M/.The Azhikkode Service Co-op bank Ltd, Kannur V. The ITO, Kannur

ITA 261/COCH/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3892 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Business income; Question of law
• Section: 143(3); 56; 263

Judgement Text

ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH (SMC) KOCHI BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO 261/COCH/2017 (ASST YEAR 2012-13 ) THE AZHIKODE SERVICE COOPERATIVE BANK LTD , NO.F 1149 AZHIKODE- KANNUR KERALA 670 009 PAN NO. AAAAA7103M VS THE INCOME TAX OFFICER WARD 1 KANNUR ITA NO 208/COCH/2017 (ASST YEAR 2007-08 ) M/S MANIAT SERVICE COOPERATIVE BANK PO MANIAT KASARAGOD 671 310 PAN NO. AAAAM7608K VS THE INCOME TAX OFFICER WARD 2 KASARAGOD ITA NO 209/COCH/2017 (ASST YEAR 2007-08 ) M/S MADIKAI SERVICE COOPERATIVE BANK PO MADIKAI KASARAGOD 671 314 PAN NO. AAAAT7221K VS THE INCOME TAX OFFICER WARD 2 KASARAGOD ITA NO 210/COCH/2017 (ASST YEAR 2007-08 ) M/S BEDADKA FARMERS SERVICE COOPERATIVE BANK LTD KUNDAMKUZHY PO KASARAGD 671 541 PAN NO. AAAAB0892Q VS THE INCOME TAX OFFICER WARD 1 KASARAGOD ITA NO 263/COCH/2017 (ASST YEAR 2008-09 ) THE PAYYANNUR SERVICE COOPERATIVE BANK -NO.F 1401 PO PAYYANNUR KANNUR 670 307 PAN NO. AAABP0133D VS THE INCOME TAX OFFICER WARD 2 KANNUR ( APPELLANT S ) (RESPONDENT) ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 2 ITA NO 268/COCH/2017 (ASST YEAR 2011-12 ) THE MADAI SERVICE COOPERATIVE BANK VENGARA PO KANNUR 670 305 PAN NO. AAAJM1064A VS THE INCOME TAX OFFICER WARD 1 KANNUR & ITA NO 269/COCH/2017 (ASST YEAR 2011-12 ) EZHOME SE RVICE COOPERATIVE BANK LTD NO.C 1508 PO EZHOME KANNUR 670 334 PAN NO. AAAAE4881C VS THE INCOME TAX OFFICER WARD 1 KANNUR ( APPELLANT S ) (RESPONDENT) ASSESSEE BY SHRI GEORGE THOMAS REVENUE BY SHRI A DHANARAJ, SR DR DATE OF HEARING 11 TH JULY 2 017 DATE OF PRONOUNCEMENT 12 TH JULY 2017 ORDER PER GEORGE GEORGE K, JM; THESE SEVEN APPEALS, AT THE INSTANCE OF THE VARIOU S ASSESSEES, ARE DIRECTED AGAINST SEPARATE ORDERS OF THE CIT(A). 2 SINCE COMMON ISSUE IS INVOLVED IN ALL THESE APPEA L, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORD ER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 3 3 I SHALL FIRST TAKE UP FOR ADJUDICATION THE APPEAL IN ITA NO.261/COCH/2017 CONCERNING THE AZHIKODE SERVICE COOPERATIVE BANK. ITA NO. 261/COCH/2017 4 BRIEFLY STATED THE FACTS IN RELATION TO THE ABOVE CASE ARE AS FOLLOWS: THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCI ETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT 1969. IT IS PROVIDING CRE DIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2012-13, THE RETURN OF INCOME WAS F ILED ON 30.9.2012, BY DECLARING NIL INCOME AFTER CLAIMING THE ENTIRE TOTAL INCOME OF RS.1,00,769/- AS DEDUCTION U/S 80P OF THE I T ACT. THE ASSESSMENT WAS TAKEN UP FOR SCR UTINY AND THE ASSESSMENT U/S 143(3) WAS COMPLETED VIDE ORDER DATED 30.10.2014, WHEREIN, THE CLAIM OF DEDUCTION U/S 80P WAS DENIED BY THE ASSESSING OFFICER. THE RE ASON FOR DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE ACT WAS THAT THE ASSESS EE WAS DOING THE BUSINESS OF BANKING AND IN VIEW OF INSERTION OF SUB SECTION(4) TO SECTION 80P, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 80P. 5 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER DENYING THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT, THE ASSESSEE PREFERRED APPEA L TO THE FIRST APPELLATE AUTHORITY. THE CIT(A), FOLLOWING THE JUDGMENT OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO-OP BANK LTD VS CIT REPORTED IN 384 ITR 490, ALLOWED THE CLAIM OF DEDUCTION U/S 80P(2) OF THE ACT. HOWEVER, WITH RE GARD TO INTEREST RECEIVED ON DEPOSITS WITH SUB TREASURY, AMOUNTING TO RS.4,03,088/-, THE CIT(A) HELD THE SAME TO BE INCOME ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 4 FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS, T HEREBY DENIED THE BENEFIT OF DEDUCTION U/S 80P FOR RS. 4,03,088/-. IN TAKING THE ABOVE VIEW, THE CIT(A) RELIED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF M /S TOTGARS COOPERATIVE SALES SOCIETY LTD VS ITO REPORTED IN 322 ITR 283. THE REL EVANT FINDINGS OF THE CIT(A) IN THIS REGARD READ AS FOLLOWS: 8. DURING THE A Y S 2011-12 AND 2012-13, THE APPELL ANT EARNED INTERESTS AMOUNTING TO RS.850/- AND RS.4,03,088/- RESPECTIVELY ON TREASURY DEPOSITS AND CLAIMED THESE AMOUNTS AS DEDUCTIONS UNDER SECTION 80P OF THE INCOME TAX A CT. HOWEVER, THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF M/S TOTGARS' CO- OPER ATIVE SALE SOCIETY LTD VS INCOME TAX OFFICER (322 ITR 283) THAT - 'SUCH INTEREST INCOM E CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)( A)(I) OF THE ACT OR IN SECTION 80P(2)( A)(III) OF THE ACT. 8.1 RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE INTEREST EARNED ON TREASURY DEPOSITS IS NOT ALLOWED AS DEDUCTION U/S 80P OF THE ACT. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO TAX THIS UNDER THE PROVISION S OF THE INCOME TAX ACT, 1961. 6 THE ASSESSEE BEING AGGRIEVED BY THE DENIAL OF BEN EFIT OF SECTION 80P(2), INTEREST EARNED ON DEPOSITS WITH SUB-TREASURY HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT (A) IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE AND HENCE OPPOSED TO THE PROVISION OF INCOME TAX ACT. 2. THE LEARNED CIT (A) HAS ERRED IN UPHOLDING THE D ISALLOWANCE OF THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80(P)(2) FOR INTEREST E ARNED ON DEPOSITS WITH SUB TREASURY ~ 4,03,088/-. THE RATIO OF THE DECISION OF HON. ITAT COCHIN BENCH, IN 'MUTTOM SERVICE CO- OPERATIVE BANK LT, VS. ITO' AND 'KIZHATHADIYOOR SER VICE CO- OPERATIVE BANK LTD VS. ITO' IS SQUARELY APPLICABLE TO THE APPELLANT'S CASE AND THE LEARNED CIT (A) IS BOUND TOFOLLOW THE SAME. IT IS CLEARLY STATED IN THE ABOV E CASES THAT THE INTEREST EARNED BY A CO-OPERATIVE BANK ON INVESTMENTS WITH SUB TREASURY IS ELIGIBLE FOR DEDUCTION U/S 80P (2) 3. THE LEARNED CIT (A) HAS ERRED IN PUTTING RELIANC E ON THE DECISION OF SUPREME COURT IN TORTGAR'S CO-OPERATIVE SALE SOCIETY VS. ITO. THE RA TIO OF THE ABOVE CASES IS NOT APPLICABLE TO THE APPELLANT'S CASE. THE HON. ITAT ( COCHIN BENCH) IN MUTTOM SERVICE CO- ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 5 OPERATIVE BANK VS ITO HAS HELD THAT THE DECISION OF THE HON SUPREME COURT IN TORTGAR'S CO-OPERATIVE SALE SOCIETY VS. ITO IS NOT APPLICABLE TO SERVICE CO-OPERATIVE BANKS AS THEY ARE CO-OPERATIVE SOCIETIES CARRYING ON THE BUS INESS OF BANKING AND NOT CO-OPERATIVE SOCIETIES ENGAGED IN OTHER ACTIVITIES LIKE TORTGAR' S CO-OPERATIVE SALE SOCIETY WHICH IS ENGAGED IN MARKETING THE AGRICULTURAL PRODUCE OF TH E MEMBERS. 4. ON THE ABOVE GROUNDS AND SUCH OTHER GROUNDS AS M AY BE ADDUCED AT THE TIME OF HEARING, IT PRAYED THAT JUSTICE BE DONE TO THE APPE LLANT BY ALLOWING THE CLAIM OF DEDUCTION U/S 80P(2) FOR INTEREST EARNED ON INVESTM ENTS IN SUB TREASURY. 6.1 THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE G ROUNDS OF APPEAL. THE LD DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A). 