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

ITA 372/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58225 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Keywords: Business income
• Section: 56

Judgement Text

1 ITA NO.372/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI SANJAY ARO RA (AM) I.T.A. NO. 372/COCH/2010 (ASSESSMENT YEAR 2007-08) ITO, WD.4 VS THE MUTTOM SERVICE CO-OPERATIVE ALAPPUZHA BANK LTD, NO.1165, CHERTHALA PAN : AACFT8176C (APPELLANT) (RESPONDENT) APPELLANT BY : MS VIJAYAPRABHA RESPONDENT BY : SHRI ARUN RAJ. S DATE OF HEARING : 27-12-2011 DATE OF PRONOUNCEMENT: 20-01-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME- TAX(A)-IV, KOCHI DATED 25-03-2010 AND PERTAINS TO A SSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DEDUC TION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST RECEIVED BY THE ASSESSEE FROM THE DEPOS IT MADE IN KERALA GOVERNMENT TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. 3. MS. VIJAYAPRABHA, THE LD.DR SUBMITTED THAT THE A SSESSEE, A CO-OPERATIVE BANK, DEPOSITED IN THE SMALL SAVINGS SCHEME PROMOTED BY KERALA GOVE RNMENT AND CLAIMED THE INTEREST ACCRUED THEREON AS EXEMPT U/S 80P(2)(A)(I) OF THE ACT. REF ERRING TO THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A), THE LD.DR SUBMITTED THAT THE COMMISS IONER OF INCOME-TAX(A) BY FOLLOWING THE JUDGMENT OF THE APEX COURT IN COMMISSIONER OF INCOM E-TAX VS KARNATAKA STATE CO-OPERATIVE APEX BANK (2001) 251 ITR 194 (SC) AND COMMISSIONER OF INCOME-TAX VS RAMANATHAPURAM DISTRICT CO-OPERATIVE CENTRAL BANK LTD (2002) 255 I TR 423 (SC) FOUND THAT THE INTEREST RECEIVED BY THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2 )(A)(I). REFERRING TO THE JUDGMENT OF THE APEX 2 ITA NO.372/COCH/2010 COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS ITO (2010) 322 ITR 283 (SC), THE LD. DR SUBMITTED THAT INVESTMENT OF SURPLUS FUNDS WHICH WA S NOT IMMEDIATELY REQUIRED FOR BUSINESS IN SHORT TERM DEPOSIT IN SECURITIES IS NOT A BUSINESS ACTIVITY. THEREFORE, THE INTEREST EARNED ON SUCH DEPOSIT IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2). IN VIEW OF THE LATEST JUDGMENT OF THE SUPREME COURT, ACCORDING TO THE LD.DR, THE INTEREST ACCRUED ON THE DEPOSIT MADE BY THE ASSESSEE WITH KERALA GOVERNMENT TREASURY SMALL SAVINGS FIXED DEPO SIT SCHEME IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). REFERRING TO THE APEX COURT JUDG MENT IN THE CASE OF COMMISSIONER OF INCOME- TAX VS KARNATAKA STATE CO-OPERATIVE APEX BANK (SUPR A), THE LD.DR POINTED OUT THAT IN THAT CASE IT WAS A STATUTORY REQUIREMENT FOR THE ASSESSEE TO DEP OSIT FUNDS WITH STATE BANK OR RESERVE BANK OF INDIA FOR THE PURPOSE OF CARRYING ON ITS BANKING BUSINESS. IN THIS CASE, THERE IS NO SUCH STATUTORY REQUIREMENT. THEREFORE, THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS KARNATAKA STATE CO-OPERATIVE APEX COURT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE ON HAND. 4. ON THE CONTRARY, SHRI ARUN RAJ. S, THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED HAT THE APEX COURT IN COMMISSIONER OF INCOME-TAX VS KARNATA KA STATE CO-OPERATIVE APEX BANK (SUPRA) DELIVERED ITS JUDGMENT HOLDING THAT THERE IS NOTHIN G IN THE PHRASEOLOGY IN SECTION 80P(2)(A)(I) WHICH MAKES IT APPLICABLE ONLY TO INCOME DERIVED FR OM WORKING OR CIRCULATING CAPITAL. ACCORDING TO THE LD.COUNSEL, THIS JUDGMENT OF THE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS KARNATAKA STATE CO-OPERATIVE APEX BANK (SUPRA) WAS PRONOUNCED BY THREE JUDGES BENCH OF THE APEX COURT. HOWEVER, THE JUDGMENT IN TOTGARS CO-O PERATIVE SALE SOCIETY LTD VS ITO (SUPRA) WAS DELIVERED BY 2 JUDGES BENCH OF THE APEX COURT. MO REOVER, THERE WAS NO REFERENCE ABOUT THE JUDGMENT IN KARNATAKA STATE CO-OPERATIVE APEX BANK (SUPRA) IN THE JUDGMENT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD (SUPRA). TH EREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THIS JUDGMENT OF THE APEX COURT IN TOTGARS CO-OPER ATIVE SALE SOCIETY LTD (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE. THE LD.COUNSE L HAS ALSO POINTED OUT THAT THE ASSESSEE, A CO- OPERATIVE SOCIETY, DOING BANKING BUSINESS. THE ASS ESSEE, BEFORE THE APEX COURT IN TOTGARS CO- OPERATIVE SALE SOCIETY LTD (SUPRA) IS NOT A BANK AN D IT IS NOT DOING ANY BANKING BUSINESS. ACCORDING TO THE LD.COUNSEL, THE ASSESSEE IN TOTGAR S CO-OPERATIVE SALE SOCIETY LTD (SUPRA) IS ONLY A CO-OPERATIVE SOCIETY FOR MARKETING THE AGRICULTUR AL PRODUCE OF ITS MEMBERS AND PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE BUSINESS OF TH E ASSESSEE BEFORE THE APEX COURT WAS TO PROVIDE CREDIT FACILITY TO ITS MEMBERS AND MARKET T HE AGRICULTURAL PRODUCE. THE ASSESSEE 3 ITA NO.372/COCH/2010 DEPOSITED SURPLUS FUNDS IN SHORT TERM DEPOSITS AND SECURITIES WHICH SURPLUS WAS NOT REQUIRED FOR BUSINESS PURPOSE. THE ASSESSEE MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS, AT TIMES, WERE RETAINED BY IT. THE INTEREST RECEIVED BY THE ASSESSEE FROM SUCH DEPOSITS / SECURITIES WAS CLASSIFIED AS INCOME FROM OTHER SOURCES AND T AXABLE U/S 56 OF THE INCOME-TAX ACT, 1961. THEREFORE, THE APEX COURT HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P(2). ACCORDING TO THE LD.COUNSEL, THE FATS OF THE CASE, IN OUR HAND, ARE ENTIRELY DIFFERENT. ACCORDING TO THE LD.COUNSEL THE ASSESSEE IS A BANKING SOCIETY AN D DOING BANKING BUSINESS. THEREFORE, THE INTEREST EARNED ON INVESTMENT IS ELIGIBLE FOR DEDUC TION U/S 80P(2)(A)(I) OF THE ACT. THE LD.COUNSEL HAS ALSO SUBMITTED THAT THE BOMBAY HIGH COURT IN A REPORTED CASE IN COMMISSIONER OF INCOME- TAX VS RATNAGIRI DISTRICT CO-OPERATIVE BANK LTD (20 02) 254 ITR 797 (BOM) FOUND THAT INTEREST ON INDIRA VIKAS PATRA IS ELIGIBLE FOR DEDUCTION U/S 80 P. THE SLP FILED BY THE DEPARTMENT WAS DISMISSED BY THE APEX COURT. REFERRING TO THE GOVE RNMENT ORDER IN G.O. (RT.) NO./1911/2000/FIN DATED 29-03-2000, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE GOVERNMENT OF INDIA HAS WITHDRAWN INDIRA VIKAS PATR A, AS A SMALL SAVINGS INVESTMENT, THE STATE GOVERNMENT FORMULATED THE SCHEME, KNOWN AS KERALA GOVERNMENT TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. ACCORDINGLY, THE CO-OPERATI VE SOCIETIES ARE INSTRUCTED TO DEPOSIT THE FUNDS IN THE TREASURY SMALL SAVINGS FIXED DEPOSIT C ERTIFICATE SCHEME INSTEAD OF INDIRA VIKAS PATRAS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION ON EITHE R SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE T HROUGH THE ORDER OF THE LOWER AUTHORITY. NO DOUBT, THE LATEST JUDGMENT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS ITO (SUPRA), THE APEX COURT FOUND THAT THE DEPOSIT OF SURPLUS FUNDS BY TH E CO-OPERATIVE 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 (SUPRA), THE ASSESSEE CO-OPERATIVE SOCIE TY WAS TO PROVIDE CREDIT FACILITY TO ITS MEMBERS AND MARKET THE AGRICULTURAL PRODUCE. THE ASSESSEE IS NOT IN THE BUSINESS OF BANKING. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT O F THE APEX COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD (SUPRA) IS NOT APPLICABLE IN RESPECT OF THE CO-OPERATIVE SOCIETY WHOSE BUSINESS IS BANKING. ADMITTEDLY, THE ASSESSEE HAS INVESTED FUN DS IN STATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. SINCE GOVERNMENT OF INDIA HA S WITHDRAWN INDIA VIKAS PATRA, AS A SMALL SAVINGS INSTRUMENT, FUNDS INVESTED AT THE DISCRETIO N OF THE BANK IS ONE OF THE ACTIVITIES OF THE BANKING AS PER THE BANKING REGULATION ACT. SINCE T HE ASSESSEE CO-OPERATIVE SOCIETY IS IN THE 4 ITA NO.372/COCH/2010 BUSINESS OF BANKING THE INVESTMENT IN THE STATE PRO MOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTIFICATE SCHEME IS A BANKING ACTIVITY, THEREFORE , THE INTEREST ACCRUED ON SUCH INVESTMENT HAS TO BE TREATED AS BUSINESS INCOME IN THE COURSE OF I TS 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 OPINION THAT THE JUDGMENT OF THE LARGER BENCH OF TH E APEX COURT IN KARNATAKA STATE CO- OPERATIVE APEX BANK (SUPRA) IS APPLICABLE TO THE FA CTS OF THIS CASE. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COURT IN KARNATAKA STATE CO-OP ERATIVE BANK (SUPRA), THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) IS UPHELD. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JANUARY, 2012. SD/- SD/- (SANJAY ARORA) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 20 TH JANUARY, 2012 PK/- COPY TO: 1. THE INCOME-TAX OFFICER, WD.4, ALAPUZHA 2. THE MUTTOM SERVICE CO-OPERATIVE BANK LTD, NO.1165, CHERTHALA 3. THE COMMISSIONER OF INCOME-TAX(A)-IV, KOCHI 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL , COCHIN BENCH