Income Tax Appellate Tribunal

Income Tax Appellate Tribunal, Delhi: In a set of two appeals by the assessees against separate orders of Commissioner of Income Tax (Appeals) (‘CIT(A)’), National Faceless Appeal Centre (‘NFAC’), Delhi, for not allowing deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (‘the Act’), despite the fact that the assesses were a Co-operative Thrift and Credit Society, Kul Bharat, J. allowed the appeals, partly. Placing its reliance upon a decision of the co-ordinate Bench, wherein it was laid down that the Co-operative Bank is primarily a Co-operative Society and in light of the said ruling, the Tribunal held that for the purpose of Section 80P(2)(d) of the Act, the assessees would be entitled for deduction u/s 80P(2)(d) of the Act.


In both the matters, the assessees are a Co-operative Credit Society. In one of the appeals, the income tax return was filed under the status of ‘Association of Persons’ (‘AOP’) for the year under consideration, declaring total income at Rs. NIL. It was noticed by the Assessing Authority that the assessee had claimed deduction of Rs. 43,29,747/- u/s 80P of the Act. The Assessing Officer (‘AO’) further noticed that the amount of Rs. 7,60,197/- was interest income derived from deposits in Co-operative banks. The Assessing Authority viewed that such deduction was not allowable as the income is not from the business activities of the assessee. The AO taxed this amount on the basis that the amount was not out of business income but derived from other sources. Hence, the AO made addition of Rs. 7,60,197/- and assessed the income of the assessee at Rs. 7,60,197/- u/s 143(3) read with Section 143(3B) of the Act. In appeal, by the assessee before the CIT(A), the additions were sustained, and the appeal was dismissed.

In the second appeal, wherein, similar grounds were raised, which the Tribunal dealt along with for sake of brevity, it was alleged that the NFAC grossly erred on facts and in law in confirming the addition Rs.5,42,880/- by not allowing deduction under Section 80P(2)(a)(i) of the Act by not following the ‘principle of judicial precedence’.

Analysis and Order

The Tribunal said that, there was no dispute that the assessees is a Co-operative society and it earned interest and dividend income by making deposits with the Delhi State Co-operative Bank Ltd. which is registered under Co-operative Societies Act. The Tribunal noted that in Mantola Cooperative Thrift & Credit Society Ltd. v. ITO1, after considering the binding precedents, the Tribunal held that the Co-operative Bank is primarily a Co-operative Society. Hence, in light of the said ruling, the Tribunal said that, for the purpose of Section 80P(2)(d) of the Act, the assessees would be entitled for deduction u/s 80P(2)(d) of the Act. Further, the Tribunal said that Supreme Court’s ratio in Totgars’ Coop. Sale Society Ltd. v. ITO, (2010) 3 SCC 223 is not applicable on the matter at hand, since the facts are clearly distinguishable as therein, the surplus of the funds was not deposited with any Cooperative Society but were deposited to the Commercial banks. Regarding the question of levy of interest under Section 234-B and 234-C of the Act, the Tribunal said that the levy of interest is consequential in nature.

Thus, the Court allowed both the appeals partly.

[Janta Adarsh Co-operative Thrift & Credit Society Ltd. v. ITO, 2024 SCC OnLine ITAT 830, Decided on: 28-06-2024]

1. ITA No.4078 & 2036/Del/2019 and ITA No.6935/Del/2018.

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