THE SULUR CO-OPERATIVE HOUSING SOCIETY LTD NO: SLM HSG-14,COIMBATORE vs. THE INCOME TAX OFFICER, NON CORPORATE WARD 4(1), COIMBATORE

The Assessee raised the following grounds of appeal : “1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to law, facts, and circumstances of the case and is liable to be quashed.

The CIT(A) has failed to record a clear and specific finding regarding the disallowance of deduction under section 80P and has merely affirmed the action of the Assessing Officer without independent adjudication, rendering the order non-speaking and legally unsustainable.

The CIT(A) has relied on the assessment order for AY 2016-17 while not considering the subsequent appellate order and giving effect order, wherein deduction under section 80P was allowed, thereby violating the principle of consistency.

The CIT(A) has held that interest income of Rs.42,58,022 is not eligible under section 80P(2)(a)(i) without examining whether such income arose in the course of the Appellant's regular business of providing credit facilities.

The CIT(A) has not adjudicated the alternative claim under section 80P(2)(d) in respect of interest earned from co-operative institutions and has denied the same without proper verification.

The CIT(A) has not specified the head of income under which the impugned interest income is assessed, resulting in ambiguity and lack of clarity in the findings.

The CIT(A) has confirmed the additions without proper verification and without adequately considering the submissions and evidences, thereby violating the principles of natural justice.

The appellant craves leave to add, alter, amend or withdraw any of the above grounds at the time of hearing.”

Briefly the facts of the case are that the appellant is a Co-operative Society incorporated under Tamilnadu Co-operative Societies Act, 1983. It is engaged in the business of providing financial assistance to its members for housing purpose. The Return of Income for the Assessment Year 2022-23 was filed on 29.11.2022 declaring income at Rs.1,26,000/- after claiming deduction u/s.80P of the Act of Rs.54,32,395/-. Against the said Return of Income, the assessment was completed by the e-Assessment Unit of the Department(hereinafter called ‘AO’) vide order dated 26.03.2024 passed u/s.143 r.w.s 144B of the Income Tax Act, 1961 at a total income of Rs.51,68,336/-. While doing so, the Assessing Office denied claim for deduction u/s.80P of Rs.50,42,338/- on the ground that the same represents the interest income of Rs.42,58,022/- being the interest income earned from Coimbatore District Central Bank Limited and interest and term deposits with Tamilnadu Co- operative Housing Federation as the same was not attributable to the activities of the Co-operative Society. The Assessing Officer also denied claim for deduction u/s.80P(2)(a) of the Act of Rs.7,84,316/- on the ground that no documentary evidence in support of computation of income was provided.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A) who vide impugned order confirmed the action of the Assessing Officer.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal.

We heard the rival submissions and perused the material on record. The issue that arises for our consideration is whether the interest income earned by cooperative society on investment with the cooperative banks qualifies for deduction u/s 80P(2)(a)(i) or not. The issue is no longer “res integra” as settled by the Hon’ble Madras High Court in the case of Thorapadi Uraban Cooperative Credit Society Ltd Vs Income Tax Officer, wherein it was held as under vide paras 8 to 13:- “….8 The main issue is to decide in the present case is as to whether the petitioner Co-operative Society is entitled for a deduction for the interest income received from the Co-operative Bank?

It would be appropriate to extract hereunder the relevant portion of section 80P(2)(d). "80 P. Deduction in respect of income of co-operative societies: (1) ** (2) The sums referred to in sub-section (1) shall be the following, namely: (a) to (c) ** (d) "in respect of any income by way of interest or dividends derived by the co- operative society from its investment with any other co-operative society, the whole of such income"

A reading of the above definition would make it clear that 'Co-operative Society' means a Co-operative Society registered under Co-operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.

The learned counsel for the respondent referred to the judgment of the Hon'ble Supreme Court rendered in Totgars Co-operative Sale Society Ltd. (supra), wherein the issue came up for consideration as to whether the interest income received by a Co-operative Bank from its members by way of providing the credit facilities to Its members is eligible for deduction or not. Ultimately the Hon'ble Supreme Court found that under section 80P(2)(0)(1), the same is eligible for deduction. Therefore, the law laid down by the Hon'ble Supreme Court is not applicable for in the present case as the eligibility of deduction of interest has to be decided under section 80P(2)(d) and not under section 80P(2)(a)(1). The learned counsel has also relied upon other judgments which are not applicable for the present facts of the present case.

At this juncture, it would be appropriate to refer a judgment passed by a Division Bench of this Court in CIT v. Salem Agricultural Producers Co- operative Marketing Society Ltd. [2016] 76 taxmann.com 225 (Mad.) [Tax Case Appeal No. 5 of 2015), wherein, apart from other substantial issues, the following issue has been framed for consideration, which reads as under:

In such view of the matter, since the impugned orders are passed without considering all these aspects, this Court is of the view that the same are liable to be set aside. Accordingly, the Writ Petitions are allowed and all the impugned notices are set aside. No costs. Consequently, all the connected miscellaneous petitions are closed….” 7. In the present case, there is no dispute that the appellant received interest income of Rs.42,58,022/- from Cooperative Bank. The ratio of decision of Hon‘ble Madras High Court in the case of Thorapadi Urban Coop Credit Society Ltd cited supra and CIT Vs. Salem Agricultural Producers Cooperative Marketing Society Ltd 76 taxmann.com 225 (Mad) is squarely applicable to the facts of the present case. Respectfully following the Hon’ble Madras High Court, we direct the AO to allow deduction the addition of Rs.42,58,022/- u/s.80P(2)(d) of the Act.

In the result, the appeal of the assessee stands allowed. Order pronounced in the open Court on 29th May, 2026.