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Facts
The assessee, a co-operative society, filed its return for AY 2017-18 declaring Nil income. The AO disallowed a deduction of Rs. 14,40,605/- claimed under Section 80P(2)(d) for dividend income received from other co-operative societies, and the CIT(A) upheld this disallowance.
Held
The Tribunal, following the jurisdictional High Court's decision in PCIT v. Peroorkada Service Co-op. Bank Ltd., held that dividend income received by a co-operative society from other co-operative societies is indeed eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Key Issues
Whether dividend income received by a co-operative society from other co-operative societies is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
143(2), 142(1), 143(3), 80P(2)(d), 80P(2)(a)(i), 80P
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
Assessment Year: 2017-18 Thudanganad Service Co-op. Bank Ltd. .......... Appellant Thudanganad P.O., Muttom 685587 [PAN: AACAT5997N] vs. The Income Tax Officer, Ward-1, Thodupuzha .......... Respondent Appellant by: Shri Arun Raj S., Advocate Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 26.05.2025 Date of Pronouncement: 23.06.2025 O R D E R This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-1, Nashik [CIT(A)] dated 20.03.2025 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the assessee is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. The return of income for AY 2017-18 was filed on 29.10.2017 declaring Nil income. The ITO, Ward 2, Thodupuzha (hereinafter called "the AO") issued notices u/s. 143(2) & 142(1) of the Income Tax Act, 1961 (the Act). In response to the notice u/s. 142(1) dated 09.10.2019, the assessee filed necessary documents. On verification of the bye laws and other documents it is found that the appellant is Thudanganad Service Co-op. Bank Ltd. engaged in banking activity. Against the said return of income, the assessment was completed by the AO vide order dated 19.12.2019 passed u/s. 143(3) of the Act at a total income of Rs. 14,40,605/-. While doing so, the AO disallowed the claim for deduction of Rs. 14,40,605/- u/s. 80P(2)(d) of the Act being dividend income received from other co-operative societies.
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.
I notice that this issue 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: - “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 Thudanganad Service Co-op. Bank Ltd. 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.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 23rd June, 2025.