My society deposited part of the income from its members' business in a nationalised bank. The Assessing Officer says the interest is income from other sources and not deductible under s.80P(2)(a), relying on Totgars. Is there an answer?
There is one, and it turns on two words. The High Court held that s.80P(2)(a) allows the whole of the profits and gains of business 'attributable to' the listed activities, not merely those 'derived from' them, that 'attributable to' is wider, and that where the original source of the deposits was the income from a listed activity the character of that income is not lost when it is temporarily deposited in a bank. Totgars was distinguished on its facts.
Decided by the High Court (V. Ramasubramanian J and Ms J. Uma Devi J (judgment per V. Ramasubramanian J)) on 2017-03-15, reported as Writ Petition Nos. 12727 of 2016 and batch (Andhra Pradesh High Court); no equivalent-citation line traced. It bears on section 80P, section 80P(2)(a), section 143(3) of the Income Tax Act 1961, in Co-operative Societies, Deductions & Disallowances and How Tax Law Is Read matters.
The library already carries Totgars, which is the obstacle, and Tumkur Merchants, which is one route around it. This decision is a third route and a different one: instead of asking whether the funds were surplus or operational, it asks where the money originally came from and leans on the deliberate legislative choice of the wider phrase. The Court's textual point is a good one — the Income-tax Act elsewhere uses 'directly attributable to', which would narrow the expression, so the unqualified 'attributable to' must be wider than 'derived from'. Its factual distinction of Totgars is equally worth having: in Totgars the assessee had not paid its members the sale proceeds of their produce but had invested that money, so the investments appeared as liabilities representing money belonging to the members, whereas here the deposits came out of the society's own income from an activity listed in clause (a). That is the distinction to plead. Be candid with the reader, though: this is a High Court decision distinguishing a Supreme Court decision, the Supreme Court in Totgars having held that interest arising from the investment of surplus funds cannot be attributed to the activities of the society, and it was given in writ petitions where the Court expressly noted that an alternative appellate remedy existed.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The Vavveru Co-operative Rural Bank Limited and the Buchireddi Palem Co-operative Rural Bank Limited challenged orders of assessment under s.143(3) for assessment years 2010-11, 2013-14 and 2014-15. The societies are engaged in the sale of fertilisers to their members. A portion of the income derived from that activity was deposited by them in nationalised banks, and they treated the interest on those fixed deposits as income attributable to the profits and gains of business and so eligible for deduction under s.80P(2)(a). The Assessing Officer treated the interest as income from other sources and denied the deduction. The societies came to the High Court under Article 226 rather than appealing to the CIT(A), contending that the denial of the deduction was completely contrary to the statutory provisions and went to the root of the Assessing Officer's jurisdiction. The Court recorded that an effective statutory alternative remedy existed but entertained the petitions on that basis.
The writ petitions were allowed and the Assessing Officer's orders were set aside insofar as they treated the interest income as not allowable as a deduction under s.80P(2)(a). The original source of the investments made in the nationalised banks was admittedly the income the societies derived from the activities listed in sub-clauses (i) to (vii) of clause (a), and the character of that income is not lost, especially given that the statute uses the expression 'attributable to' and not 'derived from' or 'directly attributable to'.
The Court identified the real controversy as whether the interest on the fixed deposits was profits and gains of business attributable to one of the activities in sub-clauses (i) to (vii) of clause (a) of s.80P(2). It accepted the assessees' textual argument that because the statute uses 'attributable to' and not 'derived from', clause (a) should receive a wider interpretation, and reinforced the point by noting that the Income-tax Act elsewhere uses the expression 'attributable to' with the prefix 'directly', which would narrow it; the fact that 'attributable to' is wider in scope than 'derived from' therefore could not be denied. It set out the two stages of Totgars — the Karnataka High Court having held that where a society not carrying on banking business invested its surplus funds in security term deposits the interest was relatable to its profits and gains, and the Supreme Court having held on appeal that interest arising out of the investment of surplus funds cannot be attributed to the activities of the society. It then distinguished Totgars on the facts: the assessee there was a co-operative credit society which also marketed its members' agricultural produce, its other business activity had resulted in a net loss, and it had not paid its members the proceeds of the sale of their produce but had invested those proceeds in banks, so that the investments were shown as liabilities representing money belonging to the members. In the case before it the original source of the investments was the societies' own income from the listed activities, and that character was not lost.
