ITO,Wd-5, Alappuzha V. The Muttom Service Co-op Bank Ltd, Cherthala

ITA 320/COCH/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8265 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 09-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Keywords: Business income; Tax effect
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 320 /COCH/201 8 : ASST.YEAR 201 4 - 201 5 THE INCOME TAX OFFICER, WARD 5 ALAPPUZHA . VS. M/S. THE MUTTOM SERVICE CO - OPERATIVE BANK LTD. 1165 MAIN ROAD CHERTHALA P.O. ALAPPUZHA 688 524 . PAN : AACFT8176C . (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. A.S.BINDHU RESPONDENT BY : SRI. JOJO, CA, ADVOCATE DATE OF HEARING : 25 .09.2018 DATE OF PRONOUNCEMENT : 03.10 .2018 O R D E R PER GEORGE GEORGE K., JM THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 16.04.2018 . THE RELEVANT ASSESSMENT YEAR IS 201 4 - 201 5 . 2. THE SOLITARY ISSUE THAT IS RAISED IN THIS APPEAL IS WHETHER THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT IN RESPECT OF INTEREST INCOME RECEIVED BY THE ASSESSEE ON INVESTMENTS MADE WITH SUB - TR EASURIES, BANKS ETC. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: - THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969. IT IS CARRYING ON THE BUSINESS OF BANKING / PROVIDING CREDIT ITA NO. 320 / COCH /201 8. M/S. THE MUTTOM SCB LTD. 2 FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSMENT WAS COMPLETED BY TREATING INTEREST INCOME RECEIVED FROM INVESTMENT WITH TREASURY AND BANK AS INCOME FROM OTHER SOURCES; THEREBY DENYING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWING THE ORDER OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF KIZHATHADIYOOR SERVICE CO - OPERATIVE BANK LTD. FOR ASSESSMENT YEAR 2009 - 2010 IN ITA NO.525/COCH/2014 (ORDER DATED 20.07.2016) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE CIT(A) HELD THAT INTEREST INCOME EARNED ON INVESTMENT MADE WITH TREASURY AND BANKS ARE PART OF THE BANKING ACTIVITY OF ASSESSEE AND THEREFORE THE SAID INCOME WAS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 5. THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE CIT(A) DIRECTING THE A.O. TO GRANT THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT IN RESPECT OF INTEREST INCOME RECEIVED ON INVESTME NTS MADE WITH SUB - TREASURIES AND BANK HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS: - THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KOTTAYAM IN SO FAR AS THE POINTS STATED BELOW ARE CONCERN ED, IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KOTTAYAM ERRED IN CONCLUDING THAT THE TREATMENT OF INTEREST INCOME FROM OTHER BANKS AND TREASURY IS TO BE ASSESSED UNDER THE HEA D INCOME FROM BUSINESS OR PROFESSION INSTEAD ITA NO. 320 / COCH /201 8. M/S. THE MUTTOM SCB LTD. 3 OF TREATING THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 3 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT INTEREST EARNED BY THE ASSESSEE FROM THE INVESTMENT IN TREASURY AND BAN KS IS PART OF BANKING ACTIVITY ELIGIBLE FOR DEDUCTION U/S 80P (2)(A)(I) OF THE INCOME TAX ACT RELYING ON THE DECISION OF THE HON'BLE ITAT, COCHIN, IN THE CASE OF KIZHATHADIYOOR SERVICE CO - OPERATIVE BANK LTD. FOR AY 2009 - 10, IN ITA NO. 525/ COCH/2014 DATED 20/07/ 2016.HOWEVER, THE DEPARTMENT HAS NOT CHALLENGED THE DECISION ONLY BECAUSE OF LOW TAX EFFECT PRESCRIBED FOR FILING FURTHER APPEAL. 4 . THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THE DECISION OF HON'BLE SC IN THE CASE OF TOTGAR'S CO - OPERATIVE SALE SOCI ETY LTD. (2010) REPORTED IN 322 ITR 283 WHERE HON'BLE SUPREME COURT WAS OF THE VIEW THAT SUCH INTEREST INCOME EARNED BY ASSESSEE WOULD COME IN CATEGORY OF 'INCOME FROM OTHER SOURCES' TAXABLE U/S 56 OF THE INCOME TAX ACT AND WOULD NOT QUALITY FOR DEDUCTION AS BUSINESS INCOME 80P (2)(I). 