M/s.Kizhathadiyoor Sevice Co-op Bank Ltd, Kottayam V. The ITO, Kottayam

CO 7/COCH/2015

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2942 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2015
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM C.O. NO. 07/COCH/2015 (ARSG. OUT OF I.T.A. NO.67 /COCH/2015) ASSESSMENT YEAR : 2010 - 11 KIZHATHADITYOOR SERVICE CO - OPERATIVE BANK LTD., PALA, KOTTAYAM-686 575. [PAN: AAAAK 3240R] VS. THE INCOME TAX OFFICER, WARD-2, KOTTAYAM. (ASSESSEE - APPELLANT) (R EVENUE - RESPONDENT) ASSESSEE BY SHRI PRASANTH SRINIVAS, CA REVENUE BY SHRI A. DHANARAJ, SR. DR D ATE OF HEARING 24 / 0 5 / 201 7 DATE OF PRONOUNCEMENT 26 / 0 5 /201 7 O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER: THIS CROSS OBJECTION IS RE-INSTATED THROUGH AN O RDER DATED 24/03/2017 OF THIS TRIBUNAL IN M.P. NO. 09/COCH/2016. DEPARTMENT HAD FILED AN APPEAL BEFORE THE TRIBUNAL NUMBERED AS I.T.A. NO. 67/COCH/2015 AGAINS T WHICH ASSESSEE HAD FILED CROSS OBJECTION NUMBERED AS C.O. NO. 07/COCH/2015. WHEN THE APPEAL OF THE REVENUE WAS DISMISSED, CROSS OBJECTION OF THE ASSES SEE WAS ALSO DISMISSED FOR THE REASON THAT CROSS OBJECTION WOULD NOT SURVIVE. HOWEVER, ASSESSEE THROUGH ITS M.P. 09/COCH/2016, RELYING ON A JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH C.O. NO.07COCH/2015 2 COURT IN THE CASE OF CITY CENTRE BUILDERS AND DEVELOPERS VS. ITAT IN WP(C) NO.7666 OF 2016 (G) DATED 02/07/2016, REQUESTED FOR RESTITUTION OF THE CO. PURSUANT TO THIS, THE CROSS OBJECTION WAS RESTORED BY THIS TRIBUNAL, CONSIDERING IT TO HAVE AN INDEPENDENT EXISTENCE. ACCORDINGLY, THE CO WAS TAKEN UP FOR HEARING TODAY. 2. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT APART FROM THE GROUNDS RAISED IN THE CO WHICH SUPPORTED THE ORDER OF THE C IT(A) ALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80P OF THE ACT, THERE WAS AN ADDITIONAL GROUND OF CROSS OBJECTION. AS PER THE LD. AR, THROUGH THIS A DDITIONAL GROUND, ASSESSEE HAD OBJECTED TO THE TREATMENT OF THE TREATMENT OF THE I NCOME ARISING FROM INVESTMENTS UNDER THE HEAD INCOME FROM OTHER SOURC ES AS AGAINST INCOME FROM BUSINESS. AS PER THE LD. AR, THE ASSESSING OFFICE R HAD RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS C O-OPERATIVE SALES SOCIETY VS. ITO (322 ITR 283) WHILE COMING TO THE CONCLUSION TH AT INCOME FROM INVESTMENTS COULD NOT BE CONSIDERED AS INCOME ARISING FROM BUSI NESS OF BANKING, BUT HAD TO BE TREATED AS INCOME FROM OTHER SOURCES, THEREBY DE NYING THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A) (I) AND SECTION 80P(2)(B)(I ) OF THE ACT. FURTHER, AS PER THE LD. AR, THIS TRIBUNAL IN THE ASSESSEES OWN CAS E FOR A.Y. 2009-10VIDE ITS ORDER DATED 20 TH JULY, 2016 IN I.T.A. NO. 525/COCH/2014 HAD HELD TH AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALES SOCIETY DID NOT APPLY TO CERTAIN CO-OPERATIVE BANKS WHICH A RE CO-OPERATIVE SOCIETIES C.O. NO.07COCH/2015 3 CARRYING ON THE BUSINESS OF BANKING AND NOT CO-OPER ATIVE SOCIETIES ENGAGED IN MARKETING THE PRODUCE OF ITS MEMBERS. THUS AS PER THE LD. AR, CIT(A) ERRED WHEN HE DENIED THE CLAIM OF DEDUCTION U/S. 80P(2) O F THE ACT ON THE INTEREST INCOME. 3. PER CONTRA, LD. DR STRONGLY RELIED ON THE JUDG MENT OF THE HONBLE APEX COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY V S. ITO (SUPRA). 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN I.T.A. NO.525/COCH/2014 DATED 20 TH JULY 2016, THIS TRIBUNAL IN RELATION TO THE CLAIM OF THE ASSESSEE HELD THAT INCOME ARISING FROM INVESTMENTS IN TREASURY/BANKS W AS ELIGIBLE FOR DEDUCTION U/S. 80P(2) OF THE ACT. IT HAS HELD AS UNDER: 7.2 AS REGARDS THE INTEREST FROM TREASURY AND BAN KS, WE FIND ON IDENTICAL FACTS, THE COCHIN BENCH OF THE TRIBUNAL I N THE CASE OF THE MUTTOM SERVICE COOPERATIVE BANK LTD IN ITA NO. 372 /COCH/2010 HAD DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. T HE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF MUTTOM SERVICE COOPERATIVE BANK LTD (SUPRA) HAS DISTINGUISHED THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LTD (SUPRA). THE RELEVANT FINDING OF THE COORDINATE BEN CH OF THE TRIBUNAL IN THE CASE OF THE MUTTOM SERVICE COOPERAT IVE BANK LTD (SUPRA) READ AS FOLLOWS: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE H AVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THE LOWER AUTHO RITY. NO DOUBT, THE LATEST JUDGMENT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS ITO (SUPRA), THE APEX COURT FOUND THAT THE D EPOSIT OF C.O. NO.07COCH/2015 4 SURPLUS FUNDS BY THE CO-OPERATIVE SOCIETY IS NOT EL IGIBLE FOR DEDUCTION U/S 80P(2). IN THE CASE BEFORE THE APEX C OURT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS ITO (SUPR A), THE ASSESSEE CO-OPERATIVE SOCIETY WAS TO PROVIDE CREDIT FACILITY TO ITS MEMBERS AND MARKET THE AGRICULTURAL PRODUCE. THE AS SESSEE IS NOT IN THE BUSINESS OF BANKING. THEREFORE, THIS TRI BUNAL IS OF THE OPINION THAT THE JUDGMENT OF THE APEX COURT IN TOTG ARS CO- OPERATIVE SALE SOCIETY LTD (SUPRA) IS NOT APPLICABL E IN RESPECT OF THE CO-OPERATIVE SOCIETY WHOSE BUSINESS IS BANKING. ADMITTEDLY, THE ASSESSEE HAS INVESTED FUNDS IN STATE PROMOTED T REASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. SINCE GOVERNMENT OF I NDIA HAS WITHDRAWN INDIA VIKAS PATRA, AS A SMALL SAVINGS INS TRUMENT, FUNDS INVESTED AT THE DISCRETION OF THE BANK IS ONE OF TH E ACTIVITIES OF THE BANKING AS PER THE BANKING REGULATION ACT. SINC E THE ASSESSEE CO-OPERATIVE SOCIETY IS IN THE 4 ITA NO.37 2/COCH/2010 BUSINESS OF BANKING THE INVESTMENT IN THE STATE PRO MOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTIFICATE SC HEME IS A BANKING ACTIVITY, THEREFORE, THE INTEREST ACCRUED O N SUCH INVESTMENT HAS TO BE TREATED AS BUSINESS INCOME IN THE COURSE OF ITS BANKING ACTIVITY. ONCE IT IS A BUSINESS INCO ME, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)((A)(I). THEREF ORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT OF THE LARGER BENC H OF THE APEX COURT IN KARNATAKA STATE COOPERATIVE APEX BANK (SUPRA) IS APPLICABLE TO THE FACTS OF THIS CASE. BY RESPECT FULLY FOLLOWING THE JUDGMENT OF THE APEX COURT IN KARNATAKA STATE C O- OPERATIVE BANK (SUPRA), THE ORDER OF THE COMMISSION ER OF INCOME-TAX(A) IS UPHELD. 7.3 IN THE INSTANT CASE, THE ASSESSEE IS A COOPE RATIVE BANK. THE INVESTMENT IN TREASURY/BANKS AND EARNING INTEREST O N THE SAME IS PART OF THE BANKING ACTIVITY OF THE ASSESSEES COOP ERATIVE BANK. THEREFORE, THE SAID INCOME IS ELIGIBLE FOR DEDUCTIO N U/S 80P(2)(A)(I) OF THE ACT. THEREFORE, THE INCOME TAX AUTHORITIES WERE NOT JUSTIFIED IN TREATING INTEREST INCOME RECE IVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCE AND DENYING THE BENEFIT OF SECTION 80P(2) OF THE ACT. IT IS ORDERED ACCORDINGLY. 4.1 IT HAS NOT BEEN DISPUTED BY THE REVENUE THAT MAJOR PORTION OF INTEREST INCOME AROSE TO THE ASSESSEE ON ITS INVESTMENTS IN TREASURY AND BANKS FOR THE C.O. NO.07COCH/2015 5 IMPUGNED ASSESSMENT YEAR. THEREFORE, THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IS SQUAREL Y APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR ALSO. WE ALSO FIND THAT T HE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TOTGARS CO-OPERATIVE SAL ES SOCIETY VS. ITO (SUPRA) WAS DULY CONSIDERED BY THE TRIBUNAL WHILE ARRIVING AT THIS DECISION. THEREFORE, WE HOLD THAT THE LOWER AUTHORITIES WERE NOT JUSTIFI ED IN TREATING INTEREST INCOME RECEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOUR CES AND DENYING IT THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2) OF THE AC T. 5. IN THE RESULT, CROSS OBJECTION FILED BY THE AS SESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26-05-2017. SD/- SD/- (GEORGE GEORGE K.) (ABRA HAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 26 TH MAY, 2017 GJ COPY TO: 1. KIZHATHADITYOOR SERVICE CO-OPERATIVE BANK LTD., PALA, KOTTAYAM-686 575. 2. THE INCOME TAX OFFICER, WARD-2, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI . 4. THE PR. COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN C.O. NO.07COCH/2015 6