AMBALLUR SERVICE CO OPERATIVE BANK LIMITED NO 503,MANNAMPETTA, THRISSUR vs. INCOME TAX OFFICER, THRISSUR

Brief facts of the case are that the 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. It is engaged in the business of accepting deposits from members and lending money to members for agricultural and allied activities. The appellant filed return of income for AY 2020-21 Amballur Service Co-op. Bank Ltd. disclosing Nil income. The same was revised on 30.03.2021 disclosing Nil income. Against the said return of income, the assessment was completed by the ITO, Ward 2(1), Thrissur (hereinafter called "the AO") vide order dated 30.09.2022 passed u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961 (the Act) at a total income of Rs. 1,37,42,496/-. While doing so, the AO denied deduction u/s. 80P of the Act on account of interest income of Rs. 1,37,42,496/- received from District Co-operative Bank by holding that such income does not form part of business of providing credit facilities to the members.

Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.

We have heard the rival contentions and perused the material available on record. The issue in the present appeal relates to whether the interest income earned by the co-operative societies on investments held with District Co-operative Bank qualifies for deduction u/s. 80P(2)(d) of the Act. The issue is no longer res integra as it stands adjudicated by Hon'ble Jurisdictional High Court’s decision in the case of PCIT v. Peroorkada Service Co-op. Bank Ltd. [2022] 442 ITR 141 (Ker) wherein their Lordships have rejected the Revenue’s identical stand as under: - Amballur Service Co-op. Bank Ltd. “12.2 Section 80P deals with Co-operative Societies' computation of income. As already noted, it has four sections and several sub-sections and clauses. The Parliament has considered the various situations in which the exigible income and the deductable income of the assessee is considered while computing the income of the assessee. For getting deduction, in our considered view, the assessee must also establish that the interest income earned by the assessee is from a Co-operative Society. As a matter of fact, in the case on hand, there is no dispute that it is not from a Co-operative Society registered under Kerala Co-operative Societies Act. The interest income earned from District Co-operative Bank/State Co-operative Bank, in the facts and circumstances of the case, do come within Section 80P(2)(d). Therefore, the income constitutes income from other sources and the only eligible deduction is covered by Section 80P(2)(d) viz. Interest or dividend derived by the assessee from its investments with any other Co-operative Society. The source of interest income is from Bank and Treasury, interest income received from Treasury be included in the computation of total income of the assessee. In other words, interest earned from Treasury is inadmissible for deduction and interest income from Co-operative Societies registered under the Kerala Co-operative Societies Act are eligible for deduction. The contra consideration of Commissioner of Income Tax (Appeals) and the Tribunal is incorrect and liable to be modified as stated above. Hence, it is held that the interest income earned by the assessee does not come within the ambit of Section 80P(2)(a)(i) and permissible deduction of interest income is limited to Co-operative Societies/Banks registered under Kerala Co-operative Societies Act under clause (d) of the Act and effect order on the above lines is made by the Assessing Officer. The questions are accordingly answered.”

Respectfully following the above decision of the Hon'ble Jurisdictional High Court, we hold that the assessee is entitled for deduction under section 80P(2)(d) of the Act on account of interest received from District Co-op. Bank/other co-operative societies.

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