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

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ITA 326/COCH/2024Status: DisposedITAT Cochin07 November 2024AY 2016-2017Bench: SHRI SATBEER SINGH GODARA (Judicial Member), SHRI AMARJIT SINGH (Accountant Member)6 pages
AI SummaryPartly Allowed

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?

Section 80P,Section 80P(2)(d),Section 80P(4)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: SHRI SATBEER SINGH GODARA & SHRI AMARJIT SINGH

For Appellant: Shri K.P. Pradeep, Advocate
For Respondent: Smt. V. Swarnalatha, Sr DR
Hearing: 23.08.2024Pronounced: 07.11.2024

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.

2.

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:-

1.

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.

1.

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.

5.

In the result, the appeal is partly allowed.

3.

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.

4.

This assessee’s appeal is dismissed in above terms.

Order pronounced in the open court on 7th day of November, 2024.

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