G 873 AYYAPPANTHANGAL URBAN CO-OP CREDIT SOCIETY LTD.,KANCHEEPURAM vs. ITO, WARD-8(2), CHENNAI

The assessee reiterated the claim of deduction u/s.80P of the Act before the ld.CIT(A) by filing a detailed response to the notices issued during the appellate proceedings. Further, the assessee stated that the return of income was filed u/s.142(1) of the Act before passing the order by the AO on 02.12.2019. Therefore, the claim of deduction u/s.80P of the Act has been made in the return of income and hence, the assessee is eligible to claim deduction u/s.80P of the Act. Therefore, the assessee prayed for allowing the deduction claimed u/s.80P of the Act. However, the ld.CIT(A) has dismissed the appeal of the assessee stating that the assessee had not filed the return of income before the due dates provided u/s.142(1) of the Act, apart from non-filing of the original return of income u/s.139(1) of the Act by passing an order dated 31.12.2024. Aggrieved by the order passed by the ld.CIT(A), the assessee is before us.

Before us the ld.AR for the assessee submitted that the assessee is a society registered under Tamilnadu Co-Operative Societies Act and the books of account of the assessee are audited by the department of co-operative audit, Government of Tamilnadu. Further, during the assessment proceedings the assessee had filed its audited books of accounts and the AO has considered the net profit declared by the assessee in the audited books of account as profit earned by the society for the purpose of taxation. Further, the ld.AR submitted that the return of income filed beyond the date prescribed u/s.142(1) of the Act has to be considered as valid return

Per contra, the ld.DR for the revenue submitted that the assessee had not filed the return of income either u/s.139(1) of the Act or before the date provided u/s.142(1) of the Act. Hence, the assessee is not eligible for deduction u/s.80P of the Act since the claim has not been made in the valid return of income as prescribed u/s.80A(5) of the Act and prayed for dismissing the appeal of the assessee.

We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with case laws relied on. Admittedly, the assessee is a cooperative society registered under The Tamil Nadu Co-Operative Societies Act and the books of accounts are audited by the co- operative department, Government of Tamil Nadu. The assessee had not filed its return of income u/s.139(1) of the Act and filed its return of income u/s.142(1) of the Act on 07.11.2019 which is beyond the date provided by the AO. However, we find that the assessee had filed the return of income u/s.142(1) of the Act before concluding the assessment order dated 02.12.2019 by claiming deduction u/s.80P of the Act to the tune of Rs.68,64,914/- (as per the return of income – Form ITR -5 – Page No.44.)

Further, we find that the AO and that of ld.CIT(A) has rejected the deduction u/s.80P of the Act claimed by the assessee stating that the return was not filed as :-5-: ITA. No.:359/Chny/2025

9. Coming back to the issue of interest income earned from fixed deposits and claimed deduction u/s.80P(2)(d) of the Act. The AO has denied deduction claimed u/s.80P(2)(d) of the Act in respect of interest income earned from a co-operative bank on the ground that as per the said provisions, interest earned from any other co-operative society is only eligible for deduction u/s.80P(2)(a)(i) of the Act. The AO has taken support from the decision of the Hon’ble Supreme Court in the case of M/s. Totagars Co-operative Sales Society Ltd., supra. We have gone through the findings recorded by the AO in the light of the decision of the Hon’ble Supreme Court in the said case and find that the fact of the case before the Hon’ble Supreme Court is entirely different from the facts of the present case. In the case before the Hon’ble Supreme Court, the assessee was a co-operative sales society which is engaged in the business of trading in agricultural produce for its members and during the course of its business it has parked surplus funds in other co- operative banks / nationalized banks and earned interest. In those facts, the Hon’ble Supreme Court came to the conclusion that the assessee is not entitled for deduction towards interest income u/s.80P(2)(d) of the Act, because such interest is not earned from its business activity. In this case, the assessee is primarily engaged in the business of providing credit facilities to its members and in the course of its business it has parked funds collected from its members in other co-operative banks / nationalized banks as per the statutory requirements of the co-operative societies Act. The assessee has treated interest earned from other co-operative banks as part of its business activity. Once the assessee has earned interest income as part of its business activity and such interest income is earned out of the funds belonging to its members, then the assessee is entitled for deduction u/s.80P(2)(d) of the Act in respect of such interest income. Therefore, we are of the considered view that the case laws relied upon by the ld.AO in the case of Totogars Co-operative Sales Society Ltd., is not applicable to the present facts. We further noted that an identical issue was considered by the Hon’ble Madras High Court in the case of CIT vs. Veerakeralam Primary Agricultural Co- operative Credit Society (2016) 388 ITR 492 (Mad), where the Hon’ble High Court after referring to the decision of the Hon’ble Supreme Court in the case of Totagars Co-operative Sales Society Ltd., held that the benefit of deduction u/s.80P of the Act is excluded for co-operative banks but credit co-operative societies are entitled to claim deduction u/s.80P of the Act in respect of interest income earned from deposits kept in other co-operative banks.

In this view of the matter and considering facts and circumstances of the case, we are of the considered view that the ld.CIT(A) was right in allowing the benefit of deduction claimed u/s.80P of the Act in respect of income derived from the activity including interest income earned from fixed deposits. We do not find any error or infirmity in the order of the CIT(A). Hence, we are inclined to uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue.” 10. In this view of the matter and consistent with view taken by the coordinate bench in appellant’s own case, we are of the considered view that the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act, in respect of income derived from its business activity including interest income earned from fixed deposits with other cooperative banks/societies. The ld. CIT(A), after considering relevant facts has rightly directed the Assessing Officer to delete additions made towards disallowance of deduction claimed u/s. 80P(2)(a)(i) of the Act and thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeals filed by the revenue for assessment years 2012-13, 2014-15 & 2017-18.

Therefore, in the present facts and circumstances of the case, since the assessee has filed the return of income on 07.11.2019 which is before concluding the assessment order dated 02.12.2019 and hence, eligible for deduction u/s.80P of the Act. In this view of the matter and consistent view taken by the coordinate bench decision, we are of the view that the assessee is entitled for deduction u/s.80P of the Act and hence, we set aside the order of the ld.CIT(A) and direct the AO to consider the return of income filed by the assessee as valid for the A.Y. 2017-18 and allow the deduction claimed u/s.80P of the Act . We order accordingly by allowing the grounds of appeal raised by the assessee.

In the result, the appeal filed by the assessee is allowed.