The NilamburCo-op Urban Bank Ltd, Malappuram V. ITo, Tirur

ITA 486/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64925 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VERGHESE
• Keywords: Business income

Judgement Text

1 ITA NO. 486/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 486/COCH/2011 (ASSESSMENT YEAR 2005-06) THE NILAMBUR CO-OPERATIVE URBAN BANK LTD VS THE DY.C IT, CIR.2(2) HEAD OFFICE, P.B. NO.10 TIRUR NILAMBUR 679 329 MALAPPURAM DIST. PAN : AAATT2863N (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SMT. SUSAN GEORGE VERGHESE DATE OF HEARING : 11-10-2012 DATE OF PRONOUNCEMENT : 16-11-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE TAXPAYER IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX(A)-II, CALICUT DATED 17-03-2011 AND PERT AINS TO ASSESSMENT YEAR 2005-06. 2. NO ONE APPEARED FOR THE TAXPAYER WHEN THE APPEAL WAS TAKEN UP FOR HEARING. HOWEVER, THE REGISTRY HAS PLACED ON RECOR D AN APPLICATION FILED BY THE LD.REPRESENTATIVE FOR THE TAXPAYER FOR ADJOURNMENT. AFTER CONSIDERING THE REASONS FOR SEEKING ADJOURNMENT WE FIND THAT THERE I S NO SUFFICIENT CAUSE FOR 2 ITA NO. 486/COCH/2011 ADJOURNING THE MATTER. THEREFORE, WE HEARD THE LD. DR AND PROCEED TO DISPOSE OF THE APPEAL ON MERIT. 3. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DEDUC TION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST FROM INDIRA VIKAS PATRA ( IVP), DIVIDEND FROM IDBI SHARES AND PREMIUM RECEIVED ON REDEMPTION OF GOVERNMENT SE CURITIES. IT IS NOT IN DISPUTE THAT THE TAXPAYER IS A CO-OPERATIVE BANK ENGA GED IN THE BUSINESS OF BANKING. SECTION 6(1)(A) OF THE BANKING REGULATION A CT PERMITS INVESTMENT OF FUNDS IN IVP, SHARES AND GOVERNMENT SECURITIES. TH IS TRIBUNAL HAD AN OCCASION TO EXAMINE THIS ISSUE ELABORATELY IN ITO VS MUTTOM SER VICE CO-OPERATIVE BANK LTD IN ITA NO.372/COCH/2010 DATED 20-01-2012. AFTER CONSIDE RING THE JUDGMENTS OF THE APEX COURT IN TOTGARS CO-OPERATIVE SALES SOCIETY LT D VS ITO (2010) 322 ITR 283 (SC) AND COMMISSIONER OF INCOME-TAX VS KARNATAKA STATE CO-OPERATIVE APEX BANK (2001) 251 ITR 194 (SC) FOUND THAT SINCE THE CO-OPER ATIVE SOCIETY IS IN THE BUSINESS OF BANKING, INTEREST ACCRUED ON SUCH INVEST MENT HAS TO BE TREATED AS BUSINESS INCOME IN THE COURSE OF BUSINESS ACTIVITY. IN FACT, THIS TRIBUNAL HAS OBSERVED AS FOLLOWS AT PAGE 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 AUTHO RITY. NO DOUBT, THE LATEST JUDGMENT IN TOTGARS CO-OPERATIVE SALE SO CIETY LTD VS ITO (SUPRA), THE APEX COURT FOUND THAT THE DEPOSIT OF S URPLUS FUNDS BY THE CO-OPERATIVE SOCIETY IS NOT ELIGIBLE FOR DEDUCTI ON U/S 80P(2). IN THE CASE BEFORE THE APEX COURT IN TOTGARS CO-OPERAT IVE SALE SOCIETY LTD VS ITO (SUPRA), THE ASSESSEE CO-OPERATIVE SOCIET Y WAS TO PROVIDE CREDIT FACILITY TO ITS MEMBERS AND MARKET THE AGRICU LTURAL PRODUCE. THE ASSESSEE IS NOT IN THE BUSINESS OF BANKING. THE REFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE JUDGMENT OF THE APEX COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD (SUPRA) IS NO T APPLICABLE IN RESPECT OF THE CO-OPERATIVE SOCIETY WHOSE BUSINESS I S BANKING. 3 ITA NO. 486/COCH/2011 ADMITTEDLY, THE ASSESSEE HAS INVESTED FUNDS IN STAT E PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT SCHEME. SINCE GOVERNMENT OF INDIA HAS WITHDRAWN INDIA VIKAS PATRA, AS A SMALL SA VINGS INSTRUMENT, FUNDS INVESTED AT THE DISCRETION OF THE BANK IS ONE OF THE ACTIVITIES OF THE BANKING AS PER THE BANKING REGU LATION ACT. SINCE THE ASSESSEE CO-OPERATIVE SOCIETY IS IN THE B USINESS OF BANKING THE INVESTMENT IN THE STATE PROMOTED TREASURY SMALL SAVINGS FIXED DEPOSIT CERTIFICATE SCHEME IS A BANKING ACTIVITY, TH EREFORE, THE INTEREST ACCRUED ON SUCH INVESTMENT HAS TO BE TREAT ED 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 OPINION THAT THE JUDGMENT OF THE LARGER BENCH OF THE APEX COURT IN KARNATAKA STATE CO-O PERATIVE APEX BANK (SUPRA) IS APPLICABLE TO THE FACTS OF THIS CASE. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COU RT IN KARNATAKA STATE CO-OPERATIVE BANK (SUPRA), THE ORDER OF THE COM MISSIONER OF INCOME-TAX(A) IS UPHELD. IN VIEW OF THE ABOVE DECISION OF THE CO-ORDINATE BEN CH OF THIS TRIBUNAL, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE INCO ME GENERATED IN THE COURSE BUSINESS ACTIVITY IS ENTITLED FOR DEDUCTION U/S 80P (2)(A)(I) OF THE ACT. BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE MUTTO M SERVICE CO-OPERATIVE BANK LTD (SUPRA) AND FOR THE REASONS STATED THEREIN THE ORDER OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO GIVE DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INCOME FROM I VP, DIVIDEND FROM IDBI SHARES AND PREMIUM ON REDUCTION OF GOVERNMENT SECURITIES. 4. IN THE RESULT, THE APPEAL OF THE TAXPAYER STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH NOVEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 16 TH NOVEMBER, 2012 PK/- 4 ITA NO. 486/COCH/2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH