TMI Blog2018 (1) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... from business’- Held that:- The Cochin Bench of the Tribunal in the case of The Kizhathadiyoor Service Co-operative Bank v. ITO [2016 (7) TMI 1405 - ITAT COCHIN] had held that the investment in treasury / bank and earning interest on the same is part of banking activity and the said income is eligible for deduction u/s 80P - ITA No.02/Coch/2017 And CO No.08/Coch/2017 - - - Dated:- 4-1-2018 - Shri George George K, JM And Shri Manjunatha G, AM For The Revenue : Sri. A.Dhanaraj, Sr.DR For The Assessee : Sri. Josekutty Jacob ORDER Per George George K, JM This appeal at the instance of the Revenue and the Cross Objection filed by the assessee is directed against the CIT(A) s order dated 02.12.2016. The relevant assessment is 2012- 2013. 2. Briefly stated the facts of the case are as follow:- 2.1 The assessee is a Primary Agricultural Co-operative Credit Society, registered under the Kerala Co-operative Society Act, 1969. It is providing credit facilities to its members. For the assessment year 2012-2013, the return of income was filed on 17.06.2013 declaring nil income after claiming deduction u/s 80P of the Income-tax Act, 1961. The assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of CIT vs. Karnataka State Co-operative Apex Bank (251 ITR 194) relied on by the appellant would squarely apply to them and in view of this, no part of interest income earned by the appellant could be treated as income from other sources. In the above mentioned decision, it was held that The placement of such funds being imperative for purpose of carrying on the banking business, the income derived therefrom would be income from the assessee s business. It could not be accepted that only income derived from circulating or working capital would fall within section 80P(2)(a)(i). There is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital. Thus, deduction was allowable in respect of income derived from the funds placed with the State Bank or the Reserve Bank . Reliance also placed here to the decision of the Hon ble ITAT, Cochin Bench in the case of M/s.Puthupally Village Service Cooperative Bank Ltd. in ITA No.279/Coch/2016 dated 31.10.2016 wherein it was held that In the instant case, the assessee is a cooperative bank. The investment in treasury / banks and earning interest on the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.1 The Revenue has also filed additional ground, which reads as follow:- The order of the learned Commissioner of Income tax (Appeals), Kottayam in so far as the additional points stated below are concerned, is opposed to law on the facts and in the circumstances of the case. 2. The learned CIT (Appeals) ought to have seen that the Supreme Court in the case of Sabarkhanta Zilla Kharid Vechar Sangh Ltd. Vs. CIT reported in 203 ITR 1027 (SC) had held that eligible deduction under section 80P of the Income tax Act, 1961 in respect of co-operative societies/ banks doing both agricultural and non-agricultural activities should not be 100% of the gross profits of such societies etc. but should be limited to the profits generated from agricultural activities alone performed by such assessees. 3. The learned CIT (appeals) ought to have seen that the above Apex court's decision is in sharp contrast to the decision of the Kerala High Court in the case of M/s Chirakkal Service Co-operative Bank others in ITA No. 212 of 2013, that held that the authorities under the Income tax Act cannot probe into question whether the assessee cooperative society is a primary agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am in ITA No.11/Coch/2014. 6. We have heard the rival submission and perused the material on record. The Hon ble High Court, in the case of Chirakkal Service Co-op Bank Ltd., reported in 384 ITR 490 has held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). The Hon'ble High Court was considering the following substantial question of law: a) Whether on the facts and in the circumstances of the case under consideration/ the Tribunal is correct in law in deciding against the assessee/ the issue regarding entitlement for exemption under section 80P, ignoring the fact that the assessee is a primary agricultural credit society? 6.1 In considering the above question of law, the Hon'ble High Court rendered the following findings: 15. Appellants in these different appeals are indisputably societies registered under the Kerala cooperative societies Act 1969, for sort, KCS Act and the bye-laws of each of them, as made available to this court as part of the paper books, clearly show that they have been classified as primary agricultural credit societies by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 8OP of the IT Act by virtue of subsection 4 of that sect; on. In this view of the matter, the appeals succeed. 17. In the light of the aforesaid, we answer substantial question: A in favour of the appellants and hold that the Tribunal erred in law in deciding the issue regarding the entitlement of exemption under section BOP against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act including the appellants are entitled to such exemption. 6.2 In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon ble High Court, in the case cited supra, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, we hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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