आदेश / ORDER

PER BEENA PILLAI, JUDICIAL MEMBER:

This appeal is filed by the revenue against the order passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the Ld. CIT(A)], dated 04/11/2025 for the A.Y. 2015-16, on the following grounds of appeal:-

1) Whether on the facts and in the circumstances of the case and in law the Ld CIT A has erred in allowing deduction under section 80P 2 d of the Income-tax Act 1961 in respect of interest income earned from deposits with co operative banks, ignoring the provisions of section 80P 4 of the Act

2) Whether on the facts and in the circumstances of the case and in law the Ld CIT A has failed to appreciate that a co operative bank engaged in commercial banking activities cannot be treated as a co operative society for the purposes of section 80P 2 d of the Act

3) Whether on the facts and in the circumstances of the case and in law the Ld CIT A has erred in holding that section 80P4 restricts only the eligibility of co operative banks to claim deduction and does not affect the allowability of deduction in the hands of the recipient society contrary to the legislative intent behind the insertion of section 80P 4

4) Whether on facts and in law the Ld.CITA erred in allowing deduction under section 80P despite the assessee having failed to file its return of income within the time prescribed under section 139 1 in contravention of the mandatory provisions of section 80A 5 of the Act

5) Whether on the facts and in the circumstances of the case and in law the Ld CITA has erred in relying on certain Tribunal decisions while ignoring contrary High Court judgments including Pr CIT vs Totagars Cooperative Sale Society Ltd and Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd which hold that interest earned from deposits with cooperative banks is not eligible for deduction under section 80P2d

6) Whether on the facts and in the circumstances of the case and in law the Ld CITA has erred in directing the Assessing Officer to recompute interest income solely on the basis of bank certificates disregarding the findings of understatement of interest income and the principle of taxation on accrual basis

7) The order of the LdCITA is erroneous in law and on facts and is liable to be set aside to the extent the relief has been granted to the assessee

8) The appellant craves leave to add to alter, amend OR withdraw any of the above grounds of appeal at OR before the time of hearing.

2. Brief facts of the case are as under:

The assessee is a co-operative society engaged in maintenance of commercial premises and deriving income from maintenance charges and interest earned on deposits with co-operative banks. The assessment was framed by the Ld.AO u/s 147 r.w.s. 144B vide order dated 20/02/2024 determining total income at Rs. 1,96,66,582/- as against returned income of Nil. The Ld.AO observed that the assessee had understated interest income and accordingly made an addition of Rs. 1,27,67,204/-. Further, deduction claimed u/s 80P amounting to Rs. 68,99,378/- was disallowed on the ground that interest earned from co-operative banks is not eligible for deduction u/s 80P(2)(d) and also invoking provisions of section 80A(5).

Aggrieved by the order of Ld.AO, assessee preferred appeal before Ld.CIT(A).

2.1. The Ld.CIT(A), after considering the submissions and judicial precedents, held that the assessee is entitled to deduction u/s 80P(2)(d) in respect of interest income earned from deposits with co-operative banks. It was observed that co-operative banks are co-operative societies for the purposes of section 80P(2)(d), and section 80P(4) does not bar such claim in the hands of the recipient society. The Ld.CIT(A) further directed the Ld.AO to recompute interest income based on bank certificates and grant consequential relief.

Aggrieved by the order of the Ld.CIT(A), revenue is in appeal before this Tribunal.

3. Before us, the Ld.DR relied on the order of the Ld.AO and submitted that