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Facts
The assessee, a primary agricultural credit co-operative society, filed its return claiming deduction under Section 80P. The Assessing Officer denied the deduction for interest income of Rs. 3,47,17,257/-. The CIT(A) partially allowed the deduction for interest income but confirmed an addition of Rs. 2,10,61,795/- related to miscellaneous income, leading to the present appeal by the assessee.
Held
The Tribunal first condoned the 561-day delay in filing the appeal due to sufficient reasonable cause. On merits, it held that the miscellaneous income also qualified for deduction under Section 80P(2)(a)(i) as it had a direct nexus with the business activities, directing the AO to allow the deduction.
Key Issues
Whether the 561-day delay in filing the appeal should be condoned, and whether miscellaneous income earned by the cooperative society is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act.
Sections Cited
80P, 143(3), 144B
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
Assessment Year: 2020-21 Patteppadam Rural Cooperative Society Ltd. .......... Appellant Kottanellur P.O., Thrissur 680662 [PAN: AAAAP3007B] vs. The Income Tax Officer, Ward 2(1), Thrissur .......... Respondent Appellant by: Shri C.A. Jojo, Advocate Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 05.06.2025 Date of Pronouncement: 22.07.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 17.12.2023 for Assessment Year (AY) 2020-21.
Brief facts of the case are that that appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is classified as a primary agricultural credit co-operative society. The return of income for AY 2020-21 was filed on 13.02.2021 disclosing total income of Rs. 85,810/- after claiming Patteppadam Rural Cooperative Society Ltd. deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 (the Act) of Rs. 1,50,53,441/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward 2(1), Thrissur (hereinafter called "the AO") vide order dated 27.09.2022 passed u/s. 143(3) r.w.s. 144B of the Act at a total income of Rs. 1,51,39,251/-. While doing so, the AO had denied deduction u/s. 80P in respect of interest income received from co-operative society and co-operative bank by holding that deduction u/s. 80P was not available. Accordingly, denied deduction of interest income of Rs. 3,47,17,257/- by holding that such income is assessable under the head ‘income from other sources’.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order directed the AO to allow deduction of interest income of Rs 1,36,55,462/- following the decisions of the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. and the Hon'ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. v. CCIT [2017] 396 ITR 371. However, directed to confirm the addition in respect of miscellaneous income of Rs. 2,10,61,795/- by holding that the appellant had failed to substantiate that the same was earned during the course of normal business activities of the appellant society.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
At the outset there is a delay in filing the appeal by 561 days. The appellant had filed a petition seeking condonation of delay by stating that the matter was entrusted to the Secretary of the Society, Mr. Shaji P.R., who subsequently fell ill due to cancer and succumbed to death on 23.09.2024 after a long period of treatment. Now the new Secretary took time in initiating steps for preparation of the appeal. Thus, it resulted in delay of 561 days. Thus he submitted that the delay in filing the appeal may be condoned. Having regard to the averments made in the affidavit seeking condonation of delay, in the absence of any evidence contrary, we are of the considered opinion that the appellant society is prevented by sufficient reasonable cause in filing the appeal within the prescribed limit. Accordingly, we condone the delay and admit the appeal for adjudication.
We have heard the rival contentions and perused the material available on record. The issue in the present appeal relates to eligibility of miscellaneous income earned by the appellant society for deduction u/s. 80P(2)(a)(i) of the Act. There is no material on record to show that the miscellaneous income had no direct nexus with the business activities of the appellant society. Therefore, the miscellaneous income partake character of business income of the appellant society, which qualifies for deduction u/s. 80P(2)(i)(a) of the Act. Accordingly, direct the AO to allow deduction u/s. 80P of the Act.