Loading judgment…
Facts
The appellant, a co-operative society, filed its income tax return claiming a Nil income after a deduction under Section 80P. Both the Assessing Officer and the CIT(A) denied this deduction for interest income, categorizing the society as a co-operative bank. The appeal was filed before the Tribunal following a directive from the Hon'ble High Court of Kerala.
Held
The Tribunal held that without a banking license, the co-operative society cannot be considered a co-operative bank. Relying on Supreme Court and jurisdictional High Court precedents, it was decided that the appellant is entitled to the deduction under Section 80P(2)(d) for interest income earned from other co-operative banks.
Key Issues
Whether the interest income earned by a co-operative society from district co-operative banks qualifies for deduction under Section 80P(2)(d) of the Income Tax Act.
Sections Cited
250, 80P, 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 George George K, Vice- & Shri Inturi Rama Rao
O R D E R
Per Inturi Rama Rao, AM :
This is an appeal filed by the assessee directed against the order of the National Faceless Assessment Centre / Commissioner of Income- tax (Appeals), [“CIT(A)”] dated 27.09.2023 passed u/s.250 of the Income-tax Act, 1961 [“the Act”] for the assessment year 2016-2017
Briefly the facts of the case are that the appellant is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. It is engaged in the activity of accepting deposits and lending money from its the members. The return of income for the assessment year 2016- 2017 was filed on 04.05.2017 disclosing Nil income after claiming deduction u/s.80P of the Income-tax Act, 1961 “(the Act”). Against the . Mylapra Service Co-op. Bank Ltd. said return of income, the assessment was completed by the Assessing Officer (“the AO”) vide order dated 11.12.2018 by denying the deduction u/s.80P of the Act by holding that the appellant society is a co-operative bank and not a co-operative.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order denied the deduction u/s.80P(2)(d) of the Act in respect of interest income of Rs.1,28,00,257 by holding that the appellant is a co-operative bank.
Being aggrieved by the order confirming the action of the AO, the appellant is in appeal before the Tribunal.
In the present case, the appellant had filed a Writ Petition before the Hon’ble High Court of Kerala. The Hon’ble High Court of Kerala in WP(C) No.30221 of 2024 dated 25th November, 2024 directed the appellant to file an appeal against the order of the CIT(A) within three weeks from the date of receipt of the copy of the judgment in the said case. The WP was disposed of on 25th November, 2024, and the appellant filed the present appeal before the Tribunal on 13.12.2024. Therefore, the appeal is treated as in time.
The issue in the present appeal is as to whether the interest income received by the co-operative society from the district Co- operative bank amounting to Rs.1,48,41,161 qualifies for deduction u/s.80P(2)(d) of the Act or not. On a mere perusal of the orders passed by the lower authorities, it would be clear that the AO as well as the CIT(A) denied the claim for deduction u/s 80P(2)(d) of the Act on the . Mylapra Service Co-op. Bank Ltd. ground that the appellant is a co-operative bank. The finding of the lower authorities is contrary to the law in view of the settled position of law in the absence of any licenses to carry on the banking business, the co-operative society cannot be considered as a co-operative bank. Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. (2021) 431 ITR 1 (SC) and Hon’ble Karnataka High Court in the case Pr.CIT & Anr. v. Totagars Co-operative Sale Society reported in (2017) 395 ITR 611 (Kar.).
The issue whether the interest income earned by the co-operative society from the co-operative banks qualifies for deduction is now settled by the decision of the Hon’ble jurisdictional High Court in the case of PCIT v. Peroorkada Service Co-operative Bank Ltd. 442 ITR 141 (Ker.). In the light of this, we hold that the appellant is entitled for deduction in respect of interest income earned from co-operative banks u/s.80P(2)(d) of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 08th day of April, 2025.