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Facts
The assessee, a co-operative society, claimed a deduction under Section 80P of the Income Tax Act for interest income received from a District Co-operative Bank. The Assessing Officer disallowed this claim, adding Rs. 96,93,219/- to the total income, which was upheld by the CIT(A). The assessee then appealed to the ITAT.
Held
Following the decision of the Hon'ble Jurisdictional High Court in PCIT v. Peroorkada Service Co-op. Bank Ltd., the Tribunal held that interest income received by a co-operative society from a District Co-operative Bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act. Consequently, the assessee was found entitled to the claimed deduction.
Key Issues
Whether interest income earned by a co-operative society from a District Co-operative Bank is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
80P, 143(3), 144B, 80P(2)(d), 80P(2)(a)(i)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 27.09.2024 for Assessment Year (AY) 2020-21.
Brief facts of the case are that the appellant is a co-operative society engaged in the financial activity. The return of income for AY 202021 was filed on 08.01.2021 declaring 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 Income Tax Officer, Ward-1, Cannore (hereinafter called "the Cannore Taluk Co-op. Employees Co-op. Society Ltd. AO") completed the assessment vide order dated 21.09.2022 vide order passed u/s. 143(3) r.w.s. 144B of the Act at total income of Rs. 39,78,619/-. While doing so, the AO made an addition of Rs. 96,93,219/- by disallowing the claim of the assessee for deduction u/s. 80P of the Act in respect of interest received from District Co- operative Bank.
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.
When the appeal was called nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, we proceeded to dispose of the appeal after hearing the learned Sr. DR.
We notice that the issue related to interest income received from the District Co-operative bank stands covered by the decision of Hon'ble Jurisdictional High Court 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 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 Cannore Taluk Co-op. Employees Co-op. Society Ltd. 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.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 10th February, 2025. 9.