Navbharat Urban Co-operative Credit Society Ltd. Vs ITO (ITAT Mumbai)
ITAT Mumbai Rules on Navbharat Urban Co-operative Credit Society’s Appeal: The Income Tax Appellate Tribunal (ITAT) Mumbai dismissed the appeals of Navbharat Urban Co-operative Credit Society Ltd. for Assessment Years 2014-15 and 2015-16. The dispute centered on the disallowance of deductions claimed under Section 80P(2)(d) of the Income Tax Act. The Assessing Officer (AO) classified interest income from fixed deposits with State Bank of India and commission income from Maharashtra State Electricity Board (MSEB) as “Income from Other Sources” rather than exempt income under Section 80P. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this view, prompting the society to approach ITAT.
The society contended that the interest earned on deposits and commission from MSEB should qualify for deduction under Section 80P(2)(d), arguing that these earnings were part of its business activities. It relied on judicial precedents, including CIT vs. Ramanathapuram District Co-operative Central Bank Ltd. (Supreme Court), Shri Renukadevi Urban Credit Co-operative Society Ltd. vs. CIT (Karnataka High Court), and CIT vs. Solapur Nagari Audyogic Sahakari Bank Ltd. (Bombay High Court). However, the AO distinguished these cases, noting that the rulings applied to co-operative banks rather than credit societies. The AO maintained that since the society was not a banking institution, the exemption under Section 80P(2)(d) was inapplicable.
During the hearing, no representative appeared on behalf of the society despite notices sent via registered post. The ITAT proceeded ex-parte and heard submissions from the Revenue Department. The tribunal observed that Section 80P(2)(d) applies only when interest income is earned from a co-operative society, whereas the deposits in question were held with a nationalized bank. Similarly, the commission from MSEB was derived from a third party and lacked mutuality, making it taxable under “Income from Other Sources.”
In line with previous rulings, including Totgars Co-operative Sale Society Ltd. vs. ITO (Supreme Court), ITAT concluded that interest income from non-members or external entities does not qualify for exemption. With no additional documentary evidence or legal arguments from the assessee, ITAT upheld the findings of the lower authorities and dismissed the appeals for both assessment years.
The ruling reinforces the principle that co-operative credit societies must distinguish between income from co-operative sources and income from external entities. The decision aligns with judicial interpretations restricting Section 80P(2)(d) benefits to interest income from other co-operative societies, not banks.
