The ITO, Range-2, Trivandrum, Trivanrum V. M/s.kadakkavoor Service Co-op Bank Ltd, Trivandrum

MA 29/COCH/2020

AI Insights

The case involves a Miscellaneous Application (MA) by the Revenue against an order of the Income Tax Appellate Tribunal, Cochin, which had partly allowed the appeals filed by the Revenue concerning the deduction of interest income under section 80P(2) of the Income Tax Act, 1961. The Revenue contended that the Tribunal's decision was erroneous as it relied on a co-ordinate Bench's order which misapplied the provisions of section 80P(2)(d), applicable only to co-operative societies, not banks. The Tribunal, however, upheld its original decision, referencing a Full Bench decision of the Hon'ble High Court, which supported the deduction claimed by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115435 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 13-10-2019
• Other Referred Cases: CIT v. Mavilayi Service Co-operative Bank Ltd. [2019] 414 ITR 67(Ker)(FB), Pr. CIT v. Peroorkadda SCB Ltd. [2022] 442 ITR 141 (Ker)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Sanjay Arora, AM &Shri Manomohan Das, JM MA No.29/Coch/2020: Asst.Year:2015-2016 (Arising out of ITA No.96/Coch/2019) The Income Tax Officer Ward 2(5) Thiruvananthapuram vs. Kadakkavoor Service Co- operative Bank Limited Bank Building, Kadakkavoor Post, Thiruvananthapuram – 695 306 [PAN: AAAAK5452D] (Applicant) (Respondent) Applicant by: Ms. J.M. Jamuna Devi, SR. DR Respondent by: None Date of Hearing: 11.08.2023 Date of Pronouncement: 25.09.2023 O R D E R Per Sanjay Arora, AM: This is a Miscellaneous Application (MA) by the Revenue directed against the Order under section 254(1) of the Income-tax Act, 1961 (‘the Act’) dated 17.05.2019 by the Tribunal disposing, among others, it’s captioned appeal. 2. None appeared for and on behalf of the assessee-respondent despite service of notice of hearing. Even on the earlier occasion when the petition came up for hearing, there was no response from the assessee. The hearing in the matter was accordingly proceeded with. 3.1 The MA raises the following grounds: “1. This Miscellaneous Petition is filed in the case of Hon’ble Income Tax Appellate Tribunal order in ITA No.96/Coch/2019 dated 17.05.2019, wherein Hon’ble ITAT partly allowed the appeals filed by the Revenue. 2. The only issue raised in this Misc. Petition is whether the assessee is entitled to deduction of interest income u/s 80P(2) of the Income Tax Act. 3. The judgment delivered by the Hon’ble Income Tax Appellate Tribunal was on the basis of the co-ordinate Bench order of the tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited (supra). MA No.29/Coch/2020 (AY 2015-2016) I T O v . K a d a k k a v o or S C B L i m i t e d . 2 4. It is to bring to the kind attention of ITAT that, in the case of Kizhathadiyoor SCBL, ITA No.525/Coch/2014 dated 20.07.2016 for AY 2009- 10, relied on by the ITAT, Kottayam District Cooperative Bank, from where the major portion of interest received, was treated as Society and granted deduction u/s. 80P(2)(d) on investment in the above bank, which is erroneous because section 80P(2)(d) of the Act specifically grants deduction to interest on investment with Co-operative societies only. Hence, the above decision may be reconsidered and reviewed. Furthermore in the case of Kizhathadiyoor Service Co-operative Bank Ltd. supra, the interest income was treated as eligible for deduction u/s 80P(2)(a)(i) by treating the assessee as a co-operative bank, which is erroneous as the provisions of sections 80P(4) clearly states that the deduction u/s 80P is allowable to Co-operative societies only and hence, the decision may be reviewed. 5. It is prayed that in the light of the judgment delivered in the above mentioned case, the Hon’ble ITAT may consider this Miscellaneous Petition and the orders passed on 17.05.2019 in ITA No.96/Coch/2019 may be recalled for hearing / rectification and pass appropriate orders on the issue specified.” 3.2 The Revenue’s case, as apparent from it’s Grounds, is that the impugned order is erroneous as the Tribunal had regarded the interest income on deposits with other co-operative banks or treasuries as part of the assessee’s business of provision of credit to its members and, therefore, deductible u/s.80P(1) r/ws. 80P(2)(a)(i). In Kizhathadiyoor Service Co-operative Bank Ltd. (ITA No.525/Coch/2014, dated 20.07.2016),relied upon by it, interest on investments in co-operative banks was held deductible u/s.80P(2)(d), which requires being reviewed inasmuch as co-operative societies are not co-operative banks. 4. We have heard the party before us, and perused the material on record. 4.1 The relevant part of the impugned order reads as under: “7.1 In view of the dictum laid down by the Full Bench of the Hon’ble High Court, the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the respective assessees and determine whether their activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. 8. As regards the interest on the investments with Co-operative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of MA No.29/Coch/2020 (AY 2015-2016) I T O v . K a d a k k a v o or S C B L i m i t e d . 3 Kizhathadiyoor Service Co-operative Bank Limited (supra) held that interest income earned from investments with treasuries and banks is part of banking activity of the assessees, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P(2) on such interest income, the Assessing Officer shall examine the assessee’s activities whether it is in tune with the activities expected of a co-operative society registered under the Kerala Co-operative Societies Act, 1969 and grant deduction on such interest income u/s 80P(2) of the I.T.Act. It is ordered accordingly.” (emphasis, ours) 4.2 The Revenue’s MA is not maintainable. No ‘mistake’ of fact/s or of law, has been pointed out and, in fact, both the stated grounds are incorrect. The Tribunal has decided the appeal under reference not by, as claimed, following it’s earlier order in Kizhathadiyoor Service Co-operative Bank Ltd. (supra), but by the Full Bench of the Hon’ble jurisdictional High Court in CIT v. Mavilayi Service Co-operative Bank Ltd. [2019] 414 ITR 67(Ker)(FB). In fact, having found the same as laying the law in the matter, it has directed the Assessing Officer (AO) to examine the applicability of the said decision inasmuch as the impugned appellate order was based on decision/s by the Hon’ble Court contrary thereto. The larger bench decision being in favour of the Revenue, a challenge to the impugned order in rectification proceedings could arise at the instance of the assessee. And which again has to be within the time provided therefor by the statute. As regards the claim of interest on investment in cooperative banks as eligible for deduction u/s. 80P(1) r/w s. 80P(2)(d), we find no such direction per the impugned order, even as the Tribunal has no power of review. We cannot though help adding that the said direction, assuming so, is in agreement with the later binding decision in Pr. CIT v. Peroorkadda SCB Ltd. [2022] 442 ITR 141 (Ker). 5. No case for interference qua the impugned order is accordingly made out. It is nevertheless open for the assessee to, if so advised, contest the AO’s order in the set aside proceedings where and to the extent it is found by it inconsistent with the latest decision by the Hon’ble Apex Court in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC). We, accordingly, decline interference. MA No.29/Coch/2020 (AY 2015-2016) I T O v . K a d a k k a v o or S C B L i m i t e d . 4 6. In the result, Revenue’s miscellaneous application is dismissed. Order pronounced on September25, 2023 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963 Sd/- (Manomohan Das) Sd/- (Sanjay Arora) Judicial Member Accountant Member Cochin; Dated: September 25, 2023 Devadas G* Copy to: 1. The Applicant. 2. The Respondent. 3. The Pr.CIT concerned 4. The Sr. DR, ITAT, Cochin Bench. 5. Guard File. Assistant Registrar ITAT, Cochin.