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Income Tax Appellate Tribunal - Chennai

The Tamiladu Education Dept Govt ... vs Ito Non Corp Ward 3(5), Chennai on 10 April, 2026

                      आयकरअपील यअ धकरण ,'सी' यायपीठ,चे नई।
                IN THE INCOME TAX APPELLATE TRIBUNAL
                          'C' BENCH: CHENNAI

         ी इं तूरी रामा राव ले खासद एवं ी मनु कुमार िग र, ाियक सद
    BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND
            SHRI MANU KUMAR GIRI, JUDICIAL MEMBER

                      आयकरअपीलसं./ITA No.3929/Chny/2025
                       नधारणवष/Assessment Year: 2021-22

The Tamiladu Education Dept. Govt.           v. ITO,
Officials Co-op. Thrift Cre. Society Ltd.,      Non-Corporate Ward - 3(5),
DPI Campus, College Road,                       Chennai.
Nungambakkam, Chennai - 600 006.
[PAN: AAGAT 4032 L]
(अपीलाथ /Appellant)                              (   यथ /Respondent)

अपीलाथ की ओर से/Appellant/Assessee by        :   Mr. G. Reddi Prakash, F.C.A.
 !थ की ओर से /Respondent by                  :   Ms. R. Anitha, Addl. C.I.T.
सुनवाईक तार ख/Date of Hearing                :   17.02.2026

घोषणाक तार ख /Date of Pronouncement          :   10.04.2026


                                   आदे श / O R D E R


     PER MANU KUMAR GIRI, JM:

This appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2021-22 dated 28.10.2025.

2. Facts of the case are as under:

The assessee is a Thrift & Credit Co-operative Society registered under the Tamil Nadu Co-operative Societies Act, engaged in providing credit facilities to its members. For the Assessment Year 2021-22, the assessee filed its return of income on 23.12.2021 declaring NIL income after claiming deduction u/s. 80P of the ITA No.3929/Chny/2025 (AY: 2021-22) :- 2 -:

Income-tax Act, 1961 ('Act').The case was selected for scrutiny under CASS to verify the claim of deduction u/s. 80P. During the course of assessment proceedings, it was noticed that the assessee earned interest income from members' loans ofRs.91,27,422/-, Miscellaneous income ofRs.8,58,935/-, which included interest on deposits ofRs.8,57,710/-. Out of the above, the assessee claimed deduction u/s. 80P(2)(d) in respect of Rs.8,57,710/- being interest earned from deposits with co- operative banks and other institutions.The assessee explained that a portion of such deposits (Rs.5,82,487/-) represented statutory reserve funds maintained with a co-operative bank as mandated under the Tamil Nadu Co-operative Societies Act. The balance amount of Rs.2,75,223/- represented interest earned from deposits with co-operative banks and other institutions.The Assessing Officer accepted the assessee's contention in respect of Rs.5,82,487/- being interest on statutory reserve funds and allowed deduction.However, with regard to the balance amount of Rs.2,75,223/-, the AO held that the interest income was earned from deposits made with co-operative banks and other financial institutions. Such income does not qualify for deduction u/s. 80P(2)(d), as the said provision applies only to interest/dividend derived from investments with other co-operative societies. A co- operative bank, though registered under co-operative laws, is engaged in banking business and cannot be equated with a co- operative society for this purpose. Accordingly, the AO treated the amount of Rs.2,75,223/- as income from other sources and disallowed the deduction u/s. 80P(2)(d).

:- 3 -:

3. On appeal by the assessee, the ld.CIT(A) upheld the action of the AO by observing that section 80P(2)(d) applies only to income derived from investments with co-operative societies, and not co- operative banks. Co-operative banks are governed by the Banking Regulation Act and function distinctly from ordinary co-operative societies. The insertion of Section 80P(4) indicates legislative intent to exclude co-operative banks from the ambit of Section 80P. The ld.CIT(A) relied on judicial precedents including:

Totagars Co-operative Sale Society Ltd. v. ITO (SC) PCIT v. Totagars Co-operative Sale Society (Karnataka HC) State Bank of India Employees Co-op Credit Society Ltd. (Karnataka HC) PCIT v. Andhra Pradesh State Co-operative Bank Ltd. (Telangana HC) The ld.CIT(A) held that interest income from deposits with co- operative banks cannot be treated as income derived from another co-operative society. The nature of funds (whether surplus or statutory) does not alter the taxability of such interest. Accordingly, the disallowance of Rs.2,75,223/- was confirmed.

4. The ld. AR for the Assessee submitted that the assessee is eligible for deduction u/s. 80P(2)(a)(i) as it is engaged in providing credit facilities to its members. The deposits were made out of statutory reserve funds and not surplus funds. Co-operative banks are registered as co-operative societies under the relevant State Act. Therefore, interest earned from such co-operative banks qualifies for deduction u/s. 80P(2)(d). Section 80P(4) applies only to co-operative banks claiming deduction and not to co-operative societies investing in such banks. Reliance was placed on various Tribunal decisions allowing such deduction.

