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Facts
The assessee, Koodali Public Servant Co-op. Society Ltd., a co-operative society engaged in banking, filed appeals against CIT(A) orders for AY 2018-19 and 2020-21. The AO had disallowed a deduction claimed u/s 80P of the Income Tax Act for interest income earned from co-operative banks, which was confirmed by the CIT(A).
Held
Following the jurisdictional High Court judgment in PCIT v. Peroorkada Service Co-op. Bank Ltd., the Tribunal held that the assessee is entitled to a deduction under Section 80P(2)(d) of the Act for interest income received from Co-operative Banks.
Key Issues
Whether a co-operative society is eligible for deduction under Section 80P(2)(d) of the Income Tax Act for interest income earned from co-operative banks.
Sections Cited
143(3), 80P, 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 These appeal filed by the assessee are directed against the orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 15.02.2024 & 20.02.2024 for Assessment Year (AY) 2018-19 & 2020-21, respectively.
The assessee is a co-operative society engaged in the business of banking. The returns of income were filed declaring Nil income in AY 2018-19 and Rs. 7,24,640/- for AY 2020-21, respectively. Against the said returns of income, the assessment was completed by the Income Tax Officer, Ward-3, Kannur (hereinafter called "the AO") vide orders dated 13.04.2021 and 19.09.2022 passed u/s. & 290/Coch/2024 Koodali Publc Servant Coi-op. Society Ltd. a43(3) of the Income Tax Act, 1961 (the Act) at total income of Rs. 34,23,360/- & Rs. 66,04,673/- disallowing the deduction claimed by the assessee u/s. 80P of the Act in respect of interest income earned from co-operative banks.
Being aggrieved, an appeal was filed before the CIT(A), who vide 3. the impugned order confirmed the action of the AO.
Being aggrieved, the assessee is in appeal before us in the present appeal.
I heard the rival contentions of both the parties and perused the material available on record.
Learned CIT- DR vehemently argued that such interest income could have hardly be held even derived from assessee’s regular credit facilities made available to the members concerned. He further quotes PCIT & Anr. v. Totagars Co-operative Sales Society reported in (2017) 395 ITR 611 (Kar.) and submitted that the impugned disallowance has been rightly made in assessee’s hand.
Regarding the interest income received from Treasury, Scheduled Banks, etc., this issue is no longer res integra, as it is covered by the judgement of the 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: - & 290/Coch/2024 Koodali Publc Servant Coi-op. Society Ltd. “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 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 decisions of the Hon'ble Jurisdictional High Court, I hold that the assessee is entitled for deduction under sections 80P(2)(d) of the Act on account of interest received from Co-operative Banks.
In the result, the appeals filed by the assessee are allowed.