Ltd. Vs. ACIT [2015] 58 taxmann.com 113 / 232 Taxman 510 / 377 ITR 272 (Bombay) — Bombay High Court authority relied upon in the Annasaheb Patil litigation on the distinction between a co-operative credit society and a co-operative bank.
- Mavilayi Service Co-operative Bank Ltd. Vs. CIT [2021] 123 taxmann.com 161 / 279 Taxman 75 / 431 ITR 1 / [2021] 7 SCC 90 (Supreme Court) — Supreme Court authority expressly referred to in the reproduced judgment concerning eligibility of qualifying credit societies under Section 80P and the operation of Section 80P(4).
FULL TEXT OF THE ORDER OF ITAT PUNE
The assessee has filed the appeal against the order of the CIT(A)/NFAC, Delhi passed u/sec 143(3) and u/sec 250 of the Income Tax Act. The assessee has raised the grounds of appeal challenging the action of the CIT(A) in denial of claim of deduction u/sec80P(2)(a)(i) of the Act made by the Assessing Officer and without prejudice alternate relief u/sec80P(2)(d) of the Act on interest income from cooperative banks.
2. The brief facts of the case are that, the assessee is a co-operative credit society registered under the Maharashtra Co-Operative Societies Act 1961 and is engaged in the business of accepting deposits from members and providing credit facilities to its members. The assessee has filed the return of income for the Assessment Year 2018-19 disclosing a total income of Rs. 3,38,810/- on 29.09.2018 after claiming deduction u/sec 80P(2)(a)(i) of the Act of Rs. 76.53,839/-. Subsequently, the case was selected for scrutiny under the e-assessment Scheme, 2019 and the reasons for selection on the issues (i) Expenditure of personal nature (ii) Investments/Advances/Loans and (iii) Deduction from total income under Chapter VI-A from the total income”. Subsequently notice u/sec 143(2) of the Act and notice u/sec 142(1) of the Act are issued calling for the details in respect of the claims and information supporting the return of income filed by the assessee. The assesse has filed the information of members of the society along with interest income on deposits with the cooperative banks of Rs.93,74,627/-. The Assessing Officer (A.O) has dealt on the submissions/details of members and activities and find that the assessee is not eligible for claim of deduction under section 80P(2)(a)(i) of the Act and has not made separate disallowance of interest income on deposits with the cooperative banks. Finally, the A.O. was not satisfied with the explanations and dealt on the provisions and denied the claim of deduction u/sec80P2 (a)(i) of the act of Rs.76,53,839/- and assessed the total income of Rs.79,92,650/- and passed the order u/sec 143(3) r.w.s. 143(3A) and 143(3B) of the Act dated 10.04.2021.
3. Aggrieved by the order, the assessee has filed the appeal before the CIT(A) where the CIT(A) considered the grounds of appeal, statements of facts and findings of the Assessing Officer and issued notice and the assessee has filed the written submissions on the claim of deduction u/sec 80P2(a)(i) / u/sec 80P2(d) of the Act but the CIT(A) has confirmed the action of the AO and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed appeal before the Hon’ble Tribunal.
4. At the time of hearing, Ld. AR submitted that the CIT(A) has erred in confirming the action of the AO in treating the interest income from cooperative banks is not eligible for deduction u/sec 80P2(a)(i) of the Act and denied alternatively claim under section 80P2(d) of the Act The Ld. AR substantiated the submissions with the facts and judicial decisions and prayed for allowing the appeal. Per Contra, Ld. DR relied on the order of the CIT(A).
5. We heard the rival submissions and perused the material on record. The Ld.AR submitted that the CIT(A) has erred in observing that the assessee is ineligible for deduction u/s.80P(2)(a)(i) of the Act or u/sec80P2(d) of the Act in respect of interest income earned from the cooperative banks. We find the Hon’ble Tribunal in the revenue appeal ITO Ward.-5,Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit (ITA No.2375/PUN/2025 & C.O. No.49/PUN/2025) has dealt and held as under:
“15. We have heard Ld. Counsels from both the sides and perthe material available on record. In this regard, we find that all the grounds raised by the Revenue revolves around the issue of allowability of deduction u/s 80P(2)(d) of the IT Act to primary credit cooperative society. In this regard, we find that in number of decisions passed by coordinate benches of this Tribunal it has been held that a primary credit cooperative society is eligible to claim deduction u/s 80P(2) of the IT Act on interest and dividend income earned from its investment with other cooperative banks which are also cooperative societies duly registered under Maharashtra State Cooperative Societies Act. In this regard, following decisions are relevant :-
(i) Gurudatta Gramin Bigersheti, ITA No.502/PUN/2025 order dated 28-07-2025.
