ITAT Pune Grants Section 80P Deduction to Employees' Cooperative Credit Society – Bank Deposit Interest Qualifies

Case Overview

Case Name: Dapodi Workshop Employees Cooperative Credit Society Limited Vs ITO (ITAT Pune)
Assessment Year: 2018-19
Deduction Claimed: ₹32,97,192/- under Section 80P(2)(a)(i) of the Income Tax Act, 1961
Outcome: Appeal Allowed

Background and Factual Matrix

The assessee in the present matter is a salary earners' cooperative credit society duly registered under the Maharashtra Co-operative Societies Act, 1960. Its primary business activity is the provision of loans and credit facilities exclusively to its members — a function squarely covered under the cooperative credit society framework.

For Assessment Year 2018-19, the assessee filed its return of income on 03.10.2018, declaring total income at Nil after setting off a deduction of ₹32,97,192/- claimed under Section 80P(2)(a)(i) of the Income Tax Act, 1961. This deduction pertained to interest income earned by the society from deposits maintained with banks, which the assessee contended was directly attributable to its core business of extending credit facilities to its members.

Action of the Assessing Officer

The Assessing Officer took a contrary view and disallowed the entire deduction claim of ₹32,97,192/- under Section 80P. The basis for this disallowance was the finding that since the interest income arose from bank deposits, it could not be treated as profits and gains attributable to the business of providing credit facilities. The Assessing Officer relied upon the position that such income was investment income, distinct from the operational income of the society, and therefore fell outside the scope of Section 80P(2)(a)(i).

Proceedings Before CIT(A) / NFAC

The assessee challenged the disallowance before the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi. However, the CIT(A)/NFAC upheld the order of the Assessing Officer in its entirety, affirming the disallowance without providing relief to the assessee.

Aggrieved by this outcome, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Pune Bench.

Submissions Before the Tribunal

Assessee's Arguments

The learned Counsel appearing on behalf of the assessee led with a decisive submission — that an identical issue arising in the assessee's own case for Assessment Year 2020-21 had already been adjudicated in its favour by the Coordinate Bench of the Tribunal vide ITA No. 824/PUN/2025, order dated 16.05.2025. The counsel argued that since the facts of the present year were no different, the principle of consistency and judicial precedent mandated the same outcome.

In addition, the assessee's counsel relied upon an extensive body of judicial authority to reinforce the eligibility of cooperative credit societies for deduction under Section 80P(2)(a)(i):