Loading judgment…
Facts
The assessee, a co-operative bank, claimed deduction under Section 80P for interest income earned from deposits with scheduled banks. The Assessing Officer disallowed this, asserting the deposits were from surplus funds and not eligible under Section 80P(2)(a)(i) or 80P(2)(d). The CIT(A) partly sustained the addition of Rs.30,79,758.
Held
Following precedents, including the jurisdictional High Court's decision in Sahyadri Co-operative Credit Society Ltd., the Tribunal held that the interest income earned by the assessee from investing its surplus funds in scheduled banks is eligible for deduction under Section 80P(2)(d). The Tribunal distinguished the case from situations where the funds belonged to members, and thus allowed the appeal.
Key Issues
Whether interest income earned by a co-operative bank from deposits made out of its surplus funds with scheduled banks is eligible for deduction under Section 80P(2)(a)(i) or Section 80P(2)(d) of the Income Tax Act.
Sections Cited
80P, 80P(2)(a)(i), 80P(2)(d)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
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 04.03.2024, having DIN & Order No.ITBA/NFAC/S/250/2023- 24/1061939408(1) and relates to the assessment year 2020- 2021.
Brief facts of the case as coming out from the orders of the authorities below are that the assessee is a co-operative bank, filed its return of income for the impugned year declaring total income of Rs.20,010 after claiming deduction u/s.80P of the Act, for an amount of Rs.1,37,87,842. During . The Thudanganad SCB Limited. the course of assessment proceedings, the Assessing Officer disallowed the claim of the assessee on the ground that the assessee is not entitled for the deduction u/s.80P(2)(a)(i) as well as 80P(2)(d) of the Act. The AO was of the view that the deposits made by the assessee was out of surplus funds and hence the assessee is not entitled for the deduction u/s.80P(2)(d) or u/s.80P(2)(a)(i) of the Act in respect of interest income earned from the scheduled banks.
Aggrieved with the order of the AO, the assessee filed an appeal before the ld.CIT(A) and assailed that the view of the AO is not tenable. However, the ld.CIT(A) partly allowed the appeal of the assessee and sustained the addition of Rs.30,79,758.
Aggrieved with the order of the CIT(A), the assessee has come up in appeal before us and argued that the assessee is entitled for the deduction u/s.80P(2)(d) with respect of the interest income earned on the deposits.
The learned DR relied upon the orders of the authorities below.
We have heard the rival submissions and perused the material available on record. We observe that similar issue has been decided by us in the case of Wadakkancherry Service Co- operative Bank Ltd. v. ITO in (order dated 4th April, 2024). The relevant observations are as under:- . The Thudanganad SCB Limited. “7. We have heard the rival submissions and perused the material available on record. We are of the view insofar as the issue involved in this appeal is squarely covered by the judgment of the Hon’ble jurisdictional High Court in the case of Sahyadri Co- operative Credit Society Ltd. 301 Taxman 36 (Ker), wherein the Hon’ble High Court in para 8 observed as under:- ‘’We also find force in the submission of the learned Senior counsel, distinguishing the decision of the Supreme Court in M/s. The Totgars' Cooperative Sale Society Limited (supra), on the ground that the Court in that case had found that the Society concerned had appropriated amounts forming part of surplus receipts which were due to its members, and invested the same to earn interest during the period when the surplus receipts were in its hands. It was therefore that the court found that the interest earned bythe Society through deposit of such receipts with banks in fact ought to have accrued to the benefit of the individual members and not to the Society itself; that in relation to the Society, it was to be treated as income from other sources since the interest income had lost its nexus with the principal income earned by the Society. The facts in the instant cases are entirely different and the investment concerned was of amounts that had already attained the character of surplus profits in the hands of the assessee. On this issue, therefore, we find ourselves in agreement with the view taken by the Andhra Pradesh and Karnataka High Courts respectively in The Vavveru Cooperative Rural Bank Ltd. (supra) and Tumkur Merchants Souharda Credit Cooperative Limited (supra).”
8. We also rely upon the order of the Tribunal in (order dated 10.12.2024) in the case of Thrissur District Electricity Board Employees Co-op Society Limited, wherein the same combination of us have held the verdict of Sahyadri Co-operative Credit Society Ltd. (supra).
Therefore, respectfully following the verdict of the Hon’ble jurisdictional High Court and the view of the co-ordinate bench, we allow the appeal of the assessee.”
Respectfully following the above decision of the Tribunal, we allow the appeal of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 22nd day of May, 2025.