Poona Post and Telecom Coop. Credit Society Ltd. Vs ITO (ITAT Pune)
Pune ITAT Allows Section 80P Deduction on Interest and Dividend from Co-operative Bank Investments; Section 80P(4) Held Inapplicable to Credit Co-operative Society
The Pune ITAT held that a credit co-operative society is entitled to deduction under sections 80P(2)(a)(i) and 80P(2)(d) in respect of interest and dividend earned from investments with a co-operative bank, including the Pune District Central Co-operative Bank (PDCC). The Tribunal observed that the issue was no longer res integra and followed a series of co-ordinate bench decisions holding that section 80P(4) excludes only co-operative banks claiming deduction, and does not disentitle a co-operative credit society from claiming deduction on income received from another co-operative society. It reiterated that for the purposes of section 80P(2)(d), the relevant test is whether both the recipient and the payer are co-operative societies registered under the applicable co-operative law, and not whether the payer also functions as a co-operative bank. Rejecting the Revenue’s reliance on section 80P(4), the Tribunal held that the assessee was entitled to deduction on the interest and dividend received from PDCC as well as the eligible interest income earned from investments, relying upon the decisions in Goa PWD Staff Co-operative Credit Society, ACGL BBD Employees Co-operative Credit Society, Mavilayi Service Co-operative Bank Ltd., and Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. Accordingly, the Tribunal reversed the order of the CIT(A) and allowed the assessee’s claim for deduction under sections 80P(2)(a)(i) and 80P(2)(d).
Cases Discussed
- Goa P W D Staff Co Op Credit Society vs. Income Tax Officer (ITAT Panaji),ITA No.107/PAN/2025, order dated 07.08.2025
- ACGL BBD Employees Co-op. Credit Society, Ltd. Vs ITO, Goa (ITAT Panaji),ITA No.212/PAN/2024 dated 12/02/2025
- Alaknanda Sahakari Gruharachana Sanstha Maryadit Vs ITO (ITAT Pune),2024, TaxPub(DT) 4845 (Pune-Trib)
- PCIT Vs Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. (SC),[2023] 454 ITR 117 (SC)
- Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. (KSCARDB) Vs ITO (SC),[2023 INSC 830 (SC)]
- Mavilayi Service Co-operative Bank Ltd. (SC)
- PCIT Vs Totgar’s Co-operative Sale Society Ltd. (Karnataka HC),[2017] 292 ITR 74 (Kar)
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 19.08.2025 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment Order dated 15.03.2023 passed u/s.143(3) r.w.s.263 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).
2. The sole grievance of the assessee is that Ld.CIT(A) erred in confirming the deduction u/s.80P(2)(a)(i) and 80P(2)(d) of the Act made by the Assessing Officer to the extent of Rs.4,34,10,832/-.
3. At the outset, ld. Counsel for the assessee submitted that the assessee is Credit Cooperative Society and that it had earned dividend from Pune District Central Cooperative Bank Limited (in short ‘PDCC’) at Rs.2,94,57,283/- and remaining amount of interest from Nationalized Banks wherein surplus idle business funds were kept and the same fetched interest income. Referring to plethora of decisions mentioned in the case law paper book he submitted that it has been consistently held by this Tribunal as well as other Tribunals in case of Credit Cooperative Societies interest from Nationalised Banks/Cooperative Banks is eligible for deduction u/s.80P(2)(a)(i) of the Act and further it has also been consistently held that interest from investments with Cooperative Banks is allowable as deduction u/s.80P(2)(d) of the Act.
4. On the other hand, ld. DR supported the order of ld.CIT(A).
5. We have heard the rival submissions and perused the record placed before us. The only issue relates to disallowance of deduction u/s.80P(2)(a)(i)/80P(2)(d) of the Act at Rs.3,08,82,286/-, towards dividend and interest from PDCC bank at Rs.14,25,003/- and Rs.2,94,57,283/- respectively and the remaining amount of interest earned from IDBI bank at Rs.1,25,28,546/-.
6. We find this issue is no more res integra by virtue of plethora of decisions passed by the various Coordinate Benches across the country holding in favour of the assessee. We take note of the decision of Coordinate Bench, Panaji in the case of Goa P W D Staff Co Op Credit Society vs. Income Tax Officer in ITA No.107/PAN/2025 order dated 07.08.2025 has decided the very same issue in favour of the assessee by observing as under :
“5. From the facts solidified by the rival party’s submission we note that, there is no dispute that the assessee is a co-operative society and is entitled to claim deduction u/s 80P(2)(a)(i)/(d) of the Act. Further there is much less dispute over the nature of income received/earned by the assessee in the form of interest on deposits & balances held with GSCBL Bank. The Revenue in the present case first on hand denied 80P(2)(d) deduction to the appellant assessee for a reason that, GSCBL is a bank and not a co-operative society within the meaning of section 2(19) of the Act, hence interest income was earned from such bank do not qualify for deduction u/s 80P(2)(d) of the Act. The Revenue further bettered its denial on the foundation that, surplus funds left with the assessee is taken out of mutuality for investment with bank hence contravene the privity of mutuality, therefore the interest earned on such investment do not qualify for deduction u/80P(2)(d). It the claim of the Revenue that, the character of such interest in view ‘PCIT Vs Totgar’s Co-operative Sale Society Ltd.’ [2017, 292 ITR 74 (Kar)] falls out for deduction u/s 80P(2)(d) of the Act.
