Loading judgment…
Facts
The assessee, a co-operative society, filed its return declaring a loss and claimed Rs.1.22 crore as bad debts, which arose from waiving interest and penalties on loans to its members as directed by the Government of Kerala. The Assessing Officer disallowed these bad debts, and the CIT(A) upheld the disallowance.
Held
The Tribunal held that the AO and CIT(A) erred by not appreciating that any disallowance would ultimately increase the profit eligible for deduction under Section 80P(2)(a)(i) of the Income-tax Act. Relying on a coordinate bench decision where a similar disallowance was added back to profit eligible for deduction, the Tribunal allowed the assessee's appeal.
Key Issues
Whether the disallowance of bad debts was correct when the assessee, a co-operative society, was entitled to a deduction under Section 80P(2)(a)(i) for its profits.
Sections Cited
143(1), 80P(2), 80P(2)(a)(i), 40(a)(ia)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
Asst.Year 2012-2013 The Kerala State Co-operative The Dy.Commisioner of Federation Limited No.4330 v. Income-tax, P.B.No.1896, Kaloor Corporate Cir.1(1) Ernakulam – 682 017. Kochi. PAN : AADAT3223E. (Appellant) (Respondent) Appellant by : --- None --- Respondent by : Smt.Leena Lal, Sr.AR Date of Pronouncement : 26.05.2025 Date of Hearing : 22.05.2025. O R D E R
Per Prakash Chand Yadav, JM :
The present appeal of the assessee is arising from the order of the National Faceless Appeal Centre / learned Commissioner of Income-tax (Appeals) [“CIT(A)” for short] dated 13.11.2024, having DIN & Order No.ITBA/NFAC/S/250/2024- 25/1070338336(1) and relates to the assessment year 2012- 2013.
Brief facts of the case as coming out from the orders of the authorities below are that the assessee is a co-operative society, registered under the provisions of Kerala Co-operative Societies Act, filed its return of income declaring loss of Rs.7,52,510. The return of income filed by the assessee was processed u/s.143(1) of the Income-tax Act, 1961, and . The Kerala State Co-op Federation Ltd. thereafter the case of the assessee was picked up for scrutiny. During the course of assessment proceedings, it has been observed by the AO that the assessee has claimed an amount of Rs.1.22 crore as bad debts. The AO asked the assessee about the claim of the assessee with respect to the bad debts. In response, the assessee replied that the assessee has granted certain loans to its members on interest, these loans were also attracting penal interest in case of default. The assessee has charged penal interest from the borrowers who committed default. However the assessee has subsequently waived the interest and penalty as directed by the Government of Kerala. As a result of which, this bad debts have been accrued to the assessee. Dissatisfied with the reply of the assessee, the AO disallowed the claim of bad debts. It is pertinent to mention here that deduction u/s.80P(2) has not been disturbed by the AO.
Aggrieved with the order of the AO, the assessee filed an appeal before the CIT(A) and inter alia argued that whatever disallowance is made by the AO would ultimately form parts of the profits of he society and available for deduction u/s.80P(2)(a)(i) of the Act. However, the CIT(A) could not find any force in the arguments of the assessee and affirmed the view of the AO
Aggrieved by the order of the CIT(A), the assessee has come up in appeal before us. Today, when the matter has been called for hearing, nobody appeared from the side of the assessee, despite proper service of notice. Therefore, we are
The learned DR relied upon the orders of the authorities below.
After considering the arguments of the learned DR and perusing the material available on record, we observe that the AO as well as the CIT were not correct in appreciating the fact that the assessee is entitled for deduction u/s.80P (2)(a)(i) of the Act, and hence, whatever disallowance has been made by them would ultimately increase the profit eligible for deduction u/s.80P(2)(a)(i) of the Act, a reference can be made to the decision of coordinate bench in the case of Bangady Cooperative Society Vs ITO ITA number 739/Bang/2024 order dated 01.07.2024 , wherein deduction u/s 80P(2)(a)i) of the Act on the income derived by the assessee from providing credit facilities to its members has been enhanced by including the sum disallowed u/s 40(a)(ia) of the Act. Therefore, without going into the other aspects of the matter, we allow the appeal of the assessee on this simple reasoning itself.
In the result, the appeal filed by the assessee is allowed. Order pronounced on this 26th day of May, 2025.