PERINGANDOOR SERVICE CO OPERTAIVE BANK LTD,ATHANI, THRISSUR V. INCOME TAX OFFICER,WARD 2(1), THRISSUR

ITA 515/COCH/2025

AI Insights

The case involves the Peringandoor Service Co-op. Bank Ltd., which appealed against the order of the National Faceless Appeal Centre, Delhi, which had confirmed the assessment made by the Income Tax Officer, denying deductions on interest income under section 80P of the Income Tax Act, 1961 for the Assessment Year 2022-23. The primary legal issue was whether the interest income received from cooperative banks and other financial institutions qualifies for deduction under section 80P. The Tribunal examined precedents and statutory provisions, ultimately deciding in favor of the assessee based on judicial interpretations that supported the deduction claims.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716978 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2022-2023
• Appeal Filed On: 18-07-2025
• Other Referred Cases: Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283 (SC), PCIT v. Peroorkada Service Co-op. Bank Ltd. [2022] 442 ITR 141 (Ker), CIT vs. Sahyadri Co-operative Credit Society Ltd. in ITA No. 63 of 2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETHU S.
• Assessee Lawyers: RAMDAS M.
• Keywords: Business income; Co-operative Credit Society
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI RAHUL CHAUDHARY, JM ITA No. 515/Coch/2025 Assessment Year: 2022-23 Peringandoor Service Co-op. Bank Ltd. .......... Appellant Athani P.O., Thrissur 680581 [PAN: AADAP3407G] vs. Income Tax Officer, WD-2(1), Thrissur .......... Respondent Assessee by: Shri Ramdas M., CA Revenue by: Ms. Neethu S., Sr. DR Date of Hearing: 18.08.2025 Date of Pronouncement: 19.08.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi dated 19.05.2025 for Assessment Year (AY) 2022-23. 2. Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is classified as a primary agricultural credit co-operative society. It is engaged in the business of accepting deposits from members and providing credit facilities to members. The return of income for AY 2022-23 was filed on 30.09.2022 disclosing Nil Printed from counselvise.com 2 ITA No. 515/Coch/2025 Peringandoor Service Co-op. Bank Ltd. income after claiming deduction u/s. 80P of the Income Tax Act, 1961 (the Act). Against the said return of income, the assessment was completed by the Assessment Unit, Income Tax Department (hereinafter called \"the AO\") vide order dated 13.03.2024 passes u/s. 143(3) r.w.s. 144B of the Act at a total income of Rs. 4,74,05,046/-. While doing so, the AO denied deduction u/s. 80P(2)(d) of the Act in respect of interest income received from co-operative banks, ICICI Bank and Kerala Government Treasury of Rs. 4,74,05,046/- on investment made by the appellant bank out of business income. 3. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO placing reliance on the decision of the Hon'ble Apex Court in the case of Totgar’s Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283 (SC), etc. 4. Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal. 5. We have heard the rival contentions and perused the material available on record. The issue in the present appeal is whether the interest income received from co-operative banks and interest income received from State Government Treasury and ICICI Bank qualifies for deduction u/s. 80P of the Act. 6. The issue related to interest income received from the District Co- operative bank stands adjudicated by Hon'ble Jurisdictional High Court’s Printed from counselvise.com 3 ITA No. 515/Coch/2025 Peringandoor Service Co-op. Bank Ltd. decision 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.” 7. Regarding the interest income received from Treasury, Scheduled Banks, etc., this issue is no longer res integra, as it is covered by the judgement of the Hon'ble Jurisdictional High court in the case of CIT vs. Sahyadri Co-operative Credit Society Ltd. in ITA No. 63 of 2019, wherein it was held as under: - “ The question that arises therefore is whether, merely because the assessee chooses to deposit its surplus profit in a permitted bank or financial institution, and earns interest on such deposits, such interest would cease to form part of its profits and gains attributable to its business of providing credit facilities to its members? In our view that question must be answered in the negative, since we cannot accept the contention of the Revenue that the interest earned on those deposits loses its character as profits/gains attributable to the main business of the assessee. It is not as though the assessee in the instant case had used the surplus amount (the profit earned by it] for an investment or activity that was unrelated to its main business, and earned additional income by way of interest or gain through such activity. The assessee had only deposited the profit earned by it in the manner mandated under Section 63 of the Multi-State Co-operative Societies Act, or permitted by Section 64 of the said Act. In other words, it dealt with the surplus profit in a manner envisaged under the regulatory Printed from counselvise.com 4 ITA No. 515/Coch/2025 Peringandoor Service Co-op. Bank Ltd. Statute that regulated, and thereby legitimized, its business of providing credit facilities to its members. Under those circumstances, if the assessee managed to earn some additional income by way of interest on the deposits made, it could only be seen as an enhancement of the profits and gains that it made from its principal activity of providing credit facilities to its members. The nature and character of the principal income [profits earned by the assessee from its lending activity) does not change merely because the assessee acted in a prudent manner by depositing that income in a bank, instead of keeping it in hand. The provisions of the I.T. Act cannot be seen as intended to discourage prudent financial conduct on the part of an assessee.” 8. Respectfully following the above decisions of the Hon'ble Jurisdictional High Court, we hold that the assessee is entitled for deduction under sections 80P(d) & 80P(2)(a)(i) of the Act in respect of interest received from co- operative banks, Treasury, Scheduled Banks, etc., respectively. 9. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 19th August, 2025. Sd/- Sd/- (RAHUL CHAUDHARY) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 19th August, 2025 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File Assistant Registrar ITAT, Cochin Printed from counselvise.com "