ITAT Pune Allows Section 80P(2)(d) Deduction on Interest from Co-operative Bank Deposits

Background of the Appeal

The case of Annapurna Nagari Sahkari Vs ITO (ITAT Pune) involved an appeal by the assessee for A.Y. 2013-14 against an order passed by the National Faceless Appeal Centre, Delhi under Section 250 of the Income Tax Act 1961, arising from a reassessment made under Section 147 read with Section 144 and Section 144B.

During the appellate proceedings before the Tribunal, the assessee chose not to pursue Grounds 1 to 4, which related to certain legal issues. As a result, those grounds were dismissed as not pressed.

The only surviving controversy, contained in Grounds 5 to 8, concerned the eligibility of deduction under Section 80P(2)(d) in respect of interest income of ₹1,02,95,103 earned from deposits and investments with Co-operative Banks.

Core Issue Before the Tribunal

Question for Determination

The Tribunal had to decide:

Whether interest income of ₹1,02,95,103 arising from deposits/investments with Co-operative Banks qualifies for deduction under Section 80P(2)(d) of the Income Tax Act 1961.

In simpler terms, the dispute was whether such interest should be fully deductible as income from investments with another co-operative society (on the footing that a Co-operative Bank is also a co-operative society), or whether it should be taxed as “Income from other sources” without benefit of Section 80P(2)(d).

Arguments of the Assessee

The assessee contended that the matter was already settled in its favour by:

  • The ITAT Pune’s decision in the assessee’s own case for A.Y. 2020-21, in ITA No.2471/PUN/2024, order dated 24.03.2025, and
  • Multiple earlier decisions of co-ordinate benches of the Tribunal.

The assessee highlighted that:

  • The interest of ₹1,02,95,103 was undeniably earned from deposits/investments made with Co-operative Banks.
  • Co-operative Banks, though carrying on banking business, continue to be co-operative societies for the purposes of Section 80P(2)(d).
  • Therefore, the interest received from such Co-operative Banks should be treated as income from investments with “any other Cooperative Society” and be eligible for a 100% deduction under Section 80P(2)(d).

The assessee relied strongly on the Tribunal’s earlier ruling in its own case for A.Y. 2020-21, where a similar disallowance had been reversed and deduction under Section 80P(2)(d) had been allowed on interest from Co-operative Bank deposits.

Stand of the Revenue

The Departmental Representative (DR) opposed the claim primarily on procedural grounds. The Revenue argued:

  • The assessee had allegedly not furnished detailed supporting information or documentary evidence regarding these deposits and interest income before the lower authorities.
  • In the absence of such details on record, the issue should not be decided directly by the Tribunal.
  • Instead, the matter should be remanded back to the Assessing Officer for fresh examination and verification of facts.

The Revenue thus sought a restoration of the matter to the file of the Assessing Officer, instead of an outright allowance of the deduction.

Tribunal’s Examination and Findings

Factual Position Accepted by the Assessing Officer

The Tribunal first examined the assessment record and noted an important aspect:

  • There was no dispute that the interest of ₹1,02,95,103 had in fact been earned from deposits/investments with Co-operative Banks.
  • This factual position had been explicitly accepted by the Assessing Officer in the assessment order itself.