Coimbatore Co-Operative- Housing Society Ltd. Vs ITO (ITAT Chennai)
The ITAT Chennai allowed the appeal of a co-operative credit housing society and held that interest of ₹11.25 lakh earned on a savings bank account with Axis Bank is eligible for deduction u/s 80P(2)(a)(i).
The AO had originally allowed the claim, but later PCIT invoked u/s 263, leading to reassessment and disallowance on the ground that bank interest is not business income, relying on Totgars and Citizen Co-operative Society. The CIT(A) affirmed the disallowance.
Reversing the authorities below, the Tribunal held that the assessee’s core activity is providing credit facilities to members and the surplus funds parked in a savings bank account were temporary deployment of business funds. The resulting interest was incidental and attributable to the main business, and not from any independent or alien activity.
The ITAT clearly distinguished Totgars (interest on members’ sale proceeds treated as liability) and Citizen Co-operative Society (ultra-vires lending to public), and followed binding High Court precedents including Guttigedarara Credit Co-operative Society (Karnataka HC) and AP State Co-operative Bank (AP HC). Applying Vegetable Products principle, the Tribunal preferred the assessee-friendly view.
Accordingly, the disallowance was set aside and deduction u/s 80P(2)(a)(i) was directed to be allowed in full. Appeal allowed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This is an appeal preferred by the assessee-society against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter ‘the Ld.CIT(A)’), Delhi, dated 27.08.2025 for the Assessment Year (hereinafter ‘AY’) 2017-18.
