My society earns interest on deposits placed with a co-operative bank. The Assessing Officer says s.80P(2)(d) covers only investments with a co-operative society and a co-operative bank is not one. Is there authority the other way?
Yes. The Karnataka High Court, Dharwad Bench, held that 'co-operative society' is a genus and 'co-operative bank' a species of it, so a co-operative bank is necessarily covered by the words 'co-operative society' and interest earned from it qualifies under s.80P(2)(d). It also held that the Supreme Court's decision in Totgars, being on s.80P(2)(a)(i), is inapplicable to a claim under s.80P(2)(d). But the same High Court, at the same Bench, took the opposite view five months later on the same assessee.
Decided by the High Court (Raghvendra S. Chauhan J and Sreenivas Harish Kumar J (judgment per Raghvendra S. Chauhan J)) on 2017-01-05, reported as I.T.A. No. 100069/2016 (High Court of Karnataka, Dharwad Bench). It bears on section 80P, section 80P(1), section 80P(2)(d), section 80P(2)(a)(i), section 10(34) of the Income Tax Act 1961, in Co-operative Societies, Deductions & Disallowances and How Tax Law Is Read matters.
The library already carries the 16 June 2017 Karnataka decision that went the other way; it should carry this one too, because the split is not merely between States, it is inside a single High Court, between two Division Benches, in the same calendar year, on the same assessee's appeals. That fact is itself the most useful thing a practitioner can be told, and it is the reason the deduction under s.80P(2)(d) is still being litigated. The reasoning here has two limbs worth taking. The first is the genus-and-species point: s.2(19) defines a co-operative society by reference to registration under a co-operative societies law, and a co-operative bank so registered does not stop being a co-operative society. The second is the containment of Totgars: the Supreme Court there was construing 'attributable to' in s.80P(2)(a)(i) and the treatment of surplus funds, and s.80P(2)(d) asks a different question altogether — whether the payer is another co-operative society. Note where the disagreement actually lies. The June 2017 Bench accepted the genus-and-species point in terms and still held against the assessee, on the footing that the Supreme Court's reasoning in Totgars is not confined to s.80P(2)(a)(i). The contested question is therefore the reach of Totgars, not the meaning of 'co-operative society', and an argument that wins only the genus-and-species point wins nothing in Karnataka. That Bench also expressly declined to follow this judgment, saying it was unable to follow it in the face of the binding precedent of the Supreme Court — which is the single most important fact about this judgment's authority in Karnataka. Note also that this decision does not engage with s.80P(4) at all; where the assessee itself is a co-operative bank, that is a separate obstacle.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The respondent was a co-operative credit society providing credit facilities to its members and marketing their agricultural produce, which also ran a kirana section, rice mills, a van section, a medical shop, an arecanut trading section, lodging under the name Samrat Hotels at Sirsi, and plying and hiring of goods carriage. It claimed a deduction of Rs 4,09,34,404 under s.80P together with a deduction under s.10(34). The Assessing Officer disallowed Rs 3,34,970 of the s.80P(2)(d) claim on the ground that this represented interest earned on deposits with co-operative banks, taxable as income from other sources. The CIT(A) allowed the society's appeal and deleted the addition, and the Tribunal, Bangalore Bench 'C', dismissed the Revenue's appeals by order dated 22 January 2016 in ITA No. 709/BANG/2015 and connected appeals. The Revenue appealed under s.260A, proposing two questions, both founded on the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. v. Income Tax Officer, Civil Appeal Nos. 1622 to 1629 of 2010 decided on 8 February 2010 — the same assessee — and on the proposition that interest earned on funds not required for business purposes is other income.
The appeal was dismissed and neither proposed question was held to arise. The limited issue before the Tribunal was whether, for the purposes of s.80P(2)(d), a co-operative bank is to be considered a co-operative society; it is, because 'co-operative society' denotes a genus of large extent while 'co-operative bank' is a word of limited extent identifying a species of that genus, and the species is necessarily covered by the genus. The interest the society earned from a co-operative bank was therefore deductible and the Assessing Officer was not justified in denying the deduction. The Supreme Court's decision in Totgars was inapplicable because it dealt with the interpretation of s.80P(2)(a)(i), whereas the present case required the interpretation of s.80P(2)(d).
