ACIT, Trivandrum V. Kerala State Co-op Agri. & Rural Dev. Bank Ltd., Trivandrum

ITA 428/COCH/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58335 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A. NO.881/COCH/2008 - A.Y. 2005-06 I.T.A. NO.428/COCH/2009 - A.Y. 2006-07 A.C.I.T. / DY.C.I.T. VS M/S KERALA STATE CO-OPER ATIVE RANGE-1, TRIVANDRUM AGRICULTURAL & RURAL DEVELOP MENT BANK LTD, STATUE, TRIVANDRUM PAN : AAAAK4391F (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VIJAYAPRABHA RESPONDENT BY : MS. NIVEDITA DATE OF HEARING : 16-02-2012 DATE OF PRONOUNCEMENT : 29-02-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAIN ST THE TWO INDEPENDENT ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), TRIVAN DRUM DATED 25-06-2008 & 18-03- 2009 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, RESPECTIVELY. SINCE COMMON ISSUE ARISES FOR CONSIDERATION WE HAVE HEARD THE AP PEALS TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS OF THE REVENUE IS WITH REGARD TO DEDUCTION U/S 80P(2) IN RESPECT OF INTERE ST RECEIVED FROM NON STATUTORY DEPOSITS. 3. SMT. VIJAYAPRABHA, THE LD.DR SUBMITTED THAT THE ASSESSEE MADE DEPOSITS IN NON STATUTORY DEPOSIT. ACCORDING TO THE LD.DR, THE INT EREST RECEIVED FROM STATUTORY DEPOSIT AS REQUIRED BY RESERVE BANK OF INDIA FOR THE PURPOSE O F CARRYING ON THE BANKING ACTIVITY ALONE IS ELIGIBLE FOR DEDUCTION U/S 80P(2). IN RES PECT OF OTHER INVESTMENTS, THE INTEREST RECEIVED BY THE ASSESSEE HAS TO BE TREATED AS INCO ME FROM OTHER SOURCES. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P( 2). THE LD.DR HAS PLACED HIS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN TOTGARS CO-OP ERATIVE SOCIETY LTD VS ITO (2010) 322 ITR 283 (SC). REFERRING TO THE JUDGMENT OF THE APEX COURT IN COMMISSIONER OF INCOME-TAX VS KARNATAKA STATE CO-OPERATIVE APEX BAN K (2001) 251 ITR 194 (SC), THE ITA 881/COCH/2008 ITA 428/COCH/2009 2 LD.DR SUBMITTED THAT IN THE CASE OF ASSESSEE BEFORE THE APEX COURT IN KARNATAKA STATE CO-OPERATIVE APEX BANK (SUPRA) THE INTEREST WAS REC EIVED FROM STATUTORY DEPOSITS. THEREFORE, THAT JUDGMENT IS NOT APPLICABLE TO THE F ACTS OF THE CASE. THEREFORE, ACCORDING TO THE LD.DR, THE COMMISSIONER OF INCOME-TAX(A) IS NOT CORRECT IN DIRECTING THE ASSESSING OFFICER TO GRANT DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. 4. WE HAVE HEARD MS. NIVEDITA, THE LD.COUNSEL FOR T HE ASSESSEE ALSO. 5. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WHETH ER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST RECEIVED FROM NON STATUTORY INVESTMENT. WE FIND THAT THIS ISSUE WAS DISCUSSED ELABORATELY BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITO VS THE MUTTOM SERVICE CO-OP ERATIVE BANK LTD IN ITA NO.372/COCH/2010 ORDER DATED 20-01-2012. AFTER CON SIDERING THE CASE LAWS ON THE SUBJECT, THIS TRIBUNAL FOUND THAT THE JUDGMENT OF T HE APEX COURT IN KARNATAKA STATE CO- OPERATIVE APEX BANK (SUPRA) WOULD BE APPLICABLE EVE N IN RESPECT OF NON STATUTORY INVESTMENT. IN FACT, THIS TRIBUNAL HAS OBSERVED AS FOLLOWS, AT PARAGRAPH 5 OF ITS ORDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THE LOWER AUTHORITY. NO DOUBT , THE LATEST JUDGMENT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS ITO (SUP RA), THE APEX COURT FOUND THAT THE DEPOSIT OF SURPLUS FUNDS BY THE CO-O PERATIVE SOCIETY IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2). IN THE CASE BEF ORE 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 T HE BUSINESS OF BANKING. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT OF THE APEX COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD (SU PRA) IS NOT APPLICABLE IN RESPECT OF THE CO-OPERATIVE SOCIETY WHOSE BUSINESS IS BANKING. ADMITTEDLY, THE ASSESSEE HAS INVESTED FUNDS IN STAT E PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. SINCE GOVERNME NT OF INDIA 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. SINCE THE ASSES SEE CO-OPERATIVE SOCIETY IS IN THE BUSINESS OF BANKING THE INVESTMEN T IN THE STATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTIFICATE SC HEME IS A BANKING ACTIVITY, THEREFORE, THE INTEREST ACCRUED ON SUCH I NVESTMENT HAS TO BE TREATED AS BUSINESS INCOME IN THE COURSE OF ITS BAN KING ACTIVITY. ONCE IT IS A BUSINESS INCOME, THE ASSESSEE IS ENTITLED FOR DED UCTION U/S 80P(2)((A)(I). THEREFORE, THIS TRIBUNAL IS OF THE OPINION 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 THI S CASE. BY RESPECTFULLY ITA 881/COCH/2008 ITA 428/COCH/2009 3 FOLLOWING THE JUDGMENT OF THE APEX COURT IN KARNATA KA STATE CO-OPERATIVE BANK (SUPRA), THE ORDER OF THE COMMISSIONER OF INCO ME-TAX(A) IS UPHELD. 6. THIS TRIBUNAL ALSO HAD AN OCCASION TO CONSIDER A N IDENTICAL ISSUE IN THE CASE OF DY.C.I.T., CIR.1 VS THE KANNUR DIST. CO-OP. BANK LT D IN ITA NO.432/COCH/2010 ORDER DATED 02-02-2012. IN THE CASE BEFORE THIS TRIBUNAL IN THE KANNUR DIST.CO-OP. BANK LTD THE DEPOSIT WAS MADE WITH KERALA STATE INFRASTRUCTU RE FUND BOARD. THIS TRIBUNAL FOUND THAT IN THE VERY SAME ASSESSEES CASE, THE HIGH COU RT CONFIRMED SIMILAR ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2003-04 AND 2004- 05. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR DEDUC TION U/S 80P(2) IN RESPECT OF INVESTMENT IN NON STATUTORY DEPOSITS ALSO. BY FOLL OWING THE DECISIONS OF THIS TRIBUNAL IN THE CASE OF MUTTOM SERVICE CO-OPERATIVE BANK LTD (S UPRA) AND THE KANNUR DIST. CO-OP BANK LTD (SUPRA) AND ALSO THE JUDGMENT OF THE APEX COURT IN KARNATAKA STATE CO- OPERATIVE APEX BANK (SUPRA), WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME- TAX(A). 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH THE DAY OF FEBRUARY, 2012 SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 29 TH FEBRUARY, 2012 PK/- COPY TO: 1. KERALA STATE CO-OPERATIVE AGRICULTURAL & RURAL D EVELOPMENT BANK LTD, STATUE, TRIVANDRUM 2. DY.CIT, CIRCLE 1(2), RANGE-I, TRIVANDRUM 3. THE CIT(A), TRIVANDRUM 4. THE CIT, TRIVANDRUM 5. THE DR, ITAT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, COCHIN BENCH