Cherupoika Service Co-Operative Bank Ltd. No 3846, Kollam V. The ITO Ward-1, Kollam, Kollam

ITA 575/COCH/2022

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1052 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 08-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 80P; 250

Judgement Text

ITA No.575/Coch/2022 Cherupoika Service Co-operative Bank Ltd., Kollam IN THE INCOME TAX APPELLATE TRIBUNAL BENCH: COCHIN BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA No.575/Coch/2022 Assessment Year: 2017-18 M/s. Cherupoika Service Co- op. Bank Ltd. Cherupoika, Pavithreswram Kollam 691 543 PAN NO : AAABC1267H Vs. ITO Ward-1 Kollam APPELLANT RESPONDENT Appellant by : Shri R. Krishnan, A.R. Respondent by : Smt. J.M. Jammuna Devi, Sr. D.R. Date of Hearing : 02.08.2022 Date of Pronouncement : 02.08.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by the assessee is directed against order of CIT(A), NFAC, Delhi dated 7.11.2021 for the A.Y. 2017-18. The assessee has raised following grounds of appeal:- 1) “The Learned CIT (A) NATIONAL FACELESS APPEAL CENTRE (NFAC) erred in completing the Appeal order u/s 250 of the Income Tax Act is opposed to law, weight of evidence and the facts and circumstances of the case. ITA No.575/Coch/2022 Cherupoika Service Co-operative Bank Ltd., Kollam Page 2 of 6 2) The learned CIT(A) should have treated the appellant's income from investments amounting Rs. 1,58,704/- as income from the business of banking eligible for deduction u/s 80P(2)(a)(i) instead of treating it as income from other sources. The CIT(A) should have followed the decision of the Cochin bench of ITAT in ITO vs. Muttom Service Co-operative Bank Ltd. (ITA No. 372/Coch/2010), wherein the jurisdictional ITAT held that the decision of the Supreme Court in Totgar's Cooperative Sale Society vs. ITO ((2010) 322 ITR 283) is not applicable to service cooperative societies as they are co-operative societies carrying on the business of banking only and not co-operative societies engaged in marketing the agricultural produces of the members. Accordingly, the ITAT held that the investment income shall be included in income from banking business and deduction shall be granted u/s 80P(2)(a)(i). The Learned CIT(A) should have noted that this decision of the Cochin bench of ITAT was followed by the Pune Bench of ITAT in ITO vs. Niphad Nagari Sahakari Patsanstha Ltd. (ITA NO. 1336/PN/2011). Further the Cochin bench of ITAT held the same view in the case of M/s. Kizhathadiyoor Service Cooperative Bank LiMited in ITA No.525/Coch/2014 (order dated 20.07.2016) and M/ s. The Punukkannoor Service Co-op Bank Ltd (ITA Nos.646-651/Coch/2019. SA Nos.100-105/Coch/2019) (order dated 06.01.2020). 3) The Learned CIT(A) should have noted that entire portion of investment income was interest received from other co-operative societies, which is eligible for deduction u/s 80P(2)(d) of the Income Tax Act 1961. 4) For the above and other grounds, points and arguments that may be presented before or at the time of hearing of the appeal, it is submitted that the appeal may be allowed.” 2. Facts of the case are that th assessee is a Co-operative Society and is a Primary Agricultural Credit Society registered under Registrar of Co-operative Societies, Govt.of Kerala, engaged in the business of' banking of providing credit facilities to its members. For the assessment years under consideration, the assessee had filed Income Tax return by declaring total income of Rs Nil after claiming deduction U/s 80P (2)(a)(i) of the Income-tax Act,1961 ['the Act' for short]. 2.1 The assessment u/s 143 (3) of the Act for the AY 2017-18 was completed on 10.12.2019 and a demand notice u/s 156 of the Act was issued on 10.12.2019 with a demand of Rs 10,48,155/-.Being ITA No.575/Coch/2022 Cherupoika Service Co-operative Bank Ltd., Kollam Page 3 of 6 aggrieved by the order of the Assessing officer, the assessee had filed an appeal to the CIT (A), Thiruvananthapuram on 15-01-2020 vide ack.no 291730130150120 and the CIT(A), NFAC vide order no: ITBA/NFAC/S/250/2021-22/1036753667(1) dated 07-11-2021 partially allowed the appeal by denying eligible deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act with respect to interest income from deposit with Kollam District Co-operative Bank by confirming the order of Assessing officer that interest received from Co-operative bank is income from other sources and such income from District Co-operative bank is not eligible for deduction under section 80P(2)(d) of the Act. 2.2 The appeal is now filed against the disallowance of deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act regarding interest income from other Co-operative Society. 3. We have heard the rival submissions and perused the materials available on record. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in the case of The Kizhathadiyoor Service Coop Bank Ltd. Vs. ITO in ITA No.525/Coch/2014 dated 20.7.2016, wherein held as under: “7 We have heard the rival submissions and perused the material on record. The details of the total interest and how the AO had treated them as incomes from ‘other sources’ are tabulated below: Interest from cooperative societies AY 2009-10 Meenachil Taluk Cooperative Employees Coop Society 22,67,391/- MRMPCS cooperative society 11,41,250/- Kerala State Cooperative Consumer Federation 6,18,749/- Rubco Cooperative Society 1,63,864/- Raidco Cooperative Society 7,78,356/- Kottayam District Cooperative bank 2,90,37,290/- Kerala State Cooperative Rubber Mktg Federation 3,00,000 Monipally Mktg Cooperative Society 2,81,250/- Poovarany Service Coop Bank Ltd 0 ITA No.575/Coch/2022 Cherupoika Service Co-operative Bank Ltd., Kollam Page 4 of 6 Thindanad Service Coop Bank Ltd 0 Sun Total (1) 3,45,88,150/- Interest from Treasury and banks Sub treasury Meenachil 2,58,708/- The South Indian Bank Ltd 6,54,446/- State Bank of Travancore 0 Sub Total(2) 9,13,154/- Interest received Grand total (1) + (2)Rs. – (A) 3,55,01,304 Total receipts as shown in the assessment order Rs. - (B) 18,03,17,783/- Gross total income as per Assessment order Rs. – ( C) 42,02,695/- Percentage of interest received to total receipts (A)/(B)x100 – (D) 19.69% Income assessed as I come from other sources (C) x (D) i.e (E) Rs. 8,27,510/- 7.1 From the above, it is clear that a major portion of the investment income was interest receipt from other cooperative societies. Section 80P(2(d) provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in another cooperative society. Therefore, interest income received from other cooperative societies are eligible for deduction u/s 80P(2)(d) of the act and cannot be assessed as “income from other source.” 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 the Muttom Service Cooperative Bank Ltd in ITA No. 372/Coch/2010 had decided 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 Hon’ble Apex Court in the case of Totgar’s Cooperative Sale Society Ltd (supra). The relevant finding of the coordinate Bench of the Tribunal in the case of the Muttom Service Cooperative Bank Ltd (supra) read as follows: “5. We have considered the rival submission on either 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 Totgar’s Co-operative Sale Society Ltd vs ITO (supra), the Apex court found that the deposit of surplus funds by the co- operative society is not eligible for deduction u/s 80P(2). In the case before the Apex Court in Totgar’s Co-operative Sale Society Ltd vs ITO (supra), the assessee co-operative society 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 of the Apex court in Totgar’s 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 funds in state promoted treasury small savings fixed deposit scheme. Since Government of India has withdrawn ITA No.575/Coch/2022 Cherupoika Service Co-operative Bank Ltd., Kollam Page 5 of 6 India Vikas Patra, as a small savings instrument, 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-operative society is in the 4 ITA No.372/Coch/2010 business of banking the investment in the state promoted 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 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 Cooperative Apex Bank (supra) is applicable to the facts of this case. By respectfully following the judgment of the Apex court in Karnataka State 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 assessee’s cooperative bank. Therefore, the said income is eligible for deduction u/s 80P(2)(a)(i) of the Act. Therefore, the Income Tax Authorities were not jusgified in treating interest income received by the assessee as ‘income from other source’ and denying the benefit of section 80P(2) of the Act. It is ordered accordingly. 8. In the result, the appeal filed by the assessee is allowed.” 4. In view of the above order of the Tribunal, taking a consistent view on the issues raised before us, we allow the appeal of the assessee. 5. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 2 nd Aug, 2022 Sd/- (George George K. ) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 2 nd Aug, 2022. VG/SPS ITA No.575/Coch/2022 Cherupoika Service Co-operative Bank Ltd., Kollam Page 6 of 6 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.