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Facts
The appellant, a co-operative society, filed nil returns for AYs 2015-16 and 2017-18, claiming deduction under Section 80P. The Assessing Officer (AO) made additions on account of interest on investment under Section 143(3), which was subsequently confirmed by the CIT(A).
Held
Respectfully following the Jurisdictional High Court's decision in PCIT v. Peroorkada Service Co-op. Bank Ltd., the Tribunal held that the assessee is entitled to deduction under Section 80P(2)(d) of the Act for interest received from a District Co-operative Bank and Treasury.
Key Issues
Whether interest income earned by a co-operative society from deposits with a District Co-operative Bank and Treasury is eligible for deduction under Section 80P(2)(d) of the Income Tax Act.
Sections Cited
80, 80P, 80P(2)(d), 80P(2)(a)(i), 143(3)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 03.06.2024 & 12.07.2024 for Assessment Years (AYs) 2015-16 & 2017-18, respectively.
Brief facts of the case are that appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, & 670/Coch/2024 The Kannur District Merchants Co-op. Society Ltd. 1969. The appellant filed its returns of income declaring Nil income for AY 2015-16 on 31.03.2017 and for AY 2017-18 on 07.11.2017, after claiming deduction u/s. 80 of the Income Tax Act, 1961 (the Act) to the tune of Rs. 28,95,165/- and Rs. 27,99,137/- respectively. Against the said returns of income, the assessment was completed by the Income Tax Officer, Ward-1, Kannur (hereafter “the AO”) completed the assessment for AY 2014-15 vide orders dated 16.11.2017 & 18.10.2019 passed u/s. 143(3) of the Act making addition on account of interest on investment to the tune of Rs. 8,24,732/- for AY 2015-16 and Rs. 8,63,8540/- for AY 2017-18.
Being aggrieved, appeals were filed before the CIT(A), who vide the impugned orders confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before the Tribunal vide these appeals.
We have heard the rival contentions of both the parties and perused the material available on record.
We notice that the issue related to interest income received on fixed deposit with KDC stands adjudicated by Hon'ble Jurisdictional High Court’s decision 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 & 670/Coch/2024 The Kannur District Merchants Co-op. Society Ltd. 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 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 and Treasury.
In the result, the appeals filed by the assessee are allowed.