IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH : COCHIN BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA Nos. 405 &

406/Coch/2024 Assessment Years : 2017-18 &

2020-21 M/s. Edavilangu Service Co-

operative Bank Ltd. 3468, The Income Tax Edavilangu P.O., Officer, Kodungallur, Ward – 2(1), Thrissur – 680 671. Thrissur.

Vs.

PAN: AAAAE7972Q APPELLANT RESPONDENT Assessee by : None Revenue by : Smt. Leena Lal, Snr. AR Date of Hearing : 01-01-2025 Date of Pronouncement : 21-02-2025

ORDER

PER SOUNDARARAJAN K., JUDICIAL MEMBER These are the appeals filed by the assessee challenging the orders of the NFAC, Delhi both dated 19/10/2023 in respect of the A.Ys. 2017-18 and

2020-21 and raised the following grounds:

Assessment Year: 2017-18 “A. The assessing authority declined the deduction under Section 80P of the Act on the reasoning that the society had not furnished the registration certificate inspite of the letter issued to produce the documents. The said view is absolutely incorrect, as the appellant had produced the said certificate, which was not taken note of by the assessing authority as well as appellate authority. There is no justification for the present reasoning of the assessing authority.

B. The appellant society is registered under Kerala Co- operative Societies Act. As per Section 2(1) of the Kerala Co-operative Societies Act, member of a society includes nominal member as well as associates member. The society is accepting deposits from the members and provides credit facilities to the members only and thereby the appellant society is entitled to get the benefit of Sec. 80P(2)(a)(i) of the Act. This aspect was not considered by the assessing authority as well as the appellate authority in the proper perspective.

C. As per the dictum laid down by the Hon'ble Supreme Court in Commissioner of Income Tax Vs. Nawanshahar Central Cooperative Bank Ltd. (2007) 289 ITR 6 (SC) held that investments made by a banking concern are part of the business of banking. The income arising from such investments would, therefore, be attributable to the business of bank falling under the head "Profits and gains of business" and thus deductible under Section. 80P(2)(a)(i) of the Income Tax Act. It was also held that the said principle would cover a situation where a co-operative bank carrying on the business of banking is statutorily required to place a part of its funds in approved securities. So, the interest on deposit is a part of business of banking and the same is deductible Sec. 80P(2)(a)(i) of the Act. So, the interest on deposit is a part of business of banking and the same is deductible Sec. 80P(2)(a)(i) of the Act. So, the benefit available Sec. 80P(2) of the Act has been denied without any justifiable reason.

D. The Hon'ble High Court of Kerala as per judgment in ITA NO. 323 of 2019 dated 1.11.2021 and connected cases, (Principal Commissioner of Income Tax Vs. Peroorkada Service Co-operative Bank [2022] 442 ITR 141 (Ker), held that held that the interest earned form district Co-operative banks and the state co-operative bank did come within the section 80P (2)(d). Admittedly, from the assessment order, the appellant had received substantial income by way of interest of deposit and hence, there is no justification for denying the benefit of deduction under Section 80P of the Income Tax Act. Hence, the orders issued by the assessing authority as well as appellate authority are not tenebel.

E. Section 80P(2(d) of the Income Tax Act provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in another cooperative society. In the instant case, the interest is derived for deposits maintained with District Cooperative Bank and the interest income received from the above bank are eligible for deduction under section 80P (2)(d) of the Income Tax Act and cannot be assessed as income from other source. Hence, the reasoning made by the aut