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Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI CHANDRA POOJARI & SHRI SOUNDARARAJAN K.
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against the order of NFAC passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) dated 31.1.2023 for the assessment year 2011-12. The assessee has raised following grounds of appeal: “As per section 80P, it is provided that:- (l) Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub section (2), there shall be deducted in accordance with and subject to the provisions of this section, the sums specified in sub section (2) in computing the total income of the assessee. (2) The sums referred to in subsection (l) shall be the following namely:(a) In the case of a co-operative society engaged in — (i) Carrying on the business of banking or providing credit facilities to its members, or………….. -
2. The appellant is a credit society engaged in providing credit facilities to its members. Hence it is eligible for deduction u/s Mananthavady Co-op Urban Society Ltd., Wayanad Page 2 of 4 80(P)(2)(a)(i) and accordingly, the appellant claimed deduction in the appeal petition. However, the CIT (Appeals) erred in not allowing the eligible deduction u/s 80(P)(2)(a)(i).
3. For the A.Y. 2008-09, A.Y. 2010-1 1, A.Y. 201 1-12, A.Y. 2014-15 and A.Y. 201718, the appellant got assessment order allowing the deduction u/s 80(P)(2)(a)(i) on the above grounds, copy of these are enclosed.
4. Further, in the light of the judgments of the High Courts of Kerala and Karnataka, Society in the case of The Chirakkal Service Co- operative Bank Ltd. Vs. CIT. (ITA No. 212 of 2013) and judgments of the High Court Karnataka in the case CIT Vs. Bangalore Credit Co-operative Society Ltd. (ITA No. 598/2013), the appellant has reason to believe that deduction u/s 80P ought to have been claimed.
5. For these and other grounds that may be permitted to be furnished at the time of hearing of the appeal, it is humbly prayed that the impugned order of the CIT (Appeals) may be set aside and grant deduction u/s 80P(2)(a)(i) to the appellant.
Facts of the case are that the assessee is a Credit Co- operative Society engaged in extending credit facilities to its members. The assessee filed its return of income for A.Y. 2013-14 on 30-09-2013 declaring a total income of Rs. 12,21,460/- without claiming deduction u/s 80P of the Act and paid tax on the same. The return was processed u/s 143(1) of the Act. The case was selected for scrutiny under CASS and assessment order was passed u/s 143(3) with further additions of Rs. and total assessed income of Rs.16,91,870/- and demanded tax thereon Rs.2,00,310/-. In the light of the judgments of the Hon’ble High Courts of Kerala and Karnataka, Society in the case of The Chirakkal Service Co-operative Bank Ltd. Vs. CIT. (ITA No. 212 of 2013) and judgments of the High Court Karnataka in the case CIT Vs. Bangalore Credit Co-operative Society Ltd. (ITA No. 598/2013), the assessee has reason to believe that deduction u/s 80P ought to have been claimed. Based on the above grounds, an appeal before the CIT (Appeals)/NFAC had been filed on 10-06-2016 by the assessee. In the appeal order No. ITBA/NFAC/S/250/2022-23/ 1043488708(1) dated 20-06-2022 the claim u/s 80P of the Act, NFAC had rejected the appeal and not Mananthavady Co-op Urban Society Ltd., Wayanad Page 3 of 4 granted the deduction claimed before it u/s 80P(2)(a)(i) of the Act. Aggrieved by the order of the NFAC, the assessee is once again in appeal before us.
As regards the claim of deduction u/s 80P(2)(a)(i) of the I.T. Act, we direct the A.O. to verify whether interest / dividend is received by the assessee out of investments made with Cooperative Societies. If the assessee earns interest / dividend income out of investments with co-operative society, as observed by Hon’ble Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. Cited (supra), the same is entitled to deduction u/s 80P(2)(a)(i) of the I.T. Act. 3.1. We also take note of the judgement of jurisdictional High Court in the case of PCIT Vs. Peroorkada Serivice Co-operative Bank Ltd. & Vilappil Service Co-operative Bank Ltd. reported in 442 ITR 141 (Ker.), wherein held as under: “The assessee was a primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969. The assessee was engaged in banking activity and providing credit facilities to its members. The assessee claimed complete deduction of income under section 80P(2)(a)(i) of the Act including interest income earned by the assessee from the deposit of idle funds with Co-operative bank and treasury treating the said income as business income. The Assessing Officer rejected the claims of the assessee for deduction under section 80P(2)(a)(i) and treated the interest income as income from other sources. The Commissioner (Appeals) accepted the case of the assessee. The Tribunal accepted the entire claim of deduction of interest income earned by the assessee as business income. On appeal to the High Court:
Held, (i) that the Supreme Court in Mavilayi Service Co-operative BankLtd. V. CIT (2021) 431 ITR 1 (SC), held that since the assessee was a registered co-operative society and the deduction claimed was interest earned from loans lent to members and amount invested with a co-operative bank the threshold eligibility of deduction was admissible to the assessee and accordingly the income earned by way of interest from members was eligible for deduction under section 80P(2)(a)(i). Hence interest from amounts deposited with co-operative bank was entitled to deduction under section 80P.
MAVILAYI SERVICE CO-OPERATIVE BANK LTD. v. CIT (2021) 431 ITR 1 (SC) followed.
Mananthavady Co-op Urban Society Ltd., Wayanad Page 4 of 4 (ii) That interest from a treasury was not better positioned than interest received from non-members. The interest earned from district co- operative banks and the State Co-operative bank, in the facts and circumstances of the case, did come within section 80P(2)(d). Interest income received from treasury was inadmissible for deduction.”