7 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE SOLITARY ISSUE FOR MY CONSIDERATION IS WHETHER INTE REST RECEIVED ON INVESTMENTS WITH SUB- TREASURY IS LIABLE TO BE ASSESSED UNDER THE HEAD I NCOME FROM OTHER SOURCES OR INCOME FROM BUSINESS. IF THE SAME IS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S 80P (2) OF THE I T ACT, IN RESPECT OF INTEREST RECEIVED ON SUCH INVESTMENTS. THE ASSESSE E ADMITTEDLY IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS. SECTION 5(B) OF THE BANK ING REGULATION ACT 1948 DEFINES BANKING AS THE ACCEPTING FOR THE PURPOSE OF LENDIN G OR INVESTMENT OF DEPOSITS OF MONEY FROM THE PUBLIC, REPAYABLE ON DEMAND OR OTHERWISE A ND WITHDRAWAL BY CHEQUE, DRAFT, ORDER, OTHERWISE. NOW THE QUESTION IS WHETHER A CO OPERATIVE SOCIETY OR A PRIMARY AGRICULTURAL SOCIETY CAN DO BANKING BUSINESS AND WH ETHER BY DOING SUCH AN ACTIVITY, IT LOSES THE ELIGIBILITY FOR DEDUCTION U/S 80P2(1). TH E HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMAMITHA VS ITO HAS CLEARLY ANSWERED THE ISSUE. THE HONBLE HIGH COURT , AFTER CONSIDERING THE AMENDMENT ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 6 INTRODUCED BY FINANCE ACT 2006 W.E.F 1.4.2007 (INSE RTION OF SECTION 80P(4) HAD RENDERED THE FOLLOWING FINDINGS: THEREFORE, THE INTENTION OF THE LEGISLATURE IS CLE AR. IF A COOPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANKING BUSINESS, THEN THE INCOME DERIV ED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE. THE SAID INCOME IS LIABLE FOR TAX. A COOPERATIVE BANK AS DEFINED UNDER THE BANKIN G REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO D ENY THE SAID BENEFITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY COOPERATIV E AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID NOT WANT TO EXTEND THE SAID BENEFIT TO A CO-OPERATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON BANKING BUSINESS I.E. THE P URPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESSEE IS NOT A CO- OPERATIVE BANK CARRYIN G ON EXCURSIVELY BANKING BUSINESS AND AS IT DOES NOT POSSESS A LICENCE FROM RESERVE B ANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A CO-OPERATIVE BANK. IT IS A CO-OPERATIVE SO CIETY WHICH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO ITS MEMBERS WHICH IS C OVERED UNDER SECTION 80P(2)(A)(I) I.E. CARRYING ON THE BUSINESS OF BANKING FOR PROVID ING CREDIT FACILITIES TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT EXTENDED UNDER SECTION 80P(1) TO SUCH SOCIETY, THEREFORE, THERE WAS NO ERR OR COMMITTED BY THE ASSESSING AUTHORITY. THE SAID ORDER WAS NOT PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE CONDITION PRECEDENT FOR THE COMMISSIONER TO INVOKE THE POWER UNDER SECTION 263 IS THAT THE TWIN CONDITION SHOULD BE SATISFIED. THE ORDER S HOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7.1 FROM THE ABOVE JUDGMENT OF THE HONBLE KARNATAK A HIGH COURT, IT IS QUITE CLEAR THAT A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRI MARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK WHO DO NOT HAVE LICENSE FROM RESER VE BANK OF INDIA TO CARRY ON THE BUSINESS OF BANKING, IS NOT A COOPERATIVE BANK, HIT BY THE PROVISIONS OF SECTION 80P(4) OF THE ACT. THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO-OP BANK LTD (SUPRA), IS ALSO I N SUPPORT OF THE ASSESSEE AS REGARDS THE GRANT OF 80P DEDUCTION. 7.2 IN THE INSTANT CASE, THE ASSESSEE DO NOT POSSES ANY BANKING LICENSE FROM THE RESERVE BANK OF INDIA AND IS NOT EXCLUSIVELY CARRY ING ON ANY BANKING FACILITY; BUT IT IS ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 7 CARRYING ON BUSINESS OF LENDING MONEY TO ITS MEMBER S AND THEREFORE IS COVERED U/S 80P(2) OF THE ACT. THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF M/S TOTGARS COOPERATIVE SALES SOCIETY LTD. (SUPRA) RELIED BY TH E CIT(A) IS DISTINGUISHABLE ON FACTS. THE HONBLE APEX COURT IN THE CASE OF M/S TOTGARS C OOPERATIVE SALES SOCIETY LTD (SUPRA) WAS DEALING WITH THE CASE WHERE THE ASSESSE E APART FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS WAS ALSO MARKETING AGRICU LTURAL PRODUCES GROWN BY ITS MEMBERS. SALE CONSIDERATION RECEIVED FROM THE MARKE TING OF AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED BY THE ASSESSEE IN THAT