The Court held the Revenue's contention untenable because the issue before the Tribunal had been a limited one, and observed that if a co-operative bank is a co-operative society then interest earned by a co-operative society from a co-operative bank must be deductible. It reasoned that a co-operative society can be of different natures and can carry on different activities, and that a co-operative society doing banking is merely a variety of co-operative society; the species is covered by the genus. It supported that conclusion by reference to the definition of a primary co-operative bank in s.56 of the Banking Regulation Act 1949, from which it concluded that a co-operative society carrying on banking is included within the words 'co-operative society'. It recorded as admitted that the interest the society earned was from a co-operative bank, and held that s.80P(2)(d) therefore permitted the interest to be deducted from gross income in computing total income. It distinguished the Supreme Court's decision in Totgars, on which both proposed questions rested, on the ground that it dealt with s.80P(2)(a)(i) and not s.80P(2)(d).
Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society".
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppYes. The Karnataka High Court, Dharwad Bench, held that 'co-operative society' is a genus and 'co-operative bank' a species of it, so a co-operative bank is necessarily covered by the words 'co-operative society' and interest earned from it qualifies under s.80P(2)(d). It also held that the Supreme Court's decision in Totgars, being on s.80P(2)(a)(i), is inapplicable to a claim under s.80P(2)(d). But the same High Court, at the same Bench, took the opposite view five months later on the same assessee. This was decided by the High Court (Raghvendra S. Chauhan J and Sreenivas Harish Kumar J (judgment per Raghvendra S. Chauhan J)) and bears on section 80P, section 80P(1), section 80P(2)(d), section 80P(2)(a)(i), section 10(34) of the Income Tax Act 1961. It is reported as I.T.A. No. 100069/2016 (High Court of Karnataka, Dharwad Bench). The library already carries the 16 June 2017 Karnataka decision that went the other way; it should carry this one too, because the split is not merely between States, it is inside a single High Court, between two Division Benches, in the same calendar year, on the same assessee's appeals. That fact is itself the most useful thing a practitioner can be told, and it is the reason the deduction under s.80P(2)(d) is still being litigated. The reasoning here has two limbs worth taking. The first is the genus-and-species point: s.2(19) defines a co-operative society by reference to registration under a co-operative societies law, and a co-operative bank so registered does not stop being a co-operative society. The second is the containment of Totgars: the Supreme Court there was construing 'attributable to' in s.80P(2)(a)(i) and the treatment of surplus funds, and s.80P(2)(d) asks a different question altogether — whether the payer is another co-operative society. Note where the disagreement actually lies. The June 2017 Bench accepted the genus-and-species point in terms and still held against the assessee, on the footing that the Supreme Court's reasoning in Totgars is not confined to s.80P(2)(a)(i). The contested question is therefore the reach of Totgars, not the meaning of 'co-operative society', and an argument that wins only the genus-and-species point wins nothing in Karnataka. That Bench also expressly declined to follow this judgment, saying it was unable to follow it in the face of the binding precedent of the Supreme Court — which is the single most important fact about this judgment's authority in Karnataka. Note also that this decision does not engage with s.80P(4) at all; where the assessee itself is a co-operative bank, that is a separate obstacle. If it applies to you, the first step is this: Put the payee bank's certificate of registration under the State Co-operative Societies Act on record. Both this decision and the Madras High Court in Thorapadi Urban Co-op Credit Society turned on that document.
