TaxTMI 
TaxTMI 
2026 (8) TMI 1032
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....ng to Rs.7,65,96,433, disallowance under section 40(a)(ia) amounting to Rs.6,22,97,012, and disallowance under section 36(1)(v) amounting to Rs.58,09,975. She contended that the assessee is eligible for deduction under section 80P(2)(a)(i) and that the disallowances made by the Assessing Officer and sustained by the learned CIT(A) are not justified. She submitted that the balance of convenience is in favour of the assessee and, therefore, the demand should be kept in abeyance until the pending appeals are disposed of by the Coordinate Bench. She further submitted that recovery of the demand would cause undue hardship to the assessee, a co-operative bank, and stated that the assessee is ready to argue the appeals either on the same day or on any date fixed by the Bench. 3. The learned Senior Departmental Representative, Ms. Neethu S., strongly opposed the stay petitions and submitted that the additions had been confirmed by two concurrent authorities; therefore, no stay should be granted in the present cases. However, she stated that she had no objection if the appeals were taken up and disposed of expeditiously. 4. In view of the above facts, both parties agreed that the appe....
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....ed on 27 December 2022, determining the total income of the assessee at Rs.14,47,03,420. 6. The assessee preferred an appeal before the learned CIT(A), who passed an order on 19 September 2025. The assessee contended before the learned CIT(A) that the show-cause notice stated to have been issued by the Assessing Officer on 16 December 2022 was never served and had not been received by it. The learned CIT(A) initially confirmed the action of the Assessing Officer by order dated 31 October 2023, which was challenged before the Coordinate Bench. By order dated 9 December 2024, the Coordinate Bench set aside the issue to the file of the learned CIT(A) for deciding the appeal on merits in accordance with law. Thereafter, the appeal was migrated to the National Faceless Appeal Centre. 7. The learned NFAC was confronted by the assessee with the fact that it is a co-operative society registered under the Kerala Co-operative Societies Act, 1969, with its principal object and business being the provision of credit facilities to its members. The assessee was registered as a co-operative society on 2 February 1956 and is classified as a primary agricultural credit society. It was also no....
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....n ITA No. 939/Coch/2025 against the order of the learned CIT(A) dated 17 September 2025, whereby the appeal of the assessee was dismissed, and the disallowance of deduction was upheld. In this case, the assessee filed its return of income on 14 September 2016 declaring nil income after claiming deduction of Rs.3,95,36,536 under section 80P of the Income-tax Act. The Assessing Officer denied the deduction and passed the assessment order dated 26 December 2018 under section 143(3) of the Act. 13. For Assessment Year 2023-24, the assessee is in appeal in ITA No. 1048/Coch/2025 against the order of the learned CIT(A) dated 6 October 2025, whereby the appeal filed by the assessee against the assessment order dated 25 March 2025, passed under section 143(3) read with section 144B of the Act by the National Faceless Assessment Centre, Delhi, was dismissed. The assessee filed its return of income on 6 October 2023 declaring nil income after claiming deduction of Rs.11,13,11,934 under section 80P of the Income-tax Act. 14. On the issue of deduction under section 80P(2)(a)(i) of the Income-tax Act, the learned authorised representative submitted that the Hon'ble Kerala High Court has h....
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.... arises for consideration in the instant case is with regard to its entitlement to deduction in respect of the interest that it earned from deposits that it had made in compliance with the statutory requirements under the MultiState Co-operative Societies Act. It is not in dispute that the amount of profits and gains of business attributable to its business of providing credit facilities to its members is eligible for the benefit of deduction under Section 80P (2) of the I.T. Act. The question that arises for consideration, however, is whether, on deposit by the respondent/assessee of the amounts that are found to be eligible for deduction under Section 80P (2), with a bank or other permitted institutions, the interest earned by the assessee on such deposits would also be entitled to the benefit of deduction under Section 80P (2) of the I.T. Act?. According to the Revenue, while the assessee was entitled to the deduction in relation to the principal income by way of interest earned through the provision of credit facility to its members, the interest income earned through deposit of the principal income with banks and other permitted financial institutions would attract tax under t....
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....ive society to the extent and in the manner specified in the byelaws. 64. Investment of funds:- A multi-state cooperative society may invest or deposit its funds- (a) in a cooperative bank, state cooperative bank, cooperative land development bank or central cooperative bank; or (b) in any of the securities issued by the Central Government, State Government, Government Corporations, Government Companies, Authorities, Public Sector Undertakings or any other securities ensured by Government guarantees; (c) in the shares or securities of any other multi-state cooperative society or any cooperative society; or (d) in the shares, securities or assets of a subsidiary institution or any other institution in the same line of business as the multi-State co-operative society; or (e) with any other scheduled or nationalised bank. Explanation,- For the purposes of this clause, the expression,- (i) "scheduled bank" shall have the same meaning as assigned to it in clause (e) of section 2 of the Reserve Bank of India Act, 1934; and (ii) "nationalised bank" means a corresponding new bank constituted under sub-section (1) of section 3 of t....
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....he levy of tax under the head of "Income from other sources". This was because wherever the Legislature intended such interest income to also enjoy the benefit of deduction, it was expressly provided in Section 80P(2)(d) and the assessee in the instant case has not satisfied the requirements for getting the benefit of deduction under the said provision. The argument in other words, is that the express provision for deduction of interest on deposits conferred by Section 80P(2)(d) excludes, by implication, the deduction in relation to similar interest income under Section 80P(2)(a) of the I.T. Act. 7. On a consideration of the rival submissions, we are of the view that for the reasons stated hereinafter, the question of law that arises for consideration before us must be answered against the Revenue and in favour of the assessee. The permissible deduction that is envisaged under Section 80P(2) of the I.T. Act for a Co-operative Society that is assessed to tax under the head of 'Profits and Gains of Business or Profession' is of the whole of the amount of profits and gains of business attributable to any one or more of its activities. Thus, all amounts as can be attri....
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....ed the same to earn interest during the period when the surplus receipts were in its hands. It was therefore that the court found that the interest earned by the Society through deposit of such receipts with banks in fact ought to have accrued to the benefit of the individual members and not to the Society itself; that in relation to the Society, it was to be treated as income from other sources since the interest income had lost its nexus with the principal income earned by the Society. The facts in the instant cases are entirely different and the investment concerned was of amounts that had already attained the character of surplus profits in the hands of the assessee. On this issue, therefore, we find ourselves in agreement with the view taken by the Andhra Pradesh and Karnataka High Courts respectively in The Vavveru Co-operative Rural Bank Ltd. (supra) and Tumkur Merchants Souharda Credit Co-operative Ltd. (supra). 9. As for the argument of the learned Standing Counsel for the Revenue, with reference to the provisions of Section 80P(2)(d) of the I.T. Act, we might only observe that, while it may be a fact that interest income of the nature specified therein is specifi....