M/S. THE PANNIYANKARA SERVICE CO-OPERATIVE BANK LIMITED,KOZHIKODE vs. ITO, WARD-1(3), KOZHIKODE

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ITA 419/COCH/2025Status: DisposedITAT Cochin25 June 2025AY 2015-16Bench: SHRI INTURI RAMA RAO (Accountant Member), SHRI SONJOY SARMA (Judicial Member)4 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal, following the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd., held that the assessee, being a primary agricultural credit co-operative society, is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act.

What were the facts?

The assessee, a co-operative society, filed its return for AY 2015-16 declaring Nil income after claiming a deduction of Rs. 82,46,633/- under Section 80P. The Assessing Officer completed the assessment at a total income of Rs. 1,48,86,392/-, making additions under Section 40A(3) and for payments without TDS. The CIT(A) confirmed the AO's action, leading to the present appeal before the Tribunal.

What were the issues?

Whether a primary agricultural credit co-operative society is entitled to a deduction under Section 80P(2)(a)(i) of the Income Tax Act, considering the interpretations by the Supreme Court.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(2)(a)(i),Section 80P(4),Section 143(3),Section 40A(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, COCHIN BENCH

Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM

For Appellant: Shri Aryn Raj S., Advocate
For Respondent: Smt. Leena Lal, Sr. D.R
Hearing: 13.06.2025Pronounced: 25.06.2025

Assessment Years: 2015-16 Panniyankara Service Co-op. Bank Ltd. .......... Appellant Haseena Building, Kallai, Kozhikode 673003 [PAN: AADAP2833J] vs. The Income Tax Officer, Ward -3, Kozhikode .......... Respondent Appellant by: Shri Aryn Raj S., Advocate Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 13.06.2025 Date of Pronouncement: 25.06.2025 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 06.03.2025 \ for Assessment Year (AY) 2015-16.

2.

Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. The return of income for AY 2015-16 was filed on 30.03.2017 declaring Nil income after claiming deduction u/s. 80P of the Income Tax Act, 1961 (the Act) of Rs. 82,46,633/-. Against the said Panniyankara Service Co-op. Bank Ltd. return of income, the assessment was completed by the ITO, Ward 1(3), Kozhikode (hereinafter called "the AO") vide order dated 20.12.2017 passed u/s. 143(3) of the Act at a total income of Rs. 1,48,86,392/-. While doing so, the AO made deduction u/s. 80P(2)(a)(i) of Rs. 82,46,633/-. The AO also made additions of Rs. 65,96,559/- on account of payments made in violation of the provisions of section 40A(3) of the Act and Rs. 43,200/- on account of payment made without deduction of tax at source.

3.

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

4.

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

We have heard the rival contentions and perused the material 5. available on record. Since the appellant is a co-operative society classified as primary agricultural credit co-operative society, the appellant is entitled for deduction in respect of profits derived from business u/s. 80P(2)(a)(i) of the Act, this issue is no longer res integra, as it is covered by the judgement of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [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 Panniyankara Service Co-op. Bank Ltd. 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 co-operative 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.”

6.

Respectfully following the above decisions of the Hon'ble Supreme Court, we hold that the assessee is entitled for deduction under sections 80P(2)(a)(i) of the Act.

7.

In the result, the appeals filed by the assessee stand allowed.

Order pronounced in the open court on 25th June, 2025.

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