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Facts
The appellant, a co-operative society, filed a Nil return for AY 2017-18 claiming deduction under Section 80P. The Assessing Officer disallowed the deduction, arguing that the society dealt with nominal/associate members and earned interest from deposits with District Co-operative Bank, which according to the AO, did not qualify under Section 80P(a)(a)(i). The CIT(A) confirmed the AO's order.
Held
The Tribunal, relying on the Kerala High Court decision in PCIT v. Peroorkada Service Co-op. Bank Ltd., held that interest earned by a co-operative society from deposits with District Co-operative Bank and Treasury is eligible for deduction under Section 80P(2)(d) of the Income Tax Act. It clarified that interest from Treasury is inadmissible, but interest from Co-operative Societies is eligible for deduction.
Key Issues
Whether interest earned by a co-operative society from deposits with District Co-operative Bank and Treasury qualifies for deduction under Section 80P(2)(d) of the Income Tax Act.
Sections Cited
80P, 80P(2)(d), 80P(2)(a)(i)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
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 31.01.2024 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is formed with the object of accepting deposits from members and lending money to members. The return of income for AY 2017-18 was filed on 10.10.2017 declaring Nil income after FACT CD Employees Co-op. Credit Society Ltd. claiming deduction u/s. 80P of the Income Tax Act, 1961 (the Act). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1, Aluva (hereinafter called "the AO") disallowing the claim for deduction u/s. 80P on the ground that the appellant society also deals with nominal and associate members and also interest was earned from deposits with District Co-operative bank with does not qualify for deduction u/s. 80P(a)(a)(i) of the Act.
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 us in the present appeal.
We have heard the rival contentions and perused the material 5. available on record. The issue in the present appeal relates to the interest earned by the appellant society on deposits made with District co-operative bank qualifies for deduction u/s. 80P(2)(d) or not. The issue is no longer res integra in view of the 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 FACT CD Employees Co-op. Credit Society Ltd. 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 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 on account of interest received from District Co-operative Bank and Treasury.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 22nd May, 2025.