(ii) PuneJila Madhyawarti Sahkari Bank Sevakanchi Sahkari Patsanstha Maryadit, ITA No.1086/PUN/2025 order dated 23-06-2025.
(iii) Sharad Chandra Nagari Sahakari Patsanstha Maryadit, ITA No.1041/PUN/2025 order dated 04-06-2025.
16. We further find that the core issue of allowance of deduction u/s 80P(2) of the IT Act to a primary credit cooperative society was also decided by Hon’ble Jurisdictional Bombay High Court in the case of Anna saheb Patil Mathadi Kamgar Sahkari Path pedhi Ltd.in ITANo.933/2017 order dated 14-10-2019 wherein deduction u/s 80P(2) of the IT Act was allowed to a primary credit cooperative society. Subsequently, this Judgement was also approved by Hon’bleSupreme Court in Civil Appeal No.8719 of 2022 order dated April 20, 2023 by observing as under :-
“1. Feeling aggrieved and dissatisfied with the impugned order dated 14-10-2019 passed by the High Court of Judicature at Bombay in ITA No. 933/2017, by which the High Court has dismissed the said appeal preferred by the Revenue, relying upon its earlier decision in the case of M/s. Quepem Urban Co-operative Credit Society Ltd. Vs. Assistant Commissioner of Income Tax, 377 ITR 272, the Revenue has preferred the present appeal.
2. The High Court considered the following question of law –
“Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified as claimed by the assessee on the ground that the assessee, a co-operative credit society and is not a bank for the purpose of Section 80P(4) of the Act?”
3. Apart from the fact that against the relied upon decision in the case of M/s. Quepem Urban Co-operative Credit Society Ltd. (supra),the Special Leave Petition has been dismissed, having heard learned counsel appearing on behalf of the respective parties, the issue involved in the present appeal is squarely covered against the Revenue in view of the decision of this Court in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161/279 Taxman 75/431 ITR 1/[2021] 7 SCC 90. This Court, in the aforesaid decision has specifically observed and held that primary Agricultural Credit Societies cannot be termed as Co-operative Banks under the Banking Regulation Act and, therefore, such credit societies shall be entitled to exemption under section 80(P)(2) of the Income-tax Act, 1961.
4. Ms.AakanshaKaul, learned counsel appearing on behalf of the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also.
5. There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under section 80(P)(2) of the Income-tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under section 80(P)(2) of the Income-tax Act.
6. In view of the above and for the reasons stated hereinabove, the present appeal deserves to be dismissed and is accordingly dismissed, answering the question against the Revenue and in favour of the Assessee.”
17. Respectfully following the above latest decision passed by Hon’ble Supreme Court cited supra, we are of the considered opinion that the issue of allowance of deduction u/s 80P(2) of the IT Act in favour of primary credit cooperative society has attained finality & therefore we do not find any error in the order passed by Ld. CIT(A)/NFAC with regard to allowance of deduction u/s 80P(2)(d) of the IT Act to the assessee on interest income earned from its investment from cooperative banks which are also cooperative societies.
18. In the result, the appeal filed by the Revenue is dismissed.
19. To sum up, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is partly allowed, as indicated above.”
6. We considering the facts, circumstances, submissions and the ratio of the judicial decisions dealt in the above issues and also follow the judicial precedence. Accordingly, we set aside the order of the CIT(A) and direct the assessing officer to allow deduction under section 80P2(d) of the Act in respect of interest income on deposits with cooperative banks subject to the total aggregate claim shall be restricted to original deduction u/sec80P(2)(a)(i) of the Act claimed in the return of income filed by the assessee. And the grounds of appeal are allowed in favour of the assessee.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 30th September, 2026.
