A2455 Madurai Electricity System PSCS vs The Income Tax Officer

Court/Forum: ITAT

Bench: Ms. Padmavathy.S, Accountant Member and Shri Manu Kumar Giri, Judicial Member

Order Date: 2026-04-08

Outcome: Remanded

Sections: Section 80P(2)(a)(i), Section 250

Core Ratio

The Tribunal remanded the case to allow the assessee another opportunity to substantiate its claim for deduction under Section 80P(2)(a)(i).

Outcome

The appeal was allowed for statistical purposes, and the case was remanded back to the AO for fresh consideration with directions to allow the deduction if the assessee provides necessary details.

Favourability

Assessee

Core Issue

The central legal question was whether the assessee could claim a deduction under Section 80P(2)(a)(i) without having provided documentary evidence to substantiate that the interest income was earned from providing credit facilities to its members.

Facts of the Case

The assessee, a cooperative credit society, filed a return declaring nil income after claiming a deduction under Section 80P(2)(a)(i). The AO disallowed the deduction due to lack of evidence, and the CIT(A) upheld this decision. The assessee appealed to the Tribunal.

Arguments by Assessee

The assessee argued that it was unable to furnish the necessary details due to lack of professional support and requested another opportunity to present its case.

Arguments by Revenue

The Revenue argued that the deduction was rightly disallowed due to the assessee's failure to provide documentary evidence.

Key Sections & Provisions

Section 80P(2)(a)(i) - Deduction for income from providing credit facilities to members; Section 250 - Appeals to the CIT(A).

Ratio Decidendi

The Tribunal held that the assessee should be given another opportunity to provide the necessary documentary evidence to substantiate its claim for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961. The case was remanded to the AO to call for necessary details and allow the deduction in accordance with the law.

Court Reasoning & Analysis

• The Tribunal noted the lack of documentary evidence as the reason for disallowance.
• The Tribunal considered the assessee's request for another opportunity to present evidence.
• The Tribunal decided to remand the case to the AO for fresh consideration.
• The Tribunal directed the AO to allow the deduction if the assessee provides the necessary details.

Key Observations

• The Tribunal observed that the assessee should be given a fair opportunity to present its case.
• The Tribunal noted the importance of documentary evidence in substantiating claims for deductions.

Case Laws Cited

• Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC)

Related Issues

• Eligibility for deductions under Section 80P
• Requirement of documentary evidence for tax claims
• Procedural fairness in tax assessments

Important Passages

• Considering the facts and circumstances peculiar to assessee's case, we are inclined to give one more opportunity to the assessee to substantiate the claim of deduction u/s. 80P(2)(a)(i) of the Act by producing the required details.

Not Decided / Remanded

The issue of whether the interest income qualifies for deduction under Section 80P(2)(a)(i) was not finally decided and was remanded for further consideration.

Practical Takeaway

Practitioners should ensure that all necessary documentary evidence is provided to substantiate claims for deductions to avoid disallowance.

Full Judgment Text

आयकर अपीलीय अिधकरण, ‘ए’ ायपीठ, चेई।

IN THE INCOME TAX APPELLATE TRIBUNAL

‘A’ BENCH: CHENNAI

सुी पदमावती यस, लेखा सद एवं ी मनु कु मार िग!र, ाियक सद के सम"

BEFORE MS. PADMAVATHY.S, ACCOUNTANT MEMBER AND

SHRI MANU KUMAR GIRI, JUDICIAL MEMBER

आयकर आयकरआयकर आयकर अपील अपीलअपील अपील सं संसं सं./ITA No.3228/Chny/2025 & SA No.101/Chny/2026 (Arises in ITA No.3228/Chny/2025) िनधारण िनधारणिनधारण िनधारण वष वषवष वष /Assessment Year: 2022-23

A2455 Madurai Electricity System

PSCS,

174B EB EMP CS A2455,

Madurai – 625 007.

PAN: AAGAA 7697G

Vs. The Income Tax Officer, Non Corporate Ward-1(1), Madurai.

( अपीलाथ/Appellant)

(यथ/Respondent)

अपीलाथ$ की ओर से/ Appellant by : Mr. S. Girish Kumar, Advocate &'थ$ की ओर से /Respondent by : Ms. Balamirtha, JCIT

सुनवाई की तारीख/Date of Hearing : 24.03.2026 घोषणा की तारीख /Date of Pronouncement : 08.04.2026

आदेश / O R D E R

PER PADMAVATHY.S, A.M:

This appeal and the stay application by the assessee are against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 25.08.2025 for Assessment Year (AY) 2022-23.

ITA No.3228/Chny/2025 & SA No.101/Chny/2026 A2455 Madurai Electricity System PSCS

:- 2 -:

2. The assessee is a cooperative credit society registered under Tamil Nadu Cooperatives Societies Act, 1983. The main activity of the assessee is to provide credit facilities to its Members and mobilizing deposits from them. The assessee filed the return of income for AY 2022-23 on 05.11.2022 declaring total income of Rs. Nil after claiming deduction u/s. 80P(2)(a)(i) of the Act to the tune of Rs. 2,03,66,049/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The assessee did not represent before the A.O and therefore the A.O disallowed the deduction claimed u/s. 80P(2)(a)(i) of the Act stating that the assessee has not furnished any documentary evidences substantiating that the interest earned is from providing credit facilities to its members. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) confirmed the disallowance for the same reason that the assessee did not file any supporting evidences. The assessee is in appeal before the Tribunal against the order of the CIT(A).

