KERALA GAZETTED OFFICERS CO-OPERATIVE SOCIETY LIMITED NO. T-424,TRIVANDRUM vs. THE INCOME TAX OFFICER, TRIVANDRUM

Assessee pleads the following substantive grounds in the instant appeals: - “1) The learned Commissioner of Income Tax (Appeals) erred in confirming the business income of the appellant at Rs.3,27,62,392/- 2) Having confirmed the business income as above, the Commissioner of Income Tax (Appeals) ought to have concluded therein only that the entire amount of Kerala Gazetted Officers Co-op. Society Ltd. Rs.3.27,62,392/- is eligible for deduction u/s 80P(2)(a)(i), having held so elsewhere in the appellate order. 3) The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 14,49,23,337/- under section 68 of the Income Tax Act as unexplained credits without going into the merits of the case. 4) The learned Commissioner of Income Tax (Appeals) erred in rejecting the submissions made by the appellant as additional evidence, no admissible and violative of Rule 46A(1) of the Income Tax Rules. 5) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that what was filed before him was not additional evidence as contemplated under section 46A, but only advancement of arguments in support of the grounds of appeal

Learned CIT-DR vehemently argued in light of the decision in the case Totgar’s Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283 (SC) that such an income has been rightly treated as income from “other” sources than that eligible for the impugned deduction.

We notice in this background that the very issue stands adjudicated in Hon'ble Jurisdictional High Court’s recent decision in of 2019 in the case of 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 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 identical submission on section 80P deduction. Necessary computation shall follow as per law in very terms. Ordered accordingly.

The latter issue is of section 68 unexplained cash credit addition of Rs.14,49,23,337/- made in both the lower proceedings. Learned CIT-DR has strongly supported the same during the course of hearing contending that the assessee could not substantiate its explanation before both the learned lower authorities. Faced with this situation we deem it appropriate to restore the assessee’s instant latter Kerala Gazetted Officers Co-op. Society Ltd. substantive ground back to the Assessing Officer for his afresh adjudication within three effective opportunities, subject to a rider that the assessee shall bear the entire risk of pleading and proving all the relevant facts in consequential proceedings. Ordered accordingly.