The respondent was a co-operative credit society providing credit facilities to its members and marketing their agricultural produce, which also ran a kirana section, rice mills, a van section, a medical shop, an arecanut trading section, lodging under the name Samrat Hotels at Sirsi, and plying and hiring of goods carriage. It claimed a deduction of Rs 4,09,34,404 under s.80P together with a deduction under s.10(34). The Assessing Officer disallowed Rs 3,34,970 of the s.80P(2)(d) claim on the ground that this represented interest earned on deposits with co-operative banks, taxable as income from other sources. The CIT(A) allowed the society's appeal and deleted the addition, and the Tribunal, Bangalore Bench 'C', dismissed the Revenue's appeals by order dated 22 January 2016 in ITA No. 709/BANG/2015 and connected appeals. The Revenue appealed under s.260A, proposing two questions, both founded on the Supreme Court's decision in Totgars Co-operative Sale Society Ltd. v. Income Tax Officer, Civil Appeal Nos. 1622 to 1629 of 2010 decided on 8 February 2010 — the same assessee — and on the proposition that interest earned on funds not required for business purposes is other income. The matter was decided on 2017-01-05 by the High Court (Raghvendra S. Chauhan J and Sreenivas Harish Kumar J (judgment per Raghvendra S. Chauhan J)). On those facts the High Court held as follows. The appeal was dismissed and neither proposed question was held to arise. The limited issue before the Tribunal was whether, for the purposes of s.80P(2)(d), a co-operative bank is to be considered a co-operative society; it is, because 'co-operative society' denotes a genus of large extent while 'co-operative bank' is a word of limited extent identifying a species of that genus, and the species is necessarily covered by the genus. The interest the society earned from a co-operative bank was therefore deductible and the Assessing Officer was not justified in denying the deduction. The Supreme Court's decision in Totgars was inapplicable because it dealt with the interpretation of s.80P(2)(a)(i), whereas the present case required the interpretation of s.80P(2)(d).
The Court held the Revenue's contention untenable because the issue before the Tribunal had been a limited one, and observed that if a co-operative bank is a co-operative society then interest earned by a co-operative society from a co-operative bank must be deductible. It reasoned that a co-operative society can be of different natures and can carry on different activities, and that a co-operative society doing banking is merely a variety of co-operative society; the species is covered by the genus. It supported that conclusion by reference to the definition of a primary co-operative bank in s.56 of the Banking Regulation Act 1949, from which it concluded that a co-operative society carrying on banking is included within the words 'co-operative society'. It recorded as admitted that the interest the society earned was from a co-operative bank, and held that s.80P(2)(d) therefore permitted the interest to be deducted from gross income in computing total income. It distinguished the Supreme Court's decision in Totgars, on which both proposed questions rested, on the ground that it dealt with s.80P(2)(a)(i) and not s.80P(2)(d). In the words reproduced by the source cited on this page: "Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society"." The decision followed or applied Totgars Co-operative Sale Society Ltd. v. Income Tax Officer (SC, 8 February 2010) — distinguished as a decision on s.80P(2)(a)(i).
It was decided by the High Court on 2017-01-05 and is reported as I.T.A. No. 100069/2016 (High Court of Karnataka, Dharwad Bench). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80P, section 80P(1), section 80P(2)(d), section 80P(2)(a)(i), section 10(34), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed and neither proposed question was held to arise. The limited issue before the Tribunal was whether, for the purposes of s.80P(2)(d), a co-operative bank is to be considered a co-operative society; it is, because 'co-operative society' denotes a genus of large extent while 'co-operative bank' is a word of limited extent identifying a species of that genus, and the species is necessarily covered by the genus. The interest the society earned from a co-operative bank was therefore deductible and the Assessing Officer was not justified in denying the deduction. The Supreme Court's decision in Totgars was inapplicable because it dealt with the interpretation of s.80P(2)(a)(i), whereas the present case required the interpretation of s.80P(2)(d). It arises in Co-operative Societies, Deductions & Disallowances and How Tax Law Is Read matters, on section 80P, section 80P(1), section 80P(2)(d), section 80P(2)(a)(i), section 10(34) of the Income Tax Act 1961, and was decided by Raghvendra S. Chauhan J and Sreenivas Harish Kumar J (judgment per Raghvendra S. Chauhan J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Frame the claim under s.80P(2)(d) and keep it separate from any claim under s.80P(2)(a)(i); the answer to Totgars is that it construes a different clause. Tell the client that the point is contested and that the Karnataka High Court has decided it both ways. Do not present it as settled either way. Cite the decisions of your own jurisdictional High Court first; where there is none, cite the split honestly and rely on the rule that a decision in favour of the assessee is to be preferred where two views are possible. Do not overlook s.80AC. From assessment year 2018-19 the whole of s.80P is lost unless the return is filed within the s.139(1) due date, and a well-argued s.80P(2)(d) claim fails on that ground alone. Check separately whether the society is itself hit by s.80P(4).