CASE A ND WAS INVESTED IN SHORT TERM DEPOSITS/SECURITIES. SUCH AMOUNT RETAINED BY ASSES SEES SOCIETY WAS SHOWN AS A LIABILITY IN THE BALANCE SHEET AND THEREFORE, TO TH AT EXTENT INTEREST INCOME CANNOT BE ATTRIBUTABLE NEITHER TO THE ACTIVITY MENTIONED IN S ECTION 80P(2)(A)(I) OR U/S 80P(2)(A)(III) OF THE ACT. THIS DISTINGUISHABLE FEATURE HAS BEEN T AKEN NOTE BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD IN ITA NO.307 OF 2014 ( JUDGMENT DATED 28 TH OCT 2014). THE HONBLE KARNATAKA HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: WHETHER THE TRIBUNAL FAILED IN LAW TO APPRECIATE T HAT THE INTEREST EARNED ON SHORT TERM DEPOSITS WERE ONLY INVESTMENT IN THE COU RSE OF ACTIVITY OR PROVIDING CREDIT FACILITIES TO MEMBERS AND THAT THE SAME CANN OT BE CONSIDERED AS INVESTMENT MADE FOR THE PURPOSE OF EARNING INTEREST INCOME AND CONSEQUENTLY PASSED A PERVERSE ORDER? 7.3 IN ANSWERING THE ABOVE QUESTION OF LAW, THE HON BLE KARNTAKA HIGH COURT DISTINGUISHED THE JUDGMENT OF THE APEX COURT IN THE CASE OF TOTGARS COOPERATIVE SALES SOCIETY LTD (SUPRA) AND RENDERED THE FOLLOWING FIN DINGS: ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 8 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S TOTGARS COOPERATIVE SALES SOCIETY LTD., ON WHICH RE LIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE-COOPERAT IVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE B USINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATIO N RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM P RODUCE WAS BOUGHT, DEPOSIT/ SECURITY. WAS INVESTED IN A SHORT-TERM SUCH AN AMOU NT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TV THAT EXTENT, SUCH INTEREST INCO ME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)( A)(I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS O F THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPR EME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVES TED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NET THE LI ABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN T HE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY I N A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P (L) OF THE ACT. IN TACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME- TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERA TIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DE DUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY, IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED. 7.4 THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF THE KIZHATHADIYOOR SERVICE COOP BANK LTD., ON IDENTICAL FACTS HAS RENDERED A DECISI ON IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDING OF THE COCHIN BENCH OF THE TRIBUNA L IN THE CASE OF KIZHATHADIYOOR SERVICE COOPERATIVE BANK (SUPRA) IN ITA NO. 525/COC H/2014, READ AS FOLLOWS: 7.2 AS REGARDS THE INTEREST FROM TREASURY AND BANKS, WE FIND ON IDENTICAL FACTS, THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF T HE MUTTOM SERVICE COOPERATIVE BANK LTD IN ITA NO. 372/COCH/2010 HAD DEC IDED THE MATTER IN FAVOUR OF THE ASSESSEE. THE 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 ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 9 (SUPRA). THE RELEVANT FINDING OF THE COORDINATE BENCH OF T HE TRIBUNAL IN THE CASE OF THE MUTTOM SERVICE COOPERATIVE BANK LTD (SUPRA) R EAD AS FOLLOWS: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION ON EITHER SI DE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THE LOWER AUTHORITY. NO DOUBT, T HE LATEST JUDGMENT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS ITO (SUPR A), THE APEX COURT FOUND THAT THE DEPOSIT OF SURPLUS FUNDS BY THE CO-OPERA TIVE SOCIETY IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2). IN THE CASE BEFORE THE APEX COURT 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 ASSESSEE IS NOT IN THE BU SINESS OF BANKING. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDG MENT OF THE APEX COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD (SUP RA) IS NOT APPLICABLE IN RESPECT OF THE CO-OPERATIVE SOCIETY WHOSE BUSINESS IS BANKING. ADMITTEDLY, THE ASSESSEE HAS INVESTED FUNDS IN STATE PRO MOTED TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. SINCE GOVERNMENT O F INDIA HAS WITHDRAWN INDIA VIKAS PATRA, AS A SMALL SAVINGS INSTRU MENT, FUNDS INVESTED AT THE DISCRETION OF THE BANK IS ONE OF THE ACTIVITIES OF THE BANKING AS PER THE BANKING REGULATION ACT. SINCE THE ASSESSEE CO-OPERATI VE SOCIETY IS IN THE 4 ITA NO.372/COCH/2010 BUSINESS OF BANKING THE INVEST MENT IN THE STATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTIFICATE SCHEME IS A BANKING ACTIVITY, THEREFORE, THE INTEREST ACCRUED ON SU CH INVESTMENT HAS TO BE TREATED AS BUSINESS INCOME IN THE COURSE OF ITS BANKING ACTIVITY. ONCE IT IS A BUSINESS INCOME, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)((A)(I). THEREFORE, THIS TRIBUNAL IS OF THE OPIN ION THAT THE JUDGMENT OF THE LARGER BENCH OF THE APEX COURT IN KARNATAKA STATE CO OPERATIVE APEX BANK (SUPRA) IS APPLICABLE TO THE FACTS OF THIS CASE. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COURT IN KARNATAKA S TATE CO- OPERATIVE BANK (SUPRA), THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS UPHELD. 7.3 IN THE INSTANT CASE, THE ASSESSEE IS A COOPERATIVE BANK. THE INVESTMENT IN TREASURY/BANKS AND EARNING INTEREST ON THE SAME IS PART OF THE BANKING ACTIVITY OF THE ASSESSEES COOPERATIVE BANK. THEREFORE, THE SAI D INCOME IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THEREFORE, THE INCOME TAX AUTHORITIES WERE NOT JUSTIFIED IN TREATING INTEREST INCOME RECEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCE AND DENYING THE BENEFIT OF SECTION 8 0P(2) OF THE ACT. IT IS ORDERED ACCORDINGLY. 7.5 IN VIEW OF THE JUDGMENT OF THE HONBLE KARNATAK A HIGH COURT IN THE CASE OF TUMKUR MERCHANTGS SOUHARDA CREDIT COOP LTD (SUPRA)A ND COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF SERVICE COOP BANK LTD.,(SUPRA), I AM OF THE VIEW THAT THE ASSESSEE IS ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 10 ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) WIT H REGARD TO INTEREST RECEIVED ON DEPOSITS MADE BY THE ASSESSEE WITH SUB TREASURY. I T IS ORDERED ACCORDINGLY. 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I N ITA NO.261/COCH/2017 IS ALLOWED. ITA NO. 208/COCH/2017 ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 ITA NO. 263/COCH/2017 ITA NO. 268/COCH/2017 ITA NO. 269/COCH/2017 9 THE LD COUNSEL FOR THE ASSESSEE AND THE LD DR AGR EED THAT THE FACTS INVOLVED IN THE ABOVE APPEALS ARE IDENTICAL TO THE FACTS CONSID ERED BY ME IN THE CASE OF THE AZHIKODE SERVICE COOPERATIVE BANK LTD IN ITA NO.261 /COCH/2017. IN THE CASE OF AZHIKODE SERVICE COOPERATIVE BANK I HAVE HELD THAT INTEREST ON DEPOSITS WITH SUB TREASURY IS ENTITLED TO THE BENEFIT OF DEDUCTION U/ S 80P(2).THEREFORE, I HOLD THAT ASSESSEES IN THE ABOVE APPEALS IS ENTITLED TO DEDU CTION U/S 80P(2) FOR INTEREST RECEIVED AS INVESTMENT WITH SUB-TREASURY. IT IS ORDERED ACC ORDINGLY. 10 TO SUM-UP, THE APPEALS OF THE ASSESSEES ARE ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JULY 2017 SD/- ( GEORGE GEORGE K) JUDICIAL MEMBER COCHIN: DATED 12 TH JULY 2017 RAJ* ITA NOS 261/C/2017, ITA NO. 208/COCH/2017, ITA NO 209/COCH/2017 ITA NO. 210/COCH/2017 , ITA NO. 263/COCH/2017, ITA NO. 268/COCH/2017 & ITA NO. 269/COCH/2017 11 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT, 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN