M/S POOYAPPALLY SERVICE CO-OP BANK LTD,KOLLAM vs. THE ITO WARD 2(1), KOLLAM
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI SANJAY ARORA, AM & MS. KAVITHA RAJAGOPAL, JM
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN
BEFORE SHRI SANJAY ARORA, AM AND MS. KAVITHA RAJAGOPAL, JM
ITA No.119/Coch/2023 (Assessment Year: 2018-19)
M/s. Pooyappally Service Co-operative The Income Tax Officer, Bank Ward-2(1), Kollam Limited No. 3964, Meeyannoor, Vs. Pooyappally-PO, Kollam-691 537
PAN/GIR No. AAFAP 8166 L (Assessee) (Respondent) :
Assessee by : Shri Krishnan R. Respondent by : Shri Sanjit Kumar
Date of Hearing : 07.03.2024 Date of Pronouncement : 07.06.2024
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the assessee, challenging the order of the learned
Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal
Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'),
pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19.
The assessee has challenged this appeal on the following grounds:
1) The learned officers below erred in denying deduction u/s 80P(2)(a), 80P(2)(c), 80P(2)(d) of the Income Tax Act. 2) The learned officers ought to have noted that the appellant was registered as a co- operative society and therefore the provisions of section 80P(2)(a)0) applied in the case of the appellant. 3) The learned officers below ought to have appreciated that the income of the appellant from investments in banks and other co-operative societies were assessable under the head business'.
2 ITA No. 119/Coch/2023 (A.Y. 2018-19) M/s. Pooyappally Service Co-operative Bank vs. ITO 4) The learned Commissioner of Income Tax (Appeals) ought to have noticed that the Assessing officer has not examined the case of the appellant in detail and had merely refused deduction u/s 80P(2) and the alternative argument of the appellant that expenses to generate interest income on deposits from banks etc should also have been granted as a deduction which is bad in law.
The brief facts are that the assessee is a co-operative society and Primary
Agricultural Credit Society (PACS) registered under the Kerala Cooperative Societies
Act, 1969 (Kerala Act) and is engaged in the business of banking and credit facilities to
its members. The assessee had filed its return of income on 08.10.2018 declaring total
income at Rs.Nil. The assessee’s case was selected for scrutiny and notice u/s. 143(2) and
142(1) of the Act were issued and served upon the assessee.
The learned Assessing Officer (ld. A.O. for short) observed that the assessee has
received interest income of Rs.3,41,79,966/- out of the investments made in different
branches of Pooyappally Service Co-operative Bank which according to the ld. A.O.
would fall under the head ‘income from other source’ as per section 56 of the Act and not
under the head ‘profit and gains of business or profession’ as per section 28 of the Act for
the reason that the said interest was not attributable to the activities of the assessee and
was out of the surplus fund deposited by the assessee. The ld. A.O. disallowed the
interest income earned by the assessee u/s. 80P of the Act.
The first appellate authority, on the other hand, had allowed the deduction of the
assessee u/s. 80P(2)(d) of the Act, thereby holding the same to be ‘income from other
sources’.
Aggrieved the assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on
record. The ld. AR for the assessee during the appellate proceeding had stated that only
3 ITA No. 119/Coch/2023 (A.Y. 2018-19) M/s. Pooyappally Service Co-operative Bank vs. ITO the alternate argument in ground no. 4 has to be decided in the present appeal where the
expenditure incurred to generate interest income on deposits from banks and treasury
should have been granted as ‘deduction’ by the lower authorities. The ld. AR further
stated that the assessee was unable to furnish details pertaining to such expenditure where
the deposits could also be from borrowed funds. It is observed that the assessee has
neither before the ld. A.O. nor before the ld. CIT(A) has furnished details pertaining to
the source of the deposits in bank and treasury where the ld. A.O. has held that the
interest income earned from treasury is not an allowable deduction u/s. 80P of the Act.
When the same has been held to be not an allowable deduction, then the assessee is
entitled to claim expenditure incurred for the purpose of earning such income as per
section 57(iii) of the Act. In the above factual matrix of the case, we deem it fit to restore
this limited issue to the file of the ld. A.O. for verification of the same based on the
details proposed to be filed by the ld. AR. It is needless to say that the assessee should
cooperate with the proceedings without any undue delay.
In the result, the appeal filed by the assessee is allowed for statistical purpose.
Order pronounced on 07.06.2024 under rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.
Sd/- Sd/-
(Sanjay Arora) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 07.06.2024 Roshani, Sr. PS
4 ITA No. 119/Coch/2023 (A.Y. 2018-19) M/s. Pooyappally Service Co-operative Bank vs. ITO Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Cochin 5. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Cochin