6. At the outset we note that, a similar issue of deduction of 80P(2)(d) deduction in relation to interest/dividend received by the co-operative society from GSCBL came for consideration before the Ld. Co-ordinate bench in ‘ACGL BBD Employees Co- op. Credit Society, Ltd. Vs ITO, Goa’ [ITA No. 212/PAN/2024 dt. 12/02/2025] whereby interest earned by co-operative society on its investment with GSCBL was held as deductible u/s 80P(2)(d) of the Act. The relevant adjudication laid in para 6 to 15 from the order is reproduced herein as;
6. First of all, we are mindful to state that, the allowability of deduction u/s 80P(2)(d) of the Act against the interest on deposits & dividend from shares held by one co-operative society with another co-operative society is no-more res-integra. Secondly the provisions of s/s (4) of section 80P of the Act applies to claimant assessee which is co-operative bank as defined in Part V of the Banking Regulation Act, 1949 [‘BRA’ hereafter].
7. Now coming to allowability of deduction u/s 80P(2)(d) of the Act is concerned, a bare perusal said provision of the Act clearly hint sites that an interest & dividend income derived by one co-operative society from its investment (irrespective of nature) held with other co-operative society is eligible for deduction u/s 80P(2)(d) of the Act. The constructive analysis of provision reveals that, an assessee’s entitlement for deduction u/s 80P(2)(d) of the Act prima-facie is subject to satisfaction of twofold pivotal conditions viz; (1) a recipient assessee vis-à-vis claimant of deduction must be a co- operative society within the meaning of section 2(19) of the Act AND (2) a payer of income must also be a co-operative society as defined u/s 2(19) of the Act. The conjoint reading of section 80P(2)(d) and section 2(19) of the Act necessitates that, a recipient and a payer of interest/dividend both must be co-operative society registered either under Central Co-operative Societies Act, 1912 or under any other law for the time being in force in any state. This stipulation fastened is compiled the moment both recipient & payer of interest/dividend Goa PWD Staff Co-operative Credit Society Limited Vs ITO, Goa are registered either under; (a) Co-operative Society Act, 1912 or (b) State Co-operative Societies Act in force. Thus, where a recipient cum claimant assessee as well as a payer of interest/dividend income both are registered societies then in our considered view noting can preclude an assessee from claiming such interest/dividend as deductible u/s 80P(2)(d) of the Act. This continues to hold the field irrespective of class within which such recipient assessee society or a payer society is registered. What is indispensable for clause (d) of s/s (2) of section 80P of the Act is the statutory/legal establishment of recipient & payer and not the class within which they fall or registered.
8. Conversely, where an assessee is a co-operative society & is not a co-operative bank within the meaning of explanation (a) to section 80P(4) of the Act and a payer of interest/dividend is also a co-operative society then in our considered view irrespective of status of a payer falling within the meaning assigned to it in Part V of BRA as to co-operative bank or not, a recipient assessee society’s right to deduction u/s 80P(2)(d) of the Act cannot infringed by application of s/s (4) thereof. Going a step further it is also mindful to note here that, the language of s/s (4) of section 80P of the Act unambiguously capable of suggesting that it only comes into play when a claimant assessee falls within the meaning of ‘Co-operative bank’ as assigned under Part V of BRA (supra) and not otherwise.
9. In the present case, the appellant admittedly is a co-operative society registered under the State Co-operative society Act, thus at the outset absolutely fulfils the first condition so as to entitle for deduction u/s 80P(2)(d) of the Act. Now in vouching the fulfilment of second condition, we note that, the GSCBL is also a society registered u/s 5 of Goa State Co-operative Societies Act, vide registration No BNK-(a)-1/Goa dt. 07/11/1963. In terms of section 10 (supra) the GSCBL is granted registration under ‘class-3 as co- operative bank with sub class as central Bank’. These findings de- facto sufficient to establish that, the payer of interest i.e. the GSCBL is also a registered co-operative society, thus slakes the second condition fastened on the assessee for claim of deduction u/s 80P(2)(d) of the Act. On the other hand, the appellant co-operative Goa PWD Staff Co-operative Credit Society Limited Vs ITO, Goa society is neither a co-operative bank within the meaning assigned in Part V of BRA nor holding any banking license. The payer of interest income to the assessee society i.e. GSCBL although is a co-operative bank in common parlance but not a co-operative bank strictly within the meaning assigned in Part V of BRA. Therefore, the denial of deduction by implication of s/s (4) of section 80P is untenable. In view of these clinching factual matrix, in our considered view there remains much less merits in application of s/s (4) of section 80P of the Act and in denying the 80P(2)(d) deduction to the appellant.