The original source of the investments made by the petitioners in nationalised Banks is admittedly the income that the petitioners derived from the activities listed in sub-Clauses (i) to (vii) of Clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not anyone of the two expressions, namely, derived from or directly attributable to.
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Handle my notice → Ask a CA on WhatsAppThere is one, and it turns on two words. The High Court held that s.80P(2)(a) allows the whole of the profits and gains of business 'attributable to' the listed activities, not merely those 'derived from' them, that 'attributable to' is wider, and that where the original source of the deposits was the income from a listed activity the character of that income is not lost when it is temporarily deposited in a bank. Totgars was distinguished on its facts. This was decided by the High Court (V. Ramasubramanian J and Ms J. Uma Devi J (judgment per V. Ramasubramanian J)) and bears on section 80P, section 80P(2)(a), section 143(3) of the Income Tax Act 1961. It is reported as Writ Petition Nos. 12727 of 2016 and batch (Andhra Pradesh High Court); no equivalent-citation line traced. The library already carries Totgars, which is the obstacle, and Tumkur Merchants, which is one route around it. This decision is a third route and a different one: instead of asking whether the funds were surplus or operational, it asks where the money originally came from and leans on the deliberate legislative choice of the wider phrase. The Court's textual point is a good one — the Income-tax Act elsewhere uses 'directly attributable to', which would narrow the expression, so the unqualified 'attributable to' must be wider than 'derived from'. Its factual distinction of Totgars is equally worth having: in Totgars the assessee had not paid its members the sale proceeds of their produce but had invested that money, so the investments appeared as liabilities representing money belonging to the members, whereas here the deposits came out of the society's own income from an activity listed in clause (a). That is the distinction to plead. Be candid with the reader, though: this is a High Court decision distinguishing a Supreme Court decision, the Supreme Court in Totgars having held that interest arising from the investment of surplus funds cannot be attributed to the activities of the society, and it was given in writ petitions where the Court expressly noted that an alternative appellate remedy existed. If it applies to you, the first step is this: Trace the deposits to their source and prove it. The whole of this reasoning rests on the finding that the original source of the money deposited was income from an activity listed in sub-clauses (i) to (vii) of clause (a).
The Vavveru Co-operative Rural Bank Limited and the Buchireddi Palem Co-operative Rural Bank Limited challenged orders of assessment under s.143(3) for assessment years 2010-11, 2013-14 and 2014-15. The societies are engaged in the sale of fertilisers to their members. A portion of the income derived from that activity was deposited by them in nationalised banks, and they treated the interest on those fixed deposits as income attributable to the profits and gains of business and so eligible for deduction under s.80P(2)(a). The Assessing Officer treated the interest as income from other sources and denied the deduction. The societies came to the High Court under Article 226 rather than appealing to the CIT(A), contending that the denial of the deduction was completely contrary to the statutory provisions and went to the root of the Assessing Officer's jurisdiction. The Court recorded that an effective statutory alternative remedy existed but entertained the petitions on that basis. The matter was decided on 2017-03-15 by the High Court (V. Ramasubramanian J and Ms J. Uma Devi J (judgment per V. Ramasubramanian J)). On those facts the High Court held as follows. The writ petitions were allowed and the Assessing Officer's orders were set aside insofar as they treated the interest income as not allowable as a deduction under s.80P(2)(a). The original source of the investments made in the nationalised banks was admittedly the income the societies derived from the activities listed in sub-clauses (i) to (vii) of clause (a), and the character of that income is not lost, especially given that the statute uses the expression 'attributable to' and not 'derived from' or 'directly attributable to'.
