Shiroda Progressive Urban Multipurpose Cooperative Society Limited Vs ITO (ITAT Panaji)
Panaji ITAT Allows Section 80P Deduction on Interest from Scheduled & Commercial Banks: Bank Deposits of Credit Co-operative Society Are Attributable to Banking Business
The Panaji ITAT in The Shiroda Progressive Urban Multipurpose Cooperative Society Ltd. v. ITO held that a credit co-operative society is entitled to deduction under section 80P(2)(a)(i) on interest earned from deposits/investments with scheduled and commercial banks, where such investments are attributable to its banking/credit business.
The assessee, a co-operative credit society engaged mainly in banking activities, had claimed deductions aggregating ₹44.36 lakh under sections 80P(2)(a)(i) and 80P(2)(c). The AO, relying upon the Supreme Court decision in Totgar’s Co-operative Sale Society Ltd., treated ₹44.03 lakh of interest on FDRs with other banks as “income from other sources” and denied the section 80P deduction.
The CIT(A) granted partial relief by allowing section 80P(2)(d) deduction on interest received from other co-operative societies, but denied it in respect of interest from scheduled and commercial banks.
The Tribunal relied upon the Karnataka High Court ruling in Tumkur Merchants Souharda Credit Cooperative Ltd. and the recent Bangalore ITAT decision in Mysore University Employees Co-op Credit Society Ltd. It reiterated that where funds generated from the society’s credit business, which are not immediately required for lending, are temporarily deposited with banks, such deposits constitute part of the normal business activity rather than an independent investment activity. Consequently, the interest is attributable to the society’s business and qualifies under section 80P(2)(a)(i).
The ITAT expressly held that the assessee was entitled to section 80P(2)(a)(i) deduction on interest from investments with scheduled and commercial banks because the interest was attributable to its banking business. It also directed the AO to allow the separate ₹50,000 deduction under section 80P(2)(c).
Since the assessee succeeded on merits, its additional grounds challenging the validity of the section 143(2) notice were treated as infructuous. The appeal was allowed.
Cases Discussed:
- Mysore University Employees co-op Credit Society Ltd. vs. Income-tax Officer (Bangalore – Trib.), [2026] 185 com709 (Bangalore – Trib.)[15-04-2026]
- Marathwada Krishi Vidyapeeth Karmachari Sahkari Patsanstha vs. PCIT & others (ITAT), ITA No.102/PUN2020 & others order dated 21.12.2022
- Totgar’s Cooperative Sales Society Ltd. vs. ITO (SC), (2010) 322 ITR 283 (SC)
- Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (Karnataka High Court), (2015) 230 Taxman 309 (Kar.)
- Mantola Cooperative Thrift Credit Society Ltd. vs. CIT (Delhi High Court), (2014) 110 DTR 89 (Delhi)
- Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITAT Pune), ITA No.713/PUN/2016
- Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITAT Pune), ITA No.604/PN/2014
FULL TEXT OF THE ORDER OF ITAT PANAJI
This appeal filed by the assessee is directed against the order dated 26.06.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2016-17.
