MALLAPPALLY SERVICE CO-OPERATIVE BANK LTD, NO A 155,PATHANAMTHITTA vs. ITO, WARD-1& TPS, THIRUVALLA
What did the Tribunal hold?
The Tribunal, following the jurisdictional High Court's decision in PCIT vs Peroorkada Service Co-operative Bank Ltd., held that interest income earned from investments in other co-operative banks/societies/federations is eligible for deduction under Section 80P(2)(d). However, income earned from treasury is not eligible for such deduction.
What were the facts?
The assessee, a co-operative bank, claimed deduction under Section 80P on its interest income earned from surplus funds invested in other co-operative banks and treasury. The Assessing Officer disallowed this deduction, treating the interest income as 'Income from Other Sources' and considering the assessee as a bank for the purpose of Section 80P(4).
What were the issues?
Whether interest income earned by a co-operative society from surplus funds invested in other co-operative banks and treasury is eligible for deduction under Section 80P, and if so, to what extent.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(2)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- Totgars Co-operative Sale Society Ltd. v. ITO1,283 citing322 ITR 283 · 2010 · SC
- PCIT v. Peroorkada Service Co-op. Bank Ltd.208 citing442 ITR 141 · 2022 · HC
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI SATBEER SINGH GODARA & SHRI AMARJIT SINGH
ORDER PER BENCH : This assessee’s appeal for assessment year 2016-2017arises out of the order of the Commissioner of Income-tax (Appeals) / NFAC vide DIN & Order No.ITBA/NFAC/S/250/2023-24/1061036790(1) dated 16.02.2024 in proceedings u/s.143(3) of the Income-tax Act, 1961; in short “the Act” hereinafter.
Heard both the parties. Case file perused.
1. . Mallappally SCB Limited.
We note at the outset that so far as assessee’s sole substantive grievance claiming sec.80P deduction herein is concerned, the CIT(A)-NFAC’s impugned lower appellate discussion has already accepted the same as follows :
“4. Decision:-
I have perused the grounds of appeal, statement of facts, written submission made by the appellant and the assessment order. The AO, in the assessment made u/s 143(3) has disallowed the claim of deduction u/s 80P for the year by following, the provision of section 80P(4) considering the appellant Co-operative, as a bank. The claim of deduction u/s 80P made by the appellant was denied in arriving at total income for the year. The interest income earned by the appellant by investing it's surplus funds with other co-operative banks and treasury was considered as income from other sources and not as income from it's operations of banking & providing credit facilities by following decision of the Hon'ble Supreme Court of India in the case of Tolgars Co-operative Sale Society Ltd vs ITO (2010) 322 ITR 283 (SC). Accordingly, 4.1. In the context of the facts aforementioned it would be imperative to make reference to the High Court (Kerala) decision on similar set of facts in the case of PCIT vs Peroorkada Service Co-operative Bank Ltd. vide 442 ITR 141. The jurisdictional High Court, of Kerala passed this order, dt: 01.11.2021, taking into consideration the law laid down by the Hon'ble Supreme Court, in Totgars' Co-operative Sale Society Ltd vs ITO. For the sake of clarity the decision part of the order is reproduced, as under.
14.2. This interest income is liable to be taxed under the head "Income from other sources" and during the course of assessment proceedings, it was proposed to treat Rs.14,18,62,743/- as income under the head 'Income from Other Sources'. The dispute relates to the extent to which the deduction claimed by the assessee is legal. The substantial question raised reads as follows :
. Mallappally SCB Limited.
Whether on the facts and in the circumstances of the case, is the order of the ITAT correct, in not duly considering that the assessee had invested surplus funds like an ordinary investor and the interest on such deposits has to be taxed as "Income from Other Sources" ? it has been held that the interest income earned by the Society comes with the category of income from other sources and section 80P(2)(d) deals with the eligible deduction in this behalf. It has been held in the connected cases that the assessee is entitled to deduction of interest Income earned from Co-operative Banks/Societies/ Federation registered under the Co-operative Societies Act and the income earned from Treasury is not included in section 80P(2)(d) and is not entitled for deduction from computation of income. The Assessing Officer passes Effect Order on the lines indicated above.
4.2. It has not been disputed by the AO that the appellant is registered under Kerala Co- operative society Act and Rules, as "Primary Agricultural Credit Co- operative Society". In this regard, the Certificate from Joint Registrar of Co-operative Societies (General), Pathanamthitta, has been verified by the AO. Having regard to the facts of the case and the decision of the Jurisdictional High Court, in the case of PCIT vs Peroorkada Service Co- operative Bank Ltd. vide 442 ITR 141 (Kerala), I am inclined to hold that the action of the AO is not sustainable, It has been hold by the High Court of Kerala that, the interest income earned by the Society comes within the category of Income from other sources. It has been further held in the said order that, the assetsop is entitled to deduction of interest income earned from Co- operative Banks/Societies/ Federation registered under the Co-operative Societies Act, is eligible for deduction u/s 80P(2)(d) and the income eamed from Treasury not being included In section 80P(2)(d) is not entitled for deduction . Mallappally SCB Limited. from computation of income. Respectfully. following the said order of the Kerala High Court, the AO is directed to pass an effect order accordingly. The appeal is allowed in terms of my observation made above.
In the result, the appeal is partly allowed.
That being the clinching case, we find no merit in the assessee’s instant appeal since it has already succeeded in the above extracted lower appellate discussion. Rejected accordingly.
This assessee’s appeal is dismissed in above terms.
Order pronounced in the open court on 7th day of November, 2024.
More judgments on Section 80P
- Shree Bandharda Seva Sahkari Mandli Ltd… vs Income Tax Officer Ward -4, JunagadhITA 881/RJT/2025[2019-20]Status: Disposed19 Oct 2026AY 2019-20
- Duddukuru Primary Agricultural Cooperative… vs ITO, Ward - 1, TadepalligudemITA 258/VIZ/2026[2015-16]Status: Disposed16 Oct 2026AY 2015-16
- Parthasaradhi Mutually Aided Co-Operative… vs Income-Tax Officer, Ward-17(1), HyderabadITA 2322/HYD/2026[AY 2016-17]Status: Disposed16 Oct 2026
- Jijamata Mahila Gramin Bigar Sheti Sahakari… vs ITO Ward -1, BhandraITA 102/NAG/2026[2020-21]Status: Disposed12 Oct 2026AY 2020-21
- Shri Na vs Ari Khedut Sahkari Society Ltd…ITA 362/SRT/2025[2016-17]Status: Disposed9 Oct 2026AY 2016-17
Recent GST High Court judgments
Search GST case law →- Kamlasana Impex Private Limited vs. Director General Of GST Intelligence (Hq) Delhi) & Anr.Delhi · 27 Oct 2026
- Ritu Gautam Proprietor Of Ms Heritage International vs. Additional Commissioner Central Goods And Services Tax Appeals Ii Delhi & Anr.Delhi · 27 Oct 2026
- Sutha vs. The State Tax Officer(Inspection-3)Madras · 27 Oct 2026
- M/S.Sri Satya Sai Constructions vs. The State Of Andhra PradeshAndhra Pradesh · 27 Oct 2026
- Anisha Busa vs. Sibar Institute Of Dental SciencesAndhra Pradesh · 27 Oct 2026