M/S.UMAYANALLOOR SERVICE CO-OP BANK LTD,KOLLAM vs. THE ITO WARD 4, KOLLAM

It emerges at the outset that the assessee’s identical sole substantive grievance raised in both the instant appeals seeks to reverse both the lower authorities’ action disallowing section 80P(2)(a)(i) deduction claim of Rs.2,02,04,788/- and

Learned Sr. AR vehemently argued in the course of hearing that such an interest income could have hardly be held even derived from assessee’s regular credit facilities made available to the members concerned as per PCIT & Anr. v. Totagars Co-operative Sales Society reported in (2017) 395 ITR 611 (Kar.) and submits that the impugned disallowance has been rightly made herein.

We notice in this background that the very issue stands adjudicated in hon'ble jurisdictional high court’s recent decision in PCIT v. Peroorkada Service Co-op. Bank Ltd. [2022] 442 ITR 141 (Ker) wherein their Lordships have rejected the Revenue’s identical stand 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 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) and the Tribunal is incorrect and liable to be modified as stated above. Hence, it is held that the interest income & 390/Coch/2023 Umayanallor Service Co-op. Bank Ltd. 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.”

We adopt the above detailed discussion mutatis mutandis in the case of assessee’s section 80P deduction claim(s). Necessary computation shall follow as per law in very terms. ordered accordingly.

These assessee’s twin appeals ITA.Nos.389 & 390/Coch/2023 are allowed in above terms. A copy of this common order be placed in the respective files. Order pronounced in the open court on 25th September, 2024.