10. A similar view can also be traced in the adjudication of Ld. Co-ordinate bench in ‘Alaknanda Sahakari Gruharachana Sanstha Maryadit Vs ITO’ [2024, TaxPub(DT) 4845 (Pune-Trib)] wherein the claim for deduction u/s 80P(2)(d) of the Act was denied to the assessee by implication of s/s (4) of section 80P of the Act against interest received by the assessee on its investment from Pune District Central Co-operative Bank.
11. In our considered view, once the claimant assessee falls outside the ambit of explanation (a) to section 80P(4) of the Act then denial of 80P(2) deduction would be contra-legem. This find fortified in case of ‘PCIT Vs Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd.’ [2023, 454 ITR 117 (SC)], where the assessee was a cooperative credit society engaged in the business of providing credit facilities to its members. The assessee claimed deduction u/s 80P(2) of the Act, but the Assessing Officer disallowed the deduction holding that the assessee is a cooperative bank and hence not eligible to claim deduction as per Section 80P(4) of the Act. The first and second appellate authority and the Hon’ble Jurisdictional High Court held in favour of assessee holding that assessee is a co-operative society and not a cooperative bank, hence eligible for deduction u/s 80P(2) of the Act.
12. On the contrary there is much less material placed on record by the Revenue in establishing that the payer GSCBL is a ‘co- operative bank’ within the meaning of explanation (a) to section 80P(4) of the Act, therefore in view of the decision of Hon’ble Apex Court in ‘Kerala State Co-Operative Agricultural and Rural Goa PWD Staff Co-operative Credit Society Limited Vs ITO, Goa Development Bank Ltd. (KSCARDB)’ Vs TAO’ [2023 INSC 830 (SC)], the denial of 80P(2)(d) deduction to the assessee and the impugned action of the respondent Revenue has no legal sanctity.
13. Before departure, we further find that the Hon’ble Supreme Court in case of Mavilayi Service Co-operative Bank Ltd. (supra) while analysing the provision of Section 80P(4) of the Act has categorically held that Section 80P(4) is a proviso to the main provision contained in Section 80P(1) and 80P(2) and excluded only cooperative banks which are cooperative society and also possesses a licence from RBI to do banking business. Their Hon’ble Lordships have further held that, the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks, therefore Section 80P(4) is relevant only where the claimant assessee is a cooperative bank and which claims a deduction u/s 80P(2) of the Act which is not the facts of the present case. The decision of the Hon’ble Karnataka High Court ‘PCIT Vs Totagars Co-operative Sale Society’ (supra) is distinguishable and in any case, the later decision of Hon’ble Supreme Court in case of ‘Mavilayi Service Co-operative Bank Ltd’. (Supra) wherein the correct legal preposition has been laid down by the Hon’ble Supreme Court has to be followed.
14. In view of the aforestated discussion and respectfully following judicial precedents (supra) we hold that section 80P(4) of the Act does not jeopardise the claim of deduction to the assessee co- operative society u/s 80P(2)(d) in respect of interest/dividend income from investments/share held with other co-operative society (payer) irrespective of its (payer) classification and status as to whether it attracted disqualification u/s 80P(4) of the Act or not.
15. In consequence we hold that, the views adopted by the tax authorities below in the present case, in our considered opinion are not in conformity with aforestated legal position and binding judicial precedents (supra), hence vacated. Resultantly, we set-aside the impugned order and reverse the denial of 80P(2)(d) deduction in entirety. The grounds accordingly stands adjudicated.
(Emphasis supplied)
6. In the absence of anything contrary brought to our notice by the respondent Revenue or convincing us effectively with sufficient reasons for diverting from former judicial precedents, as a matter of consistency, adopting equi-reasoning, we set-aside the impugned order and reverse the disallowance holding that, the interest on investment made with GSCBL Bank qualifies for deductions u/s 80P(2)(d) of the Act as it satisfies twofold conditions laid therein for the year under consideration. The substantive & solitary ground raised in the present appeal thus stands allowed.”
7. Following the judicial precedent referred supra and applying the same on the facts of the instant case, we allow the alleged deduction claimed by the assessee u/s.80P(2)(a)(i) and u/s. 80P(2)(d) of the Act. Impugned order of ld.CIT(A) is reversed and the grounds of appeal raised by the assessee are allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced on this 28th day of July, 2026.