3. There is a delay of 12 days in filing the appeal by the assessee. The assessee has filed condonation petition/affidavit stating the reasons for delay in filing the appeal. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST.Katiji & Ors., (167 ITR 471) (SC), we condone the delay in filing the appeal and admit the appeal for adjudication.

4. We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee submitted

ITA No.3228/Chny/2025 & SA No.101/Chny/2026 A2455 Madurai Electricity System PSCS

:- 3 -:

that the primary activity of the assessee is to provide credit facilities to its members by mobilizing deposits from the members. The Ld. AR further submitted that due to lack of professional support to represent the case the assessee could not furnish the relevant details before the lower authorities. Accordingly, the Ld. AR prayed for one more opportunity to represent the case properly before the lower authorities. The Ld. AR drew our attention to the table containing the breakup of interest accrued and received by the assessee to submit that the entire interest earned is from the regular business activity of the assessee which is eligible for deduction u/s. 80P(2)(a)(i) of the Act. From the perusal of the orders of the lower authorities, we notice that the only reason for denying the deduction u/s. 80P(2)(a)(i) of the Act is that the assessee could not furnish any documentary evidences that the income is earned in the normal course of business. Considering the facts and circumstances peculiar to assessee's case, we are inclined to give one more opportunity to the assessee to substantiate the claim of deduction u/s. 80P(2)(a)(i) of the Act by producing the required details. Accordingly we remit the back to the AO with the direction to call for necessary details and allow the deduction in accordance with law. The assessee is required to submit the necessary details as may be called for and cooperate with assessment proceedings. It is ordered accordingly.

S.A No.101/Chny/2026 :

5. In view of our decision in the appeal as elaborated herein above the stay application filed by the assessee has become infructuous. Accordingly the same is dismissed as infructuous.

ITA No.3228/Chny/2025 & SA No.101/Chny/2026 A2455 Madurai Electricity System PSCS

:- 4 -:

6. In the result, the appeal of the assessee is allowed for statistical purposes and the stay application of the assessee is dismissed as infructuous.

Order pronounced on 08 th day of April, 2026 at Chennai.

Sd/- Sd/- (मनु कु मार िग!र) (Manu Kumar Giri)
याियक
याियक
याियक
याियक सदय सदयसदय सदय / Judicial Member

(पदमावती यस) (Padmavathy.S) लेखा लेखालेखा लेखा सदय सदयसदय सदय /Accountant Member चेनई/Chennai, दनांक/Dated: 08 th April, 2026. EDN, Sr. P.S

आदेश क ितिल"प अ#े"षत/Copy to:

1. अपीलाथ/Appellant 2.  थ/Respondent 3. आयकर आयु/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF

Supporting Judgments

• J K Investo Trade (India) Limited vs DCIT (ITAT, 2023) — The assessee is eligible to claim deduction under Section 80G irrespective of the fact that the corpus contribution relates to CSR activities.
• T.R.F. Limited vs Commissioner of Income Tax, Ranchi (SC) — Post-1st April 1989, it is sufficient for the assessee to write off the bad debt in its accounts to claim a deduction under Section 36(1)(vii).
• Commissioner of Income-Tax, Calcutta vs Biju Patnaik (SC) — A finding on a question of fact is open to attack as erroneous in law when there is no evidence to support it or if it is perverse.
• Arya Roadways Company Pvt. Ltd. vs I.T.O., Ward-12(1), Kolkata (ITAT) — The case was remanded to ensure a fair opportunity for the assessee to substantiate its claims regarding the expenditure.
• S. A. Builders Ltd. vs Commissioner of Income Tax (Appeals) Chandigarh & Anr. (SC) — Interest on borrowed funds advanced to a sister concern should be allowed if the advance was made as a measure of commercial expediency.
• Allegis Services (India) Pvt. Ltd. vs Asst. Commissioner of Income Tax (ITAT, 2020) — Expenditure incurred under Section 80G cannot be denied merely because it forms part of CSR payments, leading to double disallowance.

Contrary Judgments

• Interglobe Technology Quotient Private Limited vs ACIT (ITAT, 2024) — CSR contributions can be eligible for deduction under section 80G if they meet the necessary conditions.
• Principal Commissioner of Income Tax 2 vs Gruh Finance Ltd. (HC, 2018) — The absence of evidence of non-disclosure of income negates the basis for imposing a penalty under Section 271(1)(c).
• M/S. W. T. Suren & Co. Ltd. Vs. The Commissioner of Income Tax. Bombay (SC, 1998) — Payment of gratuity made by the assessee to Rallis India Ltd. was an allowable deduction as it was incurred wholly and exclusively for the purpose of business.
• DCIT Cir-3(1) Kol. vs. M/s Narayani Ispat Pvt. Ltd. (ITAT, 2017) — Interest paid for late deposit of service tax and TDS is allowable as a deduction under Section 37(1) of the Income-tax Act, 1961.
• Dy. Commissioner of Income Tax vs Sahil Vachani (ITAT, 2025) — Merely because the assessee had claimed a deduction which was not accepted by the Revenue, it does not attract penalty under Section 271(1)(c) if all facts were
• Mukand Limited vs The Income Tax Officer 3(2)(2) (ITAT, 2020) — The starting point for computation of book profits under section 115JB should include prior period adjustments as per the profit and loss account.