PERINGANDOOR SERVICE CO-OPERATIVE BANK LTD,ATHANI P.O, THRISSUR V. INCOME TAX OFFICER, WARD 2(5), THRISSUR

ITA 376/COCH/2024

AI Insights

The case involves M/s. Peringandoor Service Co-operative Bank Ltd., which appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, concerning the Assessment Year 2020-21. The primary issues in the appeal were the denial of deductions under section 80P of the Income Tax Act for interest income from ICICI Bank and certain miscellaneous incomes. The Tribunal found that while the interest income from ICICI Bank was not eligible for deduction, the miscellaneous incomes related to loan processing and other member services could be considered business incomes and thus eligible for deductions under section 80P(2)(a)(i). The Tribunal also directed a re-evaluation of the income from the ambulance service after deducting the related expenses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396850 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL; SNR
• Assessee Lawyers: RAMDAS
• Keywords: Set aside; Business income

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH : COCHIN BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 376/Coch/2024 Assessment Year : 2020-2021 M/s. Peringandoor Service Co-operative Bank Ltd., 11/102A, Athani P.O., Thrissur. Kerala – 680 581. PAN: AADAP3407G Vs. The Income Tax Officer, Ward – 2(5), Thrissur. APPELLANT RESPONDENT Assessee by : Shri Ramdas, CA Revenue by : Smt. Leena Lal, Snr. AR Date of Hearing : 12-03-2025 Date of Pronouncement : 27-05-2025 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 29/02/2024 in respect of the A.Y. 2020-21 and raised the following grounds: Page 2 of 7 ITA No. 376/Coch/2024 Page 3 of 7 ITA No. 376/Coch/2024 2. The assessee is a primary agricultural credit society registered under the provisions of the Kerala Co-operative Societies act. During the year, the assessee filed its return of income declaring a Nil income and claimed deduction u/s. 80P of the Act. Thereafter, the case was selected for complete scrutiny and various notices were issued for which the assessee filed their detailed submissions and also enclosed documents in support of their claim. It is the case of the assessee that they had received interest on deposits made with the Co-operative banks as well as Commercial Banks and other financial institutions and also received miscellaneous incomes and claimed the entire income as eligible for deduction u/s. 80P(2) of the Act. The AO not accepted the claim made by the assessee and denied the deduction claimed by the assessee in respect of the interest amount received from the Thrissur District Co-operative Bank Ltd. and also the interest income received from the ICICI Bank. The AO also disallowed the miscellaneous income on the ground that the same are not earned during the course of the business and treated the said incomes as income from other sources. As against the said order, the assessee filed an appeal before the Ld.CIT(A). 3. The Ld.CIT(A) had allowed the interest income received from the Thrissur District Co-operative Bank u/s. 80P(2)(d) of the Act but not allowed the deduction on the interest income received from the ICICI Bank. Page 4 of 7 ITA No. 376/Coch/2024 Similarly, the Ld.CIT(A) had restricted the deduction of miscellaneous income to Rs. 26,65,254/- as against the disallowance made by the AO at Rs. 1,24,18,799/-. As against the said order, the assessee is in appeal before this Tribunal. 4. At the time of hearing, the Ld.AR submitted that the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act on the interest received from ICICI Bank since the bank account has been opened by the assessee for the benefit of the members such as for availing the facility of NEFT / RTGS. Since the assessee is not having any facility for doing online transactions, the assessee opened the Savings Bank Account in ICICI Bank to carry on the business activities smoothly. The Ld.AR further submitted that the miscellaneous income confirmed by the Ld.CIT(A) is not part of operational income. The Ld.AR submitted that the miscellaneous income represents the loan processing fees, Gehan charges collected from the members while providing loan and also the court fee stamp charges collected from the members and MDS income etc. which are all collected from the members in connection with the credit facilities offered by the assessee. The Ld.AR also further submitted that there are printing charges collected from the members and also the courier service charges collected from the members for sending notices through courier as part of loan procedures and therefore the said incomes are only the business incomes eligible for deduction u/s. 80P(2)(a)(i) of the Act. Insofar as the income received from the ambulance, the service is provided by the assessee as part of the social security activity for which the assessee had incurred an expenditure and therefore if at all any liability is to be fixed, the same should be on the net profit earned by the assessee through the ambulance service and not the entire income. 5. The Ld.DR relied on the orders of the lower authorities and submitted that the appeal may be dismissed. Page 5 of 7 ITA No. 376/Coch/2024 6. We have heard the arguments of both sides and perused the materials available on record. 7. The first dispute raised by the assessee in this appeal is about the interest income earned from the Savings Bank Account maintained by the assessee with the ICICI Bank. We have considered the explanation offered by the assessee that the said Savings Bank account was opened to give various facilities to the members who are availing loan such as NEFT / RTGS and online transactions. Even though the account was opened for the benefit of the members of the society, we cannot accept the contention that the interest income earned through the said Savings Bank Account could be treated as an income received from the business of the society. We therefore held that the interest income received from ICICI Bank would not be eligible for deduction u/s. 80P(2)(a)(i) of the Act. 8. The second dispute raised by the assessee is about the miscellaneous income of Rs. 13,46,491/- collected from the members while granting loans. The said miscellaneous income comprises loan processing fee, Gehan charges, court fee stamp charges and MDS income. Undoubtedly, the above said incomes were received by the assessee while giving credit facilities to its members and therefore the same would amounts to business income and eligible for deduction u/s. 80P(2)(a)(i) of the Act. There is no contra evidences available with the AO to treat the said miscellaneous income as income from other sources. When the assessee is able to demonstrate that the said miscellaneous income is received while granting credit facilities to its members, the said income would be a business income and eligible for deduction u/s. 80P(2)(a)(i) of the Act. We, therefore, set aside the finding given by the Ld.CIT(A) insofar as this portion of the miscellaneous income is concerned and remitted the matter to the file of the AO for verifying the records and satisfy himself about the genuineness of the claim made by the assessee and if the assessee was able to prove that the miscellaneous income was received from the members for granting the credit facilities, allow the said claim u/s. 80P(2)(a)(i) of the Act. Page 6 of 7 ITA No. 376/Coch/2024 9. Insofar as the printing charges and courier service charges, we are remitting this issue also to AO for considering the issue afresh and to decide the same in accordance with the earlier directions given above. 10. The last dispute raised by the assessee is about the miscellaneous income received from the ambulance of Rs. 13,13,891/-. We have considered the submission of the assessee that the ambulance income received by the assessee is part of the social security activity and considered the fact that the assessee had incurred an expenditure of Rs. 12,17,639.27/- towards the ambulance and therefore the net income has to be taken as income from the ambulance service. The said ground raised by the assessee seems to be a reasonable one since the entire gross income should not be taxed without giving proper deductions to the expenses incurred towards getting the said income. Therefore this issue required a reconsideration by the AO. To compute the correct income, this issue is also remitted to the file of the AO with the direction to consider the issue afresh and decide the income based on the documents / records produced by the assessee. 11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 27th May, 2025. Sd/- Sd/- (INTURI RAMA RAO) (SOUNDARARAJAN K.) Accountant Member Judicial Member Cochin, Dated, the 27th May, 2025. /MS / Page 7 of 7 ITA No. 376/Coch/2024 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Cochin 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Cochin "