The Court identified the real controversy as whether the interest on the fixed deposits was profits and gains of business attributable to one of the activities in sub-clauses (i) to (vii) of clause (a) of s.80P(2). It accepted the assessees' textual argument that because the statute uses 'attributable to' and not 'derived from', clause (a) should receive a wider interpretation, and reinforced the point by noting that the Income-tax Act elsewhere uses the expression 'attributable to' with the prefix 'directly', which would narrow it; the fact that 'attributable to' is wider in scope than 'derived from' therefore could not be denied. It set out the two stages of Totgars — the Karnataka High Court having held that where a society not carrying on banking business invested its surplus funds in security term deposits the interest was relatable to its profits and gains, and the Supreme Court having held on appeal that interest arising out of the investment of surplus funds cannot be attributed to the activities of the society. It then distinguished Totgars on the facts: the assessee there was a co-operative credit society which also marketed its members' agricultural produce, its other business activity had resulted in a net loss, and it had not paid its members the proceeds of the sale of their produce but had invested those proceeds in banks, so that the investments were shown as liabilities representing money belonging to the members. In the case before it the original source of the investments was the societies' own income from the listed activities, and that character was not lost. In the words reproduced by the source cited on this page: "The original source of the investments made by the petitioners in nationalised Banks is admittedly the income that the petitioners derived from the activities listed in sub-Clauses (i) to (vii) of Clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not anyone of the two expressions, namely, derived from or directly attributable to." The decision followed or applied Totgars Co-operative Sale Society Ltd. v. ITO (Karnataka High Court) and on appeal (2010) 322 ITR 283 (SC) — set out and distinguished on the facts.
It was decided by the High Court on 2017-03-15 and is reported as Writ Petition Nos. 12727 of 2016 and batch (Andhra Pradesh High Court); no equivalent-citation line traced. 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(2)(a), section 143(3), 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 writ petitions were allowed and the Assessing Officer's orders were set aside insofar as they treated the interest income as not allowable as a deduction under s.80P(2)(a). The original source of the investments made in the nationalised banks was admittedly the income the societies derived from the activities listed in sub-clauses (i) to (vii) of clause (a), and the character of that income is not lost, especially given that the statute uses the expression 'attributable to' and not 'derived from' or 'directly attributable to'. It arises in Co-operative Societies, Deductions & Disallowances and How Tax Law Is Read matters, on section 80P, section 80P(2)(a), section 143(3) of the Income Tax Act 1961, and was decided by V. Ramasubramanian J and Ms J. Uma Devi J (judgment per V. Ramasubramanian 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. Show that the money was the society's own, not money it was holding for members. That is what separated this case from Totgars, where the sale proceeds of members' produce stood as liabilities in the society's books. Argue the statutory text expressly: s.80P(2)(a) says 'attributable to', not 'derived from' and not 'directly attributable to', and the difference was deliberate. Do not rely on the writ route as a matter of course. The Court noted that an appeal to the CIT(A) was available and entertained the petitions only because the assessees framed the denial of deduction as going to the root of jurisdiction. Where the interest comes from a co-operative bank rather than a nationalised bank, run the s.80P(2)(d) argument as well; it is a separate and often easier claim. For assessment year 2018-19 onwards check s.80AC first: the whole deduction is forfeited if the return was not filed within the s.139(1) due date.
Still good law. A citator search returns 238 later decisions, four of them from High Courts. The Telangana High Court applied it as binding authority in The Ismailia Co-operative Credit Society v ACIT (26 March 2026): at para 19 the Bench recorded that it had followed Vavveru on similar facts in SBI Staff Mutually Aided Co-operative Credit Society and had 'allowed the appeal by directing the respondent to allow the assessee/petitioner herein to claim deduction under Section 80P(2)(a)(i)', holding that 'by applying the same principles, since the facts and circumstances are similar, the said judgments are binding on the Assessing Officer and need to be followed', and at para 23 it worked through Vavveru's tabular categorisation of section 80P. The Kerala High Court takes it up in M/s Hosdurg Range Kallu Chethu Vyavasaya Thozhilali Co-operative Society v CIT (23 November 2021) and the Calcutta High Court in Development Bank Ltd v DCIT (6 August 2025). ONE ADVERSE DEVELOPMENT TO FLAG: in UOH Staff Cooperative Credit Society v ITO (Hyderabad Tribunal, 21 January 2026) the Bench declined to follow it at paras 7 to 8, on the footing that 'the said judgment was rendered prior to the decision of the Hon'ble Supreme Court in the case of Bengaluru Club Vs. CIT (supra), and the benefit of the said decision of the Hon'ble Supreme Court was not available to the Hon'ble High Court', holding interest from nationalised banks not deductible under section 80P(2)(a)(i) or 80P(2)(d). A Tribunal cannot displace a High Court, and the Telangana High Court itself continued to apply Vavveru two months later, but the argument is being run. A word of caution about one citation that reads like support and is not: in The Chorode Service Co-operative Bank v ITO (Cochin Tribunal, 5 November 2024) the Vavveru discussion sits inside the quoted CIT(A) order, and the Tribunal's own operative words follow a Visakhapatnam Tribunal decision. No Supreme Court decision cites the judgment and no pending challenge is traceable. 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.
The report of this judgment carries no court name in its header; it begins with the names of the judges. It is indexed under the Andhra Pradesh High Court, and it is a Division Bench sitting on writ petitions, but the header itself does not say so, and the court's formal style is therefore not stated on this page. The report has stripped the quotation marks that the judgment plainly used around the expressions being construed, so paragraphs 12, 13 and 36 read 'the expression attributable to' and 'the expression derived from' without inverted commas; the quoted words 'anyone of the two expressions' in paragraph 36 appear exactly so in the source and are reproduced without correction. Paragraphs 1, 2, 3, 7, 8, 12, 13, 19, 20, 34, 36 and 37 have been read in full; the intervening paragraphs, including the passages the judgment devotes to s.80P(4), have not been read, and nothing in this entry rests on them. Numbering gaps in the facts and reasoning fields reflect that, not omissions in the source. 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 writ petitions were allowed and the Assessing Officer's orders were set aside insofar as they treated the interest income as not allowable as a deduction under s.80P(2)(a). The original source of the investments made in the nationalised banks was admittedly the income the societies derived from the activities listed in sub-clauses (i) to (vii) of clause (a), and the character of that income is not lost, especially given that the statute uses the expression 'attributable to' and not 'derived from' or 'directly attributable to'.
TaxSphere, “Vavveru Co-operative Rural Bank Ltd v CCIT”, https://taxnotice.vittsphere.com/caselaw/case/vavveru-co-operative-rural-bank-v-ccit-attributable-to-80p-2-a/ (validity last checked 2026-09-07)
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The Tribunal remanded the nominal member issue to the Assessing Officer but recorded findings on the merits while doing so, leaving the officer nothing to decide. Is there anything I can do about that in the High Court?
The Assessing Officer taxed our interest on deposits under s.56 by simply citing Totgars, without answering our case that the deposits are a statutory reserve we are obliged to maintain and that the interest we paid on borrowings should be netted against it. Is that order sustainable?
My co-operative society filed its return late and lost section 80P because of section 80AC. If the delay is condoned under section 119(2)(b), does the deduction come back?
The Tribunal refused my society's s.80P(2)(a)(i) claim on bank fixed deposit interest saying it had already been given s.80P(2)(d). Can the two clauses be treated as interchangeable, and if the interest really is income from other sources, what happens to my cost of funds?
