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Facts
The assessee, a cooperative society, filed appeals against the disallowance of deduction under Section 80P of the Income-tax Act for AYs 2017-18, 2018-19, and 2020-21. The Assessing Officer denied the claim, and the CIT(A) granted partial relief. The appeals were filed with a significant delay, which was condoned by the tribunal.
Held
The Tribunal, following the Supreme Court decision in Mavilayi Service Co-operative Bank Ltd. v. CIT, held that Section 80P is a benevolent provision to be read liberally. It concluded that cooperative societies engaged in banking are entitled to deduction under Section 80P(2)(a)(i) for interest income from scheduled banks and treasury, as Section 80P(4) does not exclude them.
Key Issues
Whether the assessee cooperative society is entitled to deduction under Section 80P(2)(a)(i) for interest income, despite the denial by the Assessing Officer and CIT(A).
Sections Cited
80P, 80P(2)(a)(i), 80P(2)(c)(ii), 80P(4), 143(2), 142(1), 143(3)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO & SHRI SONJOY SARMA
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, JUDICIAL MEMBER 198 & 209/COCH/2025 Assessment Years: 2017-18, 2018-19& 2020-21 Ayyanthole Panchayath Service Cooperative Bank Ltd....…..….……….Appellant Kariyattukara P.O., Kerala - 680611 [PAN:AACAA3641G] vs. ITO, Ward-2(1), Thrissur…..……….....................……........……...…..…..Respondent Appearances by: Shri Alan P Dev, Advocate, appeared on behalf of the assessee. Smt. Leena Lal, SNR AR, appeared on behalf of the Revenue. Date of concluding the hearing: June12, 2025 Date of pronouncing the order: August 12, 2025 ORDER Per Sonjoy Sarma, Judicial Member: These three appeals filed by the assessee, being a cooperative society, pertain to Assessment Years 2017-1I8, 2018-19, and 2020-21. Since the issues involved are common across all years, these appeals are heard together and disposed of by this consolidated order for the sake of convenience.
There is a delay of 385 days in and 385 days in 2025 in filing the respective appeals. The assessee filed condonation petitions citing sufficient and reasonable cause for the delay. After examining the contents of the applications and being satisfied with the reasons stated therein, the delay in all three cases is condoned, and the appeals are admitted for adjudication on merits.
, 198 & 209/COCH/2025 Assessment Years: 2017-18, 2018-19 & 2020-21 Ayyanthole Panchayath Service Cooperative Bank Ltd The assessee fled its return of income for AY 2017-18 and the case was selected for complete scrutiny Notices under Sections 143(2) and142(1) were issued. The Assessing Officer completed the assessment under Section 143(3) by denying the claim of deduction under Section 80P, assessing the total income at Rs.3,06,81,530/-.
On Appeal, the CIT(A) granted partial relief of Rs.50,000/- u/s 80P(2)(c)(ii) but sustained the denial of the main claim u/s 80P(2)(a)(i).
The assessee is now in appeal before the Tribunal. At the time of hearing, the ld. AR contends that the issue is squarely covered Mavilayi Service Co-operative Bank Ltd. v. CIT reported in [2021] 431 ITR 1 (SC) wherein it was held as under:
“To sum up, therefore, the ratio decidendi of Citizen Co-operative Society Ltd. (supra), must be given effect to. Section 80P of the Income-tax Act, being a benevolent provision enacted by Parliament to encourage and pro- mote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word "agriculture" into section 80P(2)(a) (i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes cooperative banks which are co-operative societies engaged in banking business, i.e., engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Co-operative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a) (i), notwithstanding that they may also be giving loans to their members which are not related to agriculture, Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.”
Respectfully following the above decisions of the Hon’ble Supreme Court, we hold that the assessee is entitled for deduction u/s 80P(2)(a)(i) of the Act on account of interest received from scheduled banks and treasury.
, 198 & 209/COCH/2025 Assessment Years: 2017-18, 2018-19 & 2020-21 Ayyanthole Panchayath Service Cooperative Bank Ltd
Since identical issues and facts are involved in assessee’s appeal & 209/Coch/25, our findings in Coch/25 shall apply mutatis mutandis to these appeals also.
In the result, the appeals filed by the assessee stand allowed.