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Facts
The assessee, a co-operative society, filed a NIL return, but the AO disallowed the deduction under Section 80P on interest income earned from deposits in a district co-operative bank. The CIT(A) partly allowed the claim under Section 80P(2)(d) but denied it under Section 80P(2)(a)(i), leading the assessee to appeal.
Held
The Tribunal condoned a 66-day delay in filing the appeal. Relying on the jurisdictional High Court's judgment in Sahyadri Co-operative Credit Society Ltd. and a co-ordinate bench decision, the Tribunal held that the interest income from surplus funds invested by the co-operative society is eligible for deduction, thereby allowing the appeal.
Key Issues
Eligibility of interest income earned by a co-operative society from deposits in a district co-operative bank for deduction under Section 80P(2)(a)(i) of the Income Tax Act.
Sections Cited
80P, 80P(2)(a)(i), 80P(2)(d)
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
Asst.Year 2018-2019 Wadakkanchery Service Co- The Income Tax Officer operative Bank Limited R-3279 Ward - 2(1) v. Thalappilly, Wadakkanchery Thrissur. Thrissur – 680 582. PAN : AAAAW3417E. (Appellant) (Respondent) Appellant by :Ms.Krishna K, Advocate Respondent by : Smt.Leena Lal, Sr.AR Date of Pronouncement : 04.04.2025 Date of Hearing : 25.02.2025 O R D E R
Per Prakash Chand Yadav, JM :
The present appeal of the assessee is arising from the order of the learned Commissioner of Income-tax (Appeals) dated 21st August, 2024and relates to the assessment year 2014-2015, having DIN & Order No.ITBA/NFAC/S/250/2024- 25/1067833247(1).
There was a delay of 66 days in filing the appeal before the Tribunal. The assessee has filed condonation petition accompanied by an affidavit of the Secretary of the assessee. On perusal of the condonation petition, we find that there is reasonable cause in filing the appeal belatedly before the Tribunal. Therefore, we condone the delay and admit the appeal for adjudication.
. Wadakkanchery SC.B Ltd.
Brief facts as coming out from the orders of the authorities below are that the assessee is a co-operative society carrying on the business of providing credit facilities to its members. For the impugned year it has filed return of income declaring Nil income. The return of income filed by the assessee was picked up for scrutiny and during the course of assessment proceedings the Assessing Officer disallowed the claim u/s.80P of the Income-tax Act, 1961 (“the Act” hereinafter) for the reason that the interest income earned from district co-operative bank is not entitled for deduction u/s.80P(2)(a)(i) / 80P(2)(d) of the Act.
Aggrieved with the order of the Assessing Officer, the assessee preferred an appeal before the learned CIT(A) and contended that the assessee is entitled for deduction u/s.80P(2)(a)(i) of the Act inasmuch as the assessee has to mandatorily follow the SLR requirements in terms of Rule 63 of the Co-operative Societies Rules. However, the ld.CIT(A) allowed the claim of the assessee vis-à-vis deduction of interest income u/s.80P(2)(d) of the Act. The ld.CIT(A) held that the claim of the assessee with respect of the deduction of interest income is covered by the provisions of sec.80P(2)(d) and not sec.80P(2)(a)(i) of the Act.
Still aggrieved with the order of the ld.CIT(A), the assessee has preferred an appeal before us and contended that the deduction u/s.80P(2)(a)(i) shall be granted to the assessee with respect to the interest income earned from district co-operative bank.
The learned Departmental Representative appearing on behalf of the Revenue relied upon the orders of the authorities below.
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 Co- operative Rural Bank Ltd. (supra) and Tumkur Merchants Souharda Credit Co- operative Limited (supra).”
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 . Wadakkanchery SC.B Ltd. 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.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 04th day of April, 2025.