ITO 1(3)(2), MUMBAI V. PUNJAB & MAHARASHTRA C-OP BANK LTD, MUMBAI

ITA 1674/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55017 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUBEL
• Section: 80P; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1674/MUM/2010 (ASSESSMENT YEAR: 2005-06) A C I T - 1(3) PUNJAB & MAHARASHTRA CO-OP. BANK LTD. ROOM NO. 504/564, 5TH FLOOR 240 SHANKAR SADAN, SION (E) AAYAKAR BHAVAN, M.K. ROAD VS. MUMBAI 400022 MUMBAI 400020 PAN - AAACP 8549 E APPELLANT RESPONDENT APPELLANT BY: SHRI M.R. KUBEL RESPONDENT BY: NONE DATE OF HEARING: 11.08.2011 DATE OF PRONOUNCEMENT: 24.08.2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) II, MUMBAI DATED 01.12.2009 2. REVENUE HAS RAISED A SOLITARY GROUND AS UNDER: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO ALLOW DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON INCOME RELATED TO I NTEREST ON DEPOSITS WITH BANKS, COMMISSION FROM BSES AND ICICI AND MISCELLANEOUS INCOME WITHOUT APPRECIATING THAT THE SOURCE OF THESE INCOME ARE NOT THE SPECIFIC ACTIVITIES REFERR ED TO IN SECTION 80P(2)(A)(I). 3. BRIEFLY STATED, ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. FOR THE YEAR UNDER CONSIDERATI ON THE A.O. HAS GIVEN A FINDING THAT THE INCOME AS LISTED BELOW ARE NOT FRO M INCOME SPECIFIED IN SECTION 80P OF THE INCOME TAX ACT AND ACCORDINGLY A RE REQUIRED TO BE TAXED. THE INCOMES CONSIDERED BY THE A.O. ARE AS UNDER: - ITA NO. 1674/MUM/2010 PUNJAB & MAHARASHTRA CO-OP. BANK LTD. 2 I) INTEREST RECEIVED FROM NATIONALIZED BANKS ` 13,11,614/- II) INTEREST RECEIVED FROM OTHER BANKS ` 3,99,128/- III) BSES COMMISSION ` 7,76,345/- IV) COMMISSION FROM ICICI ` 3,84,325/- V) OTHER INCOME ` 9,183/- TOTAL ` `` ` 10,54,082/- ACCORDING TO THE A.O. THERE ARE BROADLY TWO KINDS O F INCOME SPECIFIED IN SECTION 80P. THE FIRST IS INCOME DERIVED BY CARRYIN G ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO MEMBERS A ND, THE SECOND IS INCOME BY WAY OF INTEREST AND DIVIDEND DERIVED FROM INVEST MENT WITH OTHER CO- OPERATIVE SOCIETIES. HE HAS ARGUED THAT THE INCOME AS LISTED ABOVE DO NOT FALL IN ANY OF THESE CATEGORIES. HE HAS THEREFORE CONSID ERED ALL THE ABOVE FIVE INCOMES AS INCOME FALLING UNDER THE HEAD INCOME FR OM OTHER SOURCES AND HAS TAXED THE ENTIRE SUM AS REFERRED ABOVE. IN EFFE CT HE HAS DENIED THE BENEFIT OF SECTION 80P TO THE ASSESSEE. 4. BEFORE THE CIT(A) IT WAS CONTENDED THAT THE INTERES T AND OTHER INCOMES WERE EARNED IN THE COURSE OF BUSINESS OF BA NKING AND THE CIT(A) IN A.Y. 2004-05 ON SIMILAR FACTS ALLOWED THE BENEFIT O F DEDUCTION UNDER SECTION 80P AND THAT ORDER WAS UPHELD BY THE ITAT I N ASSESSEES OWN CASE IN ITA NO. 5857/MUM/2007. FOLLOWING THE ABOVE AND A LSO HIS PREDECESSORS ORDER THE CIT(A) HELD THAT INTEREST E ARNED BY ASSESSEE FROM OTHER BANKS, NATIONALISED AND OTHER BANKS WAS HELD TO BE OUT OF BUSINESS ACTIVITY. LIKEWISE, FOLLOWING THE TRIBUNAL ORDER IN EARLIER YEAR, THE COMMISSION OF BSES AND ICICI ARE ALSO CONSIDERED AS INCOME ATTRIBUTABLE TO BANKING BUSINESS AND ACCORDINGLY QUALIFIED FOR D EDUCTION UNDER SECTION 80P. AS FAR AS MISCELLANEOUS INCOMES ARE CONCERNED THE CIT(A) GAVE A FINDING THAT THE OTHER INCOME INCLUDED IN MISCELLAN EOUS