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TMI Blog2016 (7) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... om investments amounting Rs. 8A2,219 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 Co-operative Sale Society vs. ITO ((2010) 322 ITR 283) is not applicable to service co-operative banks as they are co-operative societies carrying on the business of banking and not co-operative societies engaged in marketing the produce of the members. Accordingly, the ITAT held that the investment income shall be included in income from b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that apart from interest on loan it is getting interest from deposits with other banks. These cannot be categorized as providing credit facility as envisaged in 80P(4)(a) and (b) of the Income Tax Act. Thus the assessee is having deposits with the following banks etc.: Sub Treasury Meenachil Kerala State Rubber Marketing Federation Kerala State Consumer Cooperative Consumer federation FD with Treasury Term Deposit with Radico Teekoy Cooperative Ta Factory South Indian Bank Pala The assessee was therefore informed that its income is not eligible for deduction u/s 80P and also that its from investment will be assessed as other Source. However the assessee claimed that the investment income is also to be assessed as a i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other income of Rs. 6,25,736/-included in miscellaneous income is also assessed under other source. However, only the net income of only 14,709/- is assessed. Total income from other source is therefore 8,27,510 +14,709 or Rs. 8,42,219/- 4 Aggrieved, the assessee preferred appeal to the first appellate authority. The CIT(A) dismissed the appeal of the assessee on this issue. The relevant finding of the CIT(A) reads as follows: "2.3 It is seen that deposits have been made with Sub-Treasury Meenachil, Kerala State Rubber Marketing Federation, Kerala State Consumer Cooperative Consumer Federation, FD with Treasury etc. The appellant submits that the ratio pronounced in the case of CIT vis. Navanshehar Central Cooperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been put for investment and interest income have been earned therefrom. In such a situation the Assessing Officer has correctly applied the ratio of the Apex Court pronounced in the case of Totagar's Co-operative Society. 5 The assessee being aggrieved by the order of the CIT(A), is in appeal before us. The ld counsel for the assessee placed reliance on the ground raised in the memorandum of appeal. On the other hand, the ld DR placed reliance on the orders of the Income Tax Authorities. 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 Meena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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