The iTO,Wd-2(1), Trivandrum V. M/s.Ananthapuram Cooperative society, Trivandrum

MA 30/COCH/2021

AI Insights

The case involves a Miscellaneous Application (MA) by the Revenue against the order of the Income Tax Appellate Tribunal, which had previously dismissed the Revenue's appeal concerning the assessment year 2011-12. The core issue was the deductibility of interest on investments from surplus funds of the Ananthapuram Service Co-operative Society under section 80P(2)(a)(i) of the Income-tax Act, 1961. The Tribunal initially relied on the decision in Vaveru Co-operative Rural Bank Ltd. v. CIT, which classified such income as 'income from other sources'. However, it was later clarified that such income could be deducted under section 80P(2)(d) if it arises from surplus funds, as supported by the decision in Pr.CIT v. Peroorkada Service Co-operative Bank Ltd.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115436 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 06-02-2020
• Other Referred Cases: Kizhathadiyoor Service Co-operative Bank Ltd. (ITA No. 525/Coch/2014, dated 20.07.2016), Vaveru Co-operative Rural Bank Ltd. v. CIT [2017] 396 ITR 371 (AP), Pr.CIT v. Peroorkada Service Co-operative Bank Ltd., dated 01.11.2021, reported at [2022] 442 ITR 441 (Ker)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Sanjay Arora, AM &Shri Manomohan Das, JM MA No.30/Coch/2021: Asst.Year:2011-2012 (Arising out of ITA No.272/Coch/2019) The Income Tax Officer Ward 2(1), Range-2 Thiruvananthapuram vs. Ananthapuram Service Co- operative Society Limited Kaithamukku, Thiruvananthapuram – 695 024 [PAN: AAEAA4313K] (Applicant) (Respondent) Applicant by: Smt.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 11.08.2019 by the Tribunal dismissing it’s captioned appeal for assessment year (AY) 2011-12. 2. None appeared for and on behalf of the assessee-respondent when the petition was called out for hearing despite due notice, as has been the case in the past, with, further, there being no adjourned application on record. Under the circumstances, we proceeded to hear the Revenue’s MA ex parte the assessee. 3. The Revenue per it’s instant application contends that the impugned order, passed following the decision in Kizhathadiyoor Service Co-operative Bank Ltd. (ITA No. 525/Coch/2014, dated 20.07.2016),is erroneous inasmuch as interest on investments with co-operative banks is out of the surplus funds of the assessee, and not its operational income and, thus, not deductible u/s.80P(2)(a)(i). In fact, in Vaveru Co-operative Rural Bank Ltd. v. CIT [2017] 396 ITR 371 (AP), also relied MA No.30/Coch/2021 (AY 2011-2012) I T O v . A n an t h a p u r a m Se rv i c e C o - o p S oc i e t y L t d . 2 upon by the Tribunal, the Hon’ble Court has clearly stated that the interest on investment of surplus funds would be liable to be assessed, as in the case of any other investor, as income from other sources, taxable u/s.56. 4. We have heard the party before us, and perused the material on record. Inasmuch as the Tribunal has relied on the decision in Vaveru Co-operative Rural Bank Ltd. (supra), holding the income on surplus funds as being income from other sources, the same may not be operational income, deductible u/s.80P(2)(a)(i), as directed by the Tribunal vide para 7.3 of it’s order. So, however, the Hon’ble Court at para 35 of it's decision, reproduced along with paras 32 to 34 at para 7.2 of the impugned order, clearly states of the same being deductible either under clause (d) or (e) of sec.80P(2) (r/w s. 80P(1)). As such, where arising out of surplus funds, the same would stand to be deducted u/s.80P(2)(d). The only amendment in the impugned order, therefore, that we consider appropriate under the circumstances is that the following sentence be read after the first sentence in para 7.3, as its second sentence: ‘Where invested out of it’s own funds, surplus for the time being, the same shall be entitled to deduction u/s. 80P(1) r/w s. 80P(2)(d).’ We may in this regard also clarify that the Hon’ble High jurisdictional Court has per it’s decision in Pr.CIT v. Peroorkada Service Co-operative Bank Ltd., dated 01.11.2021, reported at [2022] 442 ITR 441 (Ker), held interest on investment in co- operative banks as deductible u/s.80P(2)(d). We decide accordingly. 5. In the result, the Revenue’s miscellaneous application is allowed on the aforesaid terms. Order pronounced on September 25, 2023 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963. Sd/- (Manomohan Das) Sd/- (Sanjay Arora) Judicial Member Accountant Member MA No.30/Coch/2021 (AY 2011-2012) I T O v . A n an t h a p u r a m Se rv i c e C o - o p S oc i e t y L t d . 3 Cochin; Dated: September25, 2023 Devadas G* Copy to: 1. The Applicant. 2. The Respondent. 3. The Pr.CIT concerned 4. The Sr. DR, ITAT. 5. Guard File. Assistant Registrar ITAT, Cochin.