High Courts differ on this point. The same High Court, at the same Dharwad Bench, took the opposite view five months later, on 16 June 2017, in Pr. Commissioner of Income Tax v. The Totagars Co-operative Sale Society (I.T.A. No. 100066/2016 and batch), which the library already carries under the slug pcit-v-totagars-80p-2d-karnataka. So the conflict is internal to Karnataka as well as between States. The later Bench did not merely take a different view: it considered this judgment, noted that no binding precedent had been discussed in it, and said 'we are unable to follow the same in the face of the binding precedent laid by the Hon'ble Supreme Court', concluding that 'the said decision of the Co-ordinate Bench is distinguishable and cannot be applied'. Anyone citing this judgment in Karnataka will be met with that. Special leave petitions against that later judgment — SLP(C) Nos. 26314-26321 of 2017, SLP(C) No. 26817 of 2017 and SLP(C) Nos. 553-569 of 2018 — were part heard before M.R. Shah and A.S. Bopanna JJ on 27 October 2021 and listed for 10 November 2021 'as part heard'. That part-heard status has since lapsed and the file has passed through later Benches: orders of 3 July 2023 (A.S. Bopanna and M.M. Sundresh JJ, 'List the matters after four weeks on a non-miscellaneous day'), 20 November 2024, 27 November 2024, and 15 January 2025 before J.B. Pardiwala and R. Mahadevan JJ, 'Post these matters for final disposal on 19-2-2025'. No disposal could be traced after that date, and no Supreme Court judgment on s.80P(2)(d) was found on a most-recent search restricted to the Supreme Court. The petitions must be treated as pending and possibly close to disposal — check the current status before advising. On the same side as this decision, the library already carries PCIT v. Rajkot Lodhika Sahakari Kharid Vechan Sangh (Gujarat, 2025); the Madras High Court took the same view on 10 October 2023 in Thorapadi Urban Co-op Credit Society Limited v. ITO, which is a separate entry in this batch. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
There are date and reference conflicts in the report. Paragraph 3 gives the CIT(A) order as dated 30.03.2015; paragraph 4 says the Revenue was aggrieved by 'order dated 31.03.2015'. Paragraph 9 cites 'Section 56(i)(ccv) of the Banking Regulations Act, 1949'; the provision is s.56(ccv) of the Banking Regulation Act 1949, which defines 'primary co-operative bank'. Paragraph 7 says that if a co-operative bank is a co-operative society then the interest 'would necessarily be deductable under Section 80P(1) of the Act', where the operative clause is s.80P(2)(d) read with s.80P(1). Paragraph 8 supports the genus-species conclusion partly by saying the issue 'has been decided by the ITAT itself in different cases', without naming them. The cause title in the print view is I.T.A. No. 100069/2016 alone although paragraph 1 records that the Tribunal had dismissed six Revenue appeals. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed and neither proposed question was held to arise. The limited issue before the Tribunal was whether, for the purposes of s.80P(2)(d), a co-operative bank is to be considered a co-operative society; it is, because 'co-operative society' denotes a genus of large extent while 'co-operative bank' is a word of limited extent identifying a species of that genus, and the species is necessarily covered by the genus. The interest the society earned from a co-operative bank was therefore deductible and the Assessing Officer was not justified in denying the deduction. The Supreme Court's decision in Totgars was inapplicable because it dealt with the interpretation of s.80P(2)(a)(i), whereas the present case required the interpretation of s.80P(2)(d).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The AO cites Citizen Co-operative Society to deny my 80P claim. How far does it go?
We are a state-level co-operative agricultural and rural development bank. Does 80P(4) block our deduction?
My society lends to non-members too. Does that wipe out its 80P(2)(a)(i) deduction?
Shares held for control, or as stock-in-trade. Does s.14A still bite?