PUNNAYURKULAM SERVICE CO OPERATIVE BANK LTD NO P 417,PUNNAYURKULAM V. INCOME TAX OFFICER,WARD 1& TPS, GURUVAYUR

ITA 498/COCH/2025

AI Insights

The case involves Punnayurkulam Service Co-operative Bank Ltd., a cooperative society engaged in accepting deposits and providing credit facilities, which filed an appeal against the order of the National Faceless Appeal Centre, Delhi, for the Assessment Year 2020-21. The primary contention was regarding the disallowance of a deduction claim under section 80P of the Income Tax Act, specifically related to interest income from Treasury and Scheduled Banks. The Tribunal's decision was influenced by a precedent from the Hon'ble Jurisdictional High Court, which supported the assessee's position that such interest income should be considered as part of the profits and gains from their main business activities.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717287 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Appeal Filed On: 05-07-2025
• Other Referred Cases: CIT vs. Sahyadri Co-operative Credit Society Ltd. in ITA No. 63 of 2019
• Laws Referred To: Kerala Cooperative Societies Act, 1969, Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: RAMDAS M
• Keywords: Co-operative Credit Society

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM ITA No. 498/Coch/2025 Assessment Year: 2020-21 Punnayurkulam Service Co-op. .......... Appellant Bank Ltd No. P 417, Punnayurkulam, Thrissur. [PAN: AACAP 6129 J] vs. Income Tax Officer .......... Respondent Ward-1 & TPS, Guruvayur. Appellant by: Shri Ramdas M, CA Respondent by: Smt. Leena Lal, Sr. DR Date of Hearing: 08.08.2025 Date of Pronouncement: 13.08.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 07.05.2025 for Assessment Year (AY) 2020-21. 2. Brief facts of the case are that assessee is a cooperative society incorporated under the Kerala Cooperative Societies Act, 1969. It is classified as primary agricultural credit cooperative society. It is engaged in the business of accepting deposits from members and providing credit facilities to its members. The return of income for the A.Y. 2020-21 was filed on 08/02/2021 declaring nil income. Printed from counselvise.com 2 ITA No. 498/Coch/2024 Punnauyurkulam Service Co-operative Bank Ltd. Subsequently, it was revised on 27/05/2021 declaring nil income after claiming deduction u/s. 80P(2)(a)(i) & 80P(2)(c)(ii) return of income, the assessment was completed by the Assessing Officer (for short, 'AO') by making disallowance of claim deduction u/s. 80P of the Act of Rs. 28,68,891/-. 3. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order partly allowed the appeal of the appellant by holding that appellant is eligible to claim deduction u/s. 80P(2)(d) of the Act for interest earned from cooperative bank, and disallowed the interest earned from treasury. 4. Being aggrieved, the assessee is in appeal before this Tribunal in the present appeal. 5. I have heard rival submissions and perused the material on record. 6. Regarding the interest income received from Treasury, Scheduled Banks, etc., this issue is no longer res integra, as it is covered by the judgment 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 Printed from counselvise.com 3 ITA No. 498/Coch/2024 Punnauyurkulam Service Co-operative Bank Ltd. 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 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.” 7. Respectfully following the above decision of the Hon'ble Jurisdictional High Court, I hold that assessee is entitled for deduction under sections 80P(2)(a)(i) of the Act in respect of interest received from Treasury, Scheduled Banks, etc. Thus, the appeal filed by the appellant stands allowed. 8. In the result, the appeal filed by the assessee stands allowed Order pronounced in the open court on 13th August, 2025. Sd/- (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 13th August, 2025 vr/- Printed from counselvise.com 4 ITA No. 498/Coch/2024 Punnauyurkulam Service Co-operative Bank Ltd. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin Printed from counselvise.com "