CHINGOLI SERVICE CO-OPERATIVE BANK LIMITED,CHINGOLI vs. INCOME TAX OFFICER, ALAPPUZHA

Since identical issues and facts are involved in these appeals, they are heard together and disposed of by this common order.

For the sake of convenience and clarity the facts relevant to the appeal bearing for AY 2015-16 are stated herein.

Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, Chingoli Service Co-op. Bank Ltd. 1969. It is classified as primary agricultural credit co-operative society. It is engaged in the business of accepting deposits from members and lending money to its members. No regular return of income was filed u/s. 139(1) of the Income Tax Act, 1961 (the Act). However, the appellant filed return of income in response to notice u/s. 148 of the Income Tax Act, 1961 (the Act) on 17.06.2022 disclosing Nil income after claiming deduction u/s. 80P of the Act. Against the said return of income, the assessment was completed by the ITO, Ward-1, Alappuzha (hereinafter called "the AO") vide order dated 13.03.2024 passed u/s. 147 r.w.s. 144 & 144B of the Act at a total income of Rs. 5,59,991/- by denying the claim for deduction u/s. 80P of the Act.

Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal of the assessee for failure of the assessee to substantiate the deduction u/s. 80P of the Act.

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

We have heard the rival contentions and perused the material 7. 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 Chingoli Service Co-op. Bank Ltd. 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 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.”

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 on account of interest received from scheduled banks and Treasury.

Since identical issues and facts are involved in assessee’s appeal our findings in shall apply mutatis mutandis to this appeal also.