Vellanikkara Service Co-op. Bank Ltd Vs ITO (ITAT Cochin)
Income Tax Appellate Tribunal (ITAT), Cochin bench, has dismissed an appeal filed by Vellanikkara Service Co-operative Bank Ltd. against an order of the National Faceless Appeal Centre (NFAC), Delhi, for the Assessment Year 2018-19. The appeal primarily concerned a disallowance related to a provision for gratuity.
The case originated from the bank’s return of income for AY 2018-19, where it declared nil income after claiming a deduction of Rs. 3,99,21,348/- under section 80P of the Income Tax Act, 1961. The Income Tax Officer (ITO) completing the assessment under section 143(3) of the Act, however, denied the entire 80P deduction, assessing the total income at Rs. 4,11,71,348/-.
Aggrieved by the ITO’s order, the bank filed an appeal before the CIT(A). The CIT(A), in their order dated August 22, 2023, provided partial relief to the bank. Following the principle laid down by the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC), the CIT(A) allowed the claim for deduction under section 80P. However, the CIT(A) concurrently held that income generated from services rendered to non-members would not be eligible for this deduction.
The bank subsequently approached the ITAT challenging the CIT(A)’s order. The grounds of appeal raised by the bank before the ITAT, however, did not directly contest the CIT(A)’s decision regarding the partial allowance of the 80P deduction or the treatment of income from non-members. Instead, the grounds focused on an addition to income amounting to Rs. 12,50,000/-, which the bank stated was on account of a disallowance made under section 40A(7) of the Act for a provision for gratuity.
