Sikkim State Cooperative Supply and Marketing Federation Limited (SIMFED) v. Deputy Commissioner of Income-tax, Circle 3(2), Gangtok

1. FACTS OF THE CASE

SIMFED, a non-banking cooperative society with 93% State shareholding, claimed section 80P(2)(d) deduction for AY 2018–19 on interest from Sikkim State Cooperative Bank and Citizens Urban Cooperative Bank. Both were registered cooperative societies. Investments came from surplus funds and statutory reserves. The AO disallowed the claim, CIT(A) allowed it, and the Tribunal restored the disallowance on 18 June 2025.

Source: PDF p. 3

2. DISCUSSION BY THE COURT

The Court held that 80P(4) excludes cooperative banks as claimants, rather than SIMFED merely because it received interest from cooperative banks. It relied on Ashwin Kumar Urban Cooperative Society, (2024) 168 taxmann.com 314 (Gujarat), to distinguish the Supreme Court’s Totgars decision concerning 80P(2)(a)(i) and members’ funds shown as liabilities, and the Karnataka Totagars decision relied on by the Tribunal.

Source: PDF p. 6

3. JUDICIAL DECISION

Both substantial questions were answered for the assessee. The Court held SIMFED entitled to deduction under 80P(2)(d), set aside the Tribunal’s order in ITA 1582/KOL/2024 and allowed Tax Appeal 02/2025.

Source: PDF p. 7

4. OUTCOME

SIMFED succeeded on the deduction issue for AY 2018–19 on the facts recorded in this judgment.

Source: PDF p. 7

5. Expert Comments

AKHB editorial analysis, distinct from the Court’s findings.

Separate the claimant from the investment counterparty

The Court’s central distinction is that SIMFED is not a cooperative bank. Section 80P(4) was not applied to disqualify it simply because its investment counterparties were banks registered as cooperative societies.

Source: PDF p. 4

Identify the clause and the source of the funds

The claim was under 80P(2)(d), supported by the status of the two counterparties and investments of surplus and statutory reserves. The judgment distinguishes the different statutory clause and retained-member-fund setting of Totgars; it does not erase those distinctions.

Source: PDF p. 5

Do not export the result to every deposit

The recorded cooperative registration and fund context matter. The judgment does not decide interest from an ordinary commercial bank, a bank’s own deduction claim or every assessment year; subsequent treatment and the governing jurisdiction require separate checking.

Source: PDF p. 7