Income Tax Appellate Tribunal - Cochin
M/S.Kizhathadiyoor Sevice Co-Op Bank ... vs The Ito, Kottayam on 26 May, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM
C.O. No. 07/Coch/2015
(Arsg. out of I.T.A. No.67 /Coch/2015)
Assessment Year : 2010-11
Kizhathadityoor Service Co- Vs. The Income Tax Officer,
operative Bank Ltd., Ward-2, Kottayam.
Pala, Kottayam-686 575.
[PAN: AAAAK 3240R]
(Assessee-Appellant) (Revenue-Respondent)
Assessee by Shri Prasanth Srinivas, CA
Revenue by Shri A. Dhanaraj, Sr. DR
Date of hearing 24/05/2017
Date of pronouncement 26/05/2017
ORDER
Per ABRAHAM P.GEORGE, ACCOUNTANT MEMBER:
This Cross Objection is re-instated through an order dated 24/03/2017 of this Tribunal in M.P. No. 09/Coch/2016. Department had filed an appeal before the Tribunal numbered as I.T.A. No. 67/Coch/2015 against which assessee had filed Cross Objection numbered as C.O. No. 07/Coch/2015. When the appeal of the Revenue was dismissed, Cross Objection of the assessee was also dismissed for the reason that Cross Objection would not survive. However, assessee through its M.P. 09/Coch/2016, relying on a judgment of the Hon'ble Jurisdictional High 2 C.O. No.07Coch/2015 Court in the case of City Centre Builders and Developers vs. ITAT in WP(C) No.7666 of 2016 (G) dated 02/07/2016, requested for restitution of the CO. Pursuant to this, the Cross Objection was restored by this Tribunal, considering it to have an independent existence. Accordingly, the CO was taken up for hearing today.
2. The Ld. Counsel for the assessee submitted that apart from the grounds raised in the CO which supported the order of the CIT(A) allowing the deduction claimed by the assessee u/s. 80P of the Act, there was an additional ground of Cross Objection. As per the Ld. AR, through this additional ground, assessee had objected to the treatment of the treatment of the income arising from investments under the head 'income from other sources' as against 'income from business'. As per the Ld. AR, the Assessing Officer had relied on the judgment of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sales Society vs. ITO (322 ITR 283) while coming to the conclusion that income from investments could not be considered as income arising from business of banking, but had to be treated as income from other sources, thereby denying the claim of deduction under section 80P(2)(a) (i) and section 80P(2)(b)(i) of the Act. Further, as per the Ld. AR, this Tribunal in the assessee's own case for A.Y. 2009-10vide its order dated 20th July, 2016 in I.T.A. No. 525/Coch/2014 had held that the judgment of the Apex Court in the case of Totgar's Co-operative Sales Society did not apply to certain Co-operative Banks which are Co-operative Societies 3 C.O. No.07Coch/2015 carrying on the business of banking and not Co-operative Societies engaged in marketing the produce of its members. Thus as per the Ld. AR, CIT(A) erred when he denied the claim of deduction u/s. 80P(2) of the Act on the interest income.
3. Per contra, Ld. DR strongly relied on the judgment of the Hon'ble Apex Court in the case of Totgar's Co-operative Sale Society vs. ITO (supra).
4. We have perused the orders and heard the rival submissions. In assessee's own case for the assessment year 2009-10 in I.T.A. No.525/Coch/2014 dated 20th July 2016, this Tribunal in relation to the claim of the assessee held that income arising from investments in Treasury/Banks was eligible for deduction u/s. 80P(2) of the Act. It has held as under:
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 4 C.O. No.07Coch/2015 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 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 justified 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. 4.1 It has not been disputed by the Revenue that major portion of interest income arose to the assessee on its investments in Treasury and Banks for the 5 C.O. No.07Coch/2015 impugned assessment year. Therefore, the decision of the Tribunal in assessee's own case for the assessment year 2009-10 is squarely applicable for the impugned assessment year also. We also find that the judgment of the Hon'ble Apex Court in the case of Totgar's Co-operative Sales Society vs. ITO (supra) was duly considered by the Tribunal while arriving at this decision. Therefore, we hold that the lower authorities were not justified in treating interest income received by the assessee as 'income from other sources' and denying it the benefit of deduction under section 80P(2) of the Act.
5. In the result, Cross Objection filed by the assessee is allowed.
Pronounced in the open court on 26-05-2017.
sd/- sd/-
(GEORGE GEORGE K.) (ABRAHAM P. GEORGE)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi
Dated: 26th May, 2017
GJ
Copy to:
1. Kizhathadityoor Service Co-operative Bank Ltd., Pala, Kottayam-686 575.
2. The Income Tax Officer, Ward-2, Kottayam.
3. The Commissioner of Income-tax(Appeals)-V, Kochi.
4. The Pr. Commissioner of Income-tax, Kottayam.
5. D.R., I.T.A.T., Cochin Bench, Cochin.
6. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin 6 C.O. No.07Coch/2015