MALLAPPALLY SERVICE CO-OPERATIVE BANK LTD, NO A 155,PATHANAMTHITTA vs. ITO, WARD-1& TPS, THIRUVALLA

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 :

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.

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.

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.