NEDUPANA PANCHAYAT RESIDENCE WELFARE CO-OP SOCIETY LTD ,KOLLAM vs. THE ITO WARD 5 ( NOW WARD 2), KOLLAM

Case called twice. None appears at assessee’s behest. It is accordingly proceeded ex parte against the assessee.

It emerges at the outset that both the learned lower authorities have inter alia invoked sec.80P(2) disallowance amounting to Rs.6,16,900/- representing interest income derived from deposits made in cooperative bank(s) and similar institutions; on the ground that such a receipt ought to be treated as income from “other” sources than regular business income. The Revenue’s vehement contention accordingly is that the issue already stand settled against the assessee in PCIT & Anr. vs. Totagars Cooperative Sales Society [2017] 395 ITR 611 (Kar.) and The Totagars Cooperative Sales Society vs. ITO [2010] 322 ITR 283 (SC) and therefore, we ought to uphold both the learned lower authorities action.

We note in this limited factual backdrop that hon’ble jurisdictional high court’s recent decision in PCIT v. Peroorkada Service Co-op. Bank Ltd. [2022] 442 ITR 141 (Ker) has accepted the assessee’s very stand reading as under : - . Nedupana Panchayath Residence Welfare Co-op Society Ltd. “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 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 . Nedupana Panchayath Residence Welfare Co-op Society Ltd. 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.”