:- 4 -:

5. Per contra, the ld.DR for the revenue submitted that Co- operative banks are distinct from co-operative societies for the purpose of Section 80P. Interest income from deposits with banks is assessable as "Income from Other Sources". Judicial precedents of High Courts clearly hold that such income is not eligible u/s. 80P(2)(d). The assessee's reliance on Tribunal decisions cannot override binding High Court rulings.

6. We have carefully considered the rival submissions and perused the material available on record.The short issue for adjudication is whether the interest income of Rs.2,75,223/- earned by the assessee from deposits with co-operative banks is eligible for deduction u/s. 80P(2)(d).

7. We find that the order of co-ordinate Bench of this Tribunal in the case of The Triplicane Cooperative Credit Society Ltd. in ITA No.2992&2993/Chny/2025 AYs 2020-21 & 2021-22 dated 17.02.2026 on the same issue decided the appeal in favor of assessee by holding as under: -

3. We heard the parties and perused the material on record. The assessee claimed deduction u/s.80P(2)(d) towards interest earned from deposits with Chennai Central Cooperative Bank Ltd. The deduction is denied on the ground that the interest income from cooperative banks cannot be claimed as deduction u/s.80P(2)(d) and also for the reason that the assessee as per the provisions of section 80AC cannot be allowed the deduction since the return of income is not filed within the due dates specified u/s.139(1). With regard to the issue of allowability of deduction under section 80P(2)(d) in respect of interest income earned from deposits with co-operative banks, we notice that the Hon'ble Supreme Court in Mavilayi Service Co-

operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161 (SC), while analysing the scope of section 80P(4) of the Act, held that the said provision operates as a proviso to section 80P(1) and (2) and excludes only such co-operative banks which, though cooperative societies, possess an RBI licence to carry on banking business. The Hon'ble Supreme Court further held that the limited object of section 80P(4) is to deny deduction only to those co-operative banks which function at par with commercial banks by lending money to the general public. In ITA No.3929/Chny/2025 (AY: 2021-22) :- 5 -:

the light of the above decision, we are of the considered view that section 80P(4) becomes relevant only where the assessee itself is a co- operative bank claiming deduction under section 80P, which is admittedly not the case in the present appeal. Therefore, the embargo contained in section 80P(4) has no application to the assessee's claim under section 80P(2)(d). In other words though, by virtue of insertion of sub-section (4) to section 80P, a co-operative bank is not eligible to claim deduction under section 80P of the Act, it nevertheless continues to be a co-operative society registered under the Cooperative Societies Act, 1912 or under the relevant State Co-operative Societies Act. What is relevant for claim of deduction under sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. Therefore in our considered view that as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. sec. 80P(2)(d) cannot be denied. Accordingly we hold that the interest income earned by the assessee being a co-operative society from investments or deposits made with a co-operative bank would qualify for deduction under section 80P(2)(d) of the Act. The coordinate bench in several judicial proceedings has been consistently holding a similar view. Now coming to the issued deduction u/s.80P(2)(d) being disallowed on the ground of return not being filed on time, the ld AR during the course of hearing submitted that the assessee had filed a petition u/s.119(2)(b) for condoning the delay and the delay is condoned by the CCIT1, Chennai vide order dated 04.09.2021. Accordingly it was prayed that the deduction cannot be denied on the said ground. Considering the judicial precedence with respect to the deduction u/s.80P(2)(d) towards interest received from cooperative banks and the fact that the delay in filing the return of income being condoned, we are of the view that there is no reason to deny the claim of deduction u/s.80P(2)(d) to the assessee. Accordingly we direct the AO to allow the claim of the assessee for both AY 2020-21 & 2021-22 since the facts are identical.

4. In result the appeal of the assessee for both AY 2020-21 & 2021-22 are allowed.

8. Respectfully following the order of co-ordinate Bench of this Tribunal in the case of The Triplicane Cooperative Credit Society Ltd. in ITA No.2992&2993/Chny/2025 AYs 2020-21 & 2021-22 dated 17.02.2026, we hold that interest income earned from deposits with co-operative banks does qualify for deduction u/s.

80P(2)(d). The Assessing Officer is directed to allow the same.

:- 6 -:

Accordingly, we find infirmity in the orders of the CIT(A)& AO hence consequently reverse the same.

9. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 10th day of April, 2026 at Chennai.

                    Sd/-                                           Sd/-
             (इंतरू रामा राव)                              (मनु कुमार ग र)
          (Inturi Rama Rao)                              (Manu Kumar Giri)
    लेखा सद य /Accountant Member                    या यक सद य / Judicial Member


चे नई/Chennai,
(दनांक/Dated:    10th April, 2026.
SNDP, Sr. PS

आदे शक    त)ल*पअ+े*षत/Copy to:

1. अपीलाथ /Appellant
2.    थ /Respondent

3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore.

4. िवभागीय ितिनिध/DR

5. गाडफाईल/GF