THEVALAKARA FARMERS SERVICE CO-OPERATIVE BANK LIMITED NO.4047,KARUNAGAPPALLY vs. ITO, WARD 2, ALAPPUZHA

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

At the outset we find that there is a delay of 309 days in filing the present appeal. The appellant had filed a petition seeking condonation of delay by stating that the appellant was not served the Thevalakara Farmers Service Co-op. Bank Ltd. order of the NFAC either through email or through physical mode. In the absence of any material to the contrary to the averments made in the petition deserve to be accepted. Accordingly, we hold that there is no delay in filing the appeal and admit the appeal for adjudication.

As regards the merits of addition on account interest received from Treasury and Scheduled banks, etc., the issue is no longer res judicata as it stands settled by the judgement of the Hon'ble Jurisdictional High court in the case of CIT vs. Sahyadri Co-operative Credit Society Ltd. in of 2019, wherein it was held as under: - “ The question that arises therefore is whether, merely because the assessee chooses to deposit its surplus profit in a permitted bank or financial institution, and earns interest on such deposits, such interest would cease to form part of its profits and gains attributable to its business of providing credit facilities to its members? In our view that question must be answered in the negative, since we cannot accept the contention of the Revenue that the interest earned on those deposits loses its character as profits/gains attributable to the main business of the assessee. It is not as though the assessee in the instant case had used the surplus amount (the profit earned by it] for an investment or activity that was unrelated to its main business, and earned additional income by way of interest or gain through such activity. The assessee had only deposited the profit earned by it in the manner mandated under Section 63 of the Multi-State Co-operative Societies Act, or permitted by Section 64 of the said Act. In other words, it dealt with the surplus profit in a manner envisaged under the regulatory Statute that regulated, and thereby legitimized, its business of providing credit facilities to its members. Under those circumstances, if the assessee managed to earn some additional income by way of interest on the deposits made, it could only be seen as an enhancement of the profits and gains that it made from its principal activity of providing credit facilities to its members. The nature and character of the principal income [profits earned by the assessee from its lending activity) does not change merely because the assessee acted in a prudent manner by depositing that income in a bank, instead of Thevalakara Farmers Service Co-op. Bank Ltd. keeping it in hand. The provisions of the I.T. Act cannot be seen as intended to discourage prudent financial conduct on the part of an assessee.”

Respectfully following the above decisions of the Hon'ble Jurisdictional High Court, we hold that the assessee is entitled for deduction under sections 80P(2)(i)(a) of the Act in respect of interest received from Treasury, Scheduled Banks, etc.

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