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Facts
The assessee, a cooperative society, filed its return showing Nil income. The AO reopened the assessment and disallowed interest income of Rs. 2,30,963/- and restricted deduction under section 80P(2)(a)(i) to net profit.
Held
The Tribunal held that Section 80P(4) of the Act is not applicable to cooperative societies earning interest income from other cooperative societies. Therefore, the disallowance of interest income was deleted.
Key Issues
Whether interest income earned by a cooperative society from another cooperative society is eligible for deduction under Section 80P(2)(d) and if Section 80P(4) is applicable in such cases.
Sections Cited
139(1), 143(3), 80P, 80P(2)(a)(i), 80P(2)(d), 147, 144B, 80P(4)
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2015-16 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 25.01.2025 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.147 r.w.s 144B of the Income-tax Act, 1961 (hereinafter “the Act”) dated 28.03.2022.
The assessee society has filed its return of income u/s. 139(1)
of the Act showing total income at Nil . The assessment u/s. 143(3) of the Act was completed at total income of Rs Nil after allowing deduction u/s. 80P of the Act up to gross total income of Rs. 14,41,757/-. The A.O in the assessment order has noted that the assessee is eligible for deduction u/s. 80P(2)(a)(i) of the Act of Rs. 17,50,189/- and deduction u/s. 80P(2)(d) of the Act of Rs. 2,30,963/- , however restricted the deduction to gross total income . Subsequently , the A.O has reopened the assessment and made disallowance of interest income of Rs. 2,30,963/- claimed u/s. 80P(2)(d) of the Act and restricted the claim of deduction under section 80P(2)(a) to net profit as per profit and loss account of Rs. 6,11,136/- , thus making addition of Rs. 4,93,989/-.
The Ld. Authorized Representative (A.R) of the assessee has submitted that the assessee is a cooperative society and the interest income has been earned from Trichy District Central Cooperative Bank (TDCCB), which is also cooperative society and therefore, is eligible for the deduction u/s. 80P(2)(d) of the Act. The Ld. AR, in this respect has relied on the order of Coordinate Bench of this Tribunal in the case of Ottarkarattupalayam MPCS Ltd. vs. ITO in dated 15.01.2025 and the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC). The Ld. AR on restricting the claim of deduction u/s. 80P(2)(a)(i) of the Act has submitted that the A.O has wrongly considered the net profit of Rs.6,11,136/- only for the purpose of deduction claimed by totaling ignoring the computation statement available. Further, the Ld. AR has submitted that the assessee has duly added back the inadmissible expenses to arrive at the business income of Rs. 14,41,757/- and as per CBDT Circular No.37 of 2016 dated 02.11.2016, the assessee is entitled to claim the entire income computed from sections 30 to 43D of the Act and therefore, the assessee is entitled for deduction up to Rs. 14,41,757/-.
On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials available on record. The A.O has disallowed the interest income received from TDCCB amounting to Rs.2,30,963/- by invoking the provisions of Section 80P(4) of the Act. In our considered view, Section 80P(4) of the Act is not applicable to the case of the assessee, since the assessee is a co-operative society and the interest income in question has been earned from TDCCB, which is also a co-operative society. The Coordinate Bench of this Tribunal in the case of Ottarkarattupalayam MPCS Ltd. vs. ITO (supra) has held that such interest income is eligible for deduction u/s. 80P(2)(d) of the Act.
Respectfully following the same, we hold that the assessee is entitled to the claim of deduction and, therefore, the disallowance made by the A.O is hereby deleted.
With regard to the disallowance u/s. 80P(2)(a)(i) of the Act, the A.O has restricted the claim of deduction to the net profit from business as per the Profit and Loss Account at Rs.6,11,136/-. The Ld AR has argued that the assessee in the computation of income has computed the business income at Rs. 14,40,757/- after adding back the Non Statutory Reserve Created of Rs 8,50,454 debited in income & expenditure account and as per CBDT circular no 37 of 2016 deduction under chapter VI-A which are profit linked will extend to the addition made in accordance with the provisions relating to business income. We are in agreement with the Ld AR that the gross total income of Rs 14,41,757/- arrived at by the assessee, is the income of the society from carrying on the business of providing credit facilities to its member as provided in section 80P(2)(a)(i) of the Act, therefore same is allowable . Accordingly, the disallowance made by the A.O is unsustainable and is hereby deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 22nd day of August, 2025 at Chennai.