INCOME IS ESSENTIALLY EMANATING FROM THE BANKING BUSINESS OF THE ASSESSEE, THEREFORE, ON THE FACTS OF THE PRESENT CASE MISCELLANEOUS INCO ME ALSO QUALIFY FOR DEDUCTION UNDER SECTION 80P. REVENUE IS AGGRIEVED O N THE DIRECTIONS OF THE CIT(A) IN ALLOWING THE DEDUCTION UNDER SECTION 80P. 5. ASSESSEE WAS NOT REPRESENTED BY ANYBODY WHEN THE CA SE WAS POSTED, THEREFORE, THE CASE WAS DECIDED EXPARTE RESPONDENT. THE ORDER OF THE ITAT IN ITA NO. 1674/MUM/2010 PUNJAB & MAHARASHTRA CO-OP. BANK LTD. 3 ITA NO. 5857/MUM/2007, WHICH WAS FOLLOWED BY THE CI T(A), WAS PLACED ON RECORD. THE LEARNED D.R. REITERATED THE CONTENTIONS OF THE A.O. AND SUBMITTED THAT THE INTEREST RECEIVED FROM NATIONALISED BANKS CANNOT BE ALLOWED AS DEDUCTION AS SECTION 80P(2)(D) ALLOWS ONLY INCOME F ROM OTHER CO-OPERATIVE BANKS AS ELIGIBLE FOR DEDUCTION AND, THEREFORE, TO THE EXTENT OF INCOME RECEIVED AS INTEREST FROM OTHER NATIONALISED BANKS AND PRIVA TE BANKS NOT COVERED BY THE SECTION 80P. WITH REFERENCE TO REST OF THE INCO ME IT IS FAIRLY ADMITTED THAT THE ISSUES ARE COVERED BY THE ORDER OF THE ITAT IN EARLIER YEAR. 6. WE HAVE CONSIDERED THE ISSUE. THE ITAT IN EARLIER Y EAR HAS EXAMINED ALLOWABILITY OF COMMISSION RECEIVED FROM BSES AND I CICI PRUDENTIAL AND MISCELLANEOUS INCOMES AND FOLLOWING THE HON'BLE JUR ISDICTIONAL HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. AHMEDNAGAR DISTRIC T CENTRAL CO-OPERATIVE BANK LTD. 264 ITR 38 HELD THAT INCOMES EARNED BY WA Y OF COMMISSION WAS ATTRIBUTABLE TO THE BUSINESS OF BANKING AND AS SUCH RELIEF UNDER SECTION 80P(2)(A)(I) OF THE ACT WAS ALLOWABLE TO ASSESSEE. SINCE THE CIT(A) FOLLOWED THE COORDINATE BENCH DECISION IN ALLOWING THE DEDUC TION UNDER SECTION 80P(2), WE SEE NO REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A). CONSEQUENTLY WE UPHOLD THE ORDER. 7. THE ARGUMENT RAISED BY THE LEARNED D.R. THAT INTERE ST EARNED FROM OTHER NATIONALISED BANKS AND OTHER BANKS IS NOT ELI GIBLE FOR DEDUCTION UNDER SECTION 80P(2)(D) IS NOT CORRECT AS SECTION 80P(2)( A)(I) ITSELF ALLOWS THE ENTIRE INCOME EARNED IN THE COURSE OF BANKING BUSINESS BY A CO-OPERATIVE BANK INVOLVED IN BANKING BUSINESS. SINCE THERE IS NO DOU BT ABOUT THE ACTIVITY OF THE ASSESSEE BEING A CO-OPERATIVE BANK AND AS INCOM ES ARE EARNED IN THE COURSE OF BANKING BUSINESS, WE SEE NO REASON TO CON SIDER SECTION 80P(2)(D) WHEN SECTION 80P(2)(A)(I) ALLOWS THE ENTIRE PROFITS EARNED IN THE COURSE OF BANKING BUSINESS AS DEDUCTION. IT IS ALSO NOTICED T HAT CIT(A) FOLLOWED HIS PREDECESSOR ORDER ON THE SAME ISSUE AND ALLOWED AS IN LAST YEAR AND REVENUE DID NOT PREFER ANY APPEAL IN THAT YEAR AS A PPEAL WAS ONLY ON ISSUES OF COMMISSION ALLOWED AS CAN BE SEEN FROM THE ORDER OF ITAT(SUPRA). THEREFORE, LEARNED D.R.S ARGUMENT IS REJECTED. THE INTEREST INCOMES EARNED ON DEPOSITS WITH OTHER BANKS IN THE COURSE OF BANKI NG BUSINESS IS ALSO ITA NO. 1674/MUM/2010 PUNJAB & MAHARASHTRA CO-OP. BANK LTD. 4 ELIGIBLE FOR DEDUCTION IN THE IMPUGNED YEAR AS PER THE PROVISIONS OF SEC. 80P(2)(A)(I). 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH AUGUST 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) II, MUMBAI 4. THE CIT I, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.