THE KERALA HIGH COURT EMPLOYEES CREDIT CO-OPERATIVE SOCIETY LIMITED E830,ERNAKULAM vs. ITO, CORPORATE WARD 2(1), KOCHI

Since common issues are involved in these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience. We take the appeal bearing for assessment year 2017-2018 as the lead appeal

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 2017- 2018 was filed on 07.10.2017 disclosing Nil income after 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 Assessing Officer (“the AO”) vide order dated 29.12.2019 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.1,15,42,832 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.

The issue in the present appeal is as to whether the interest income received by the co-operative society from a co-operative bank 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 ground that the appellant is a co-operative -1051/Coch/2024. The Kerala High Court Employees Cr.Co-op.So.Ltd. 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).

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. and Vilappil 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 appeals filed by the assessee are allowed.