KARASSERY SERVICE CO-OP BANK LTD,KOZHIKODE vs. THE ITO WARD 2(3), KOZHIKODE

We now advert to the assessee’s “lead” appeal ITA.No.326/Coch./2023for the former assessment year 2015-2016 wherein the learned CIT(A)-NFAC has partly upheld the Assessing Officer’s action disallowing it’s sec.80P deduction claim reading as under :

Suffice to say, the Revenue’s first and foremost vehement contention is that the assessee has not derived it’s interest income from regular members only and therefore, the same is not allowable for the deduction herein in light of Citizen Co-operative Society Ltd vs. CIT (2017) 84 taxmann.com 114 (SC).

Learned DR could hardly dispute the clinching fact that their lordships’ recent landmark decision in Mavilayi Service Co-operative Bank Ltd., vs. CIT [2021] 431 ITR 1 (SC) has settled the issue in assessee’s favour and against the department that such a distinction qua the category of members is not permissible once the same

The Revenue’s next vehement arguments in light of The Totagars Cooperative Sales Society vs. ITO [2010] 322 ITR 283 (SC) that assessee’s interest income derived from deposits in cooperative banks herein is not eligible for the impugned deduction. We notice in this factual backdrop that the hon’ble jurisdictional high court in it’s recent judgment in PCIT v. Peroorkada Service Co-op. Bank Ltd. [2022] 442 ITR 141 (Ker) has already accepted the assessee’s contentions 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 considered view, the assessee must also establish that & 427/Coch/2023. Karassery SCB Limited. 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)

We accordingly accept the assessee’s sole substantive grievance as well as the “lead” appeal ITA.No.426/Coch./2023 in very terms and leave it open for the learned to Assessing Officer to frame his consequential computation as per law after examining all the relevant facts. Ordered accordingly.

Same order to follow in assessee’s latter appeal ITA.No.427/Coch./2023 since raising identical sole substantive grounds.