5 . FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE GROUNDS RAISED IN THE MEMORANDUM OF APPEAL. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING JUDICIAL PRONOUNCEM ENTS : - (I) CIT V. KARNATAKA STATE CO - OPERATIVE BANK [251 ITR 194 (SC)] (II) VAVERU CO - OPERATIVE RURAL BANK LTD. V CIT [(2017) 396 ITR 371 (THE TELUNGANA AND ANDHRA PRADESH HIGH COURT) (III) MUTTOM SERVICE CO - OPERATIVE BANK LTD. (ITA NO.372/COCH/2010) (IV) MUNDAKKAYAM SERVICE CO - OPERATIVE BANK LTD. (ITA NO.106/COCH/2016). (V) THE MANGALAM SERVICE CO - OPERATIVE BANK LTD. V. ITO (ITA NO.495/COCH/2017 ORDER DATED 17.10.2017) ITA NO. 320 / COCH /201 8. M/S. THE MUTTOM SCB LTD. 4 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE FOR OUR CONSIDERATION IS WHETHER INTEREST INCOME RECEIVED BY THE ASSESSEE ON INVESTMENTS WITH SUB - TREASURIES AND BANKS WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCO ME 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)(A)(I) OF THE I.T.ACT. WE NOTICED THAT AN IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE FOLLOWING THE JUDICIAL PRONOUNCEMENTS: - (I) CIT V. KARNATAKA STATE CO - OPERATIVE BANK [251 ITR 194 (SC)] (II) VAVERU CO - OPERATIVE RURAL BANK LTD. V CIT [(2017) 396 ITR 371 (THE TELUNGANA AND ANDHRA PRADESH HIGH COURT) (III) MUTTOM SERVICE CO - OPERATIVE BANK LTD. (ITA NO.372/COCH/2010) (IV) MUNDAKKAYAM SERVICE CO - OPERATIVE BANK LTD. (ITA NO.106/COCH/2016). (V) THE MANGALAM SERVICE CO - OPERATIVE BANK LTD. V. ITO (ITA NO.495/COCH/2017 ORDER DATED 17.10.2017) 7. 1 IT IS ALS O TO BE MENTIONED THAT THE ORDER OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF M/S.MUTHOLY SCB LTD. V. ITO [ITA NO.11/COCH/2014 ORDER DATED 24.09.2014] , WHICH WAS IN FAVOUR OF THE REVENUE, WAS SET ASIDE BY THE HONBLE HIGH COURT AND WAS REMITTED TO TH E TRIBUNAL FOR DE NOVO CONSIDERATION. SUBSEQUENT TO THE REMAND, THE TRIBUNAL VIDE ITS ORDER DATED 23.03.2017 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT INTEREST INCOME RECEIVED ON ITA NO. 320 / COCH /201 8. M/S. THE MUTTOM SCB LTD. 5 INVESTMENTS WITH SUB - TREASURIES AND CO - OPERATIVE BANKS WAS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 7.2 THE LATEST JUDGMENT OF THE HONBLE TELANGANA & ANDHRA PRADESH HIGH COURT IN THE CASE OF VAVERU CO - OPERATIVE RURAL BANK LTD. V CIT (SUPRA) HAD ALSO DECIDED ON IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEES. THE HONBLE HIGH COURT HAD HELD THAT CO - OPERATIVE SOCIETIES ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS , IN COURSE OF ITS BUSINESS HAD MADE INVESTMENTS WITH TREASURY, BANK ETC. AND EARNED INTEREST INCOME, SUCH INCOME WOUL D BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 7. 3 IN THE INSTANT CASE THE ASSESSEE HAD MADE INVESTMENTS WITH SUB - TREASURIES AND BANKS IN THE COURSE OF ITS BUSINESS OF BANKING / PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, IT WAS E NTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT IN RESPECT OF INTEREST INCOME THAT WAS RECEIVED ON SUCH INVESTMENTS IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS. IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 03 RD DAY OF OCTOBER , 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIA L MEMBER COCHIN ; DATED : 03 RD OCTOBER , 2018 . DEVDAS* ITA NO. 320 / COCH /201 8. M/S. THE MUTTOM SCB LTD. 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (APPEALS) - KOTTAYAM . 4. THE PR.CIT KOTTAYAM. 5. DR, ITAT, COCHIN 6 . GUARD FILE.