ITAT Allows Section 80P Deduction for Kerala University Co-op Society's Bank Interest Income [Read Order]

The Income Tax Appellate Tribunal (ITAT) has ruled in favor of the Kerala University Employees Co-operative Society Ltd., granting it a deduction under Section 80P for interest income earned from investments with the District Co-operative Bank, State Bank of India (SBI), and the Treasury. The decision was made in an appeal against the order passed by the National Faceless Appeal Centre (CIT(A)) for the Assessment Year 2020-21.

The dispute arose after the Income Tax Officer (ITO) issued an assessment order for the year 2020-21, disallowing the exemption claimed by the co-operative society on interest income earned from these investments. The ITO had denied the deduction, arguing that the income derived from these banks and institutions did not qualify for a deduction under Section 80P, as the society was considered a co-operative bank.

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The Kerala University Employees Co-operative Society Ltd. had filed its return of income for the year 2020-21, declaring nil income after claiming a deduction of Rs. 75,03,234 under Section 80P. The society contended that the interest income earned from investments with other co-operative societies, SBI, and the Treasury should be assessed as business income, which qualifies for a deduction under Section 80P(2)(a)(i) of the Income Tax Act.

In its appeal, the society referred to previous decisions of the Kerala High Court, including the case of Pr. CIT vs. Peroorkada Service Co-op. Bank Ltd. (2022), which held that interest income from co-operative societies is eligible for Section 80P deduction. The appellant also cited the ruling in CIT vs. Sahyadri Co-operative Credit Society Ltd. (2019), where interest income from fixed deposits made with SBI and the Treasury was also allowed for deduction under the same section.

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After considering the arguments from both parties, the ITAT held that the interest income earned by the society on its investments with the co-operative bank, SBI, and the Treasury was eligible for deduction under Section 80P. The tribunal noted that the assessments were consistent with the legal precedents established by the Kerala High Court.

The appeal filed by the Revenue was dismissed by the bench, which consisted of George George K (Vice President) and Inturi Rama Rao (Accountant Member). The tribunal’s order effectively upheld the CIT(A)'s decision, granting the deduction for the co-operative society.

To Read the full text of the Order CLICK HERE

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