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The Income Tax Officer Ward 5, Kottayam Versus M/s. Valavoor Service Co-op Bank Limited And Vice-Versa

2018 (1) TMI 590 - ITAT COCHIN

Entitled to the benefit of deduction u/s 80P(2) - Held that:- 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 Chirakkal Service Co-Operative Bank Ltd. [2016 (4) TMI 826 - KERALA HIGH COURT] had held that primary agricultural credit society, registered unde .....

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to be assessed as ‘income from other sources’ or ‘income 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 .....

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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 was completed u/s 144 vide order dated 23.03.2015 rejecting the claim of deduction u/s 80P(2). Further the assessee had brought to tax interest income received from deposits amounting to ₹ 17,71,542 as income from other sources , thereby denying the benefit of section 80P of the Ac .....

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order by denying the claim of deduction u/s 80P of the I.T.Act, the assessee has preferred the appeal to the first appellate authority. The CIT(A) following the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Limited v. CIT reported in 384 ITR 490 (Ker.), directed the Assessing Officer to grant deduction u/s 80P(2) of the Act. 3.1 As regard the interest received from FD amounting to ₹ 17,71,542, the CIT(A) held that the assessee is entit .....

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ess , reads as follow:- [Para 6 Page 7 of CIT(A)is order] ……. Similarly, portion of the interest amounting to ₹ 17,71,542/- treated as income from other sources has also not been justified since the major source of income of the appellant as seen both from the assessment order and also from the details filed during the course of appeal proceedings is interest income earned from loans and advances given both for agricultural and non-agricultural purposes and thereby no portion .....

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ss, 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 .....

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evenue has filed the present appeal raising the following grounds:- The order of the learned Commissioner of Income tax (Appeals), Kottayam in so far as the points stated below are concerned, is opposed to law on the facts and in the circumstances of the case. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in allowing deduction u/s 80P(2)(a)(i) of the Act in respect of business income of ₹ 1,88,13,979/ - assessed for the year under consideration. 3. The Ld CIT (A) ought to have .....

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etc. cannot be separately assessed under Income from Other Sources . 5. The Ld. CIT (Appeals) ought to have considered the decision of the jurisdictional Tribunal in the case of The Mutholy Service Co-operative Bank Ltd in ITA No.11/Coch/2014 wherein the Tribunal has held that interest earned by the Co-operative society on deposits with the Treasury etc. is assessable under the head Income From Other Sources . 6. The Ld. CIT (A) ought to have also considered the decision of the Delhi High Court .....

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hearing, the order of the learned Commissioner of Income tax (Appeals) on the above points may be set aside and that of the Assessing Officer restored. 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 .....

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at 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 agricultural credit society', once it is registered and classified as 'primary agricultural credit society' by the competent authorities under the provisions .....

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ing percentage given for agricultural purpose. Return filed A.Y. Percentage 17.06.2013 2012- 2013 81.16% (As per assessee) 55.91% (as per A.O. - refer para 2.13) Hence the Assessing Officer denied the exemption claimed u/s 80P(2). The CIT(A) deleted the 80P disallowance relying on the decision of the Hon.Kerala High Court in the case of M/s.Chirakkal Service Co-operative Bank Ltd. vs. CIT. Reliance is placed on the Hon.Supreme Court judgment reported in 203 ITR 1027 - case of Sabarkantha Zilla K .....

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sessee be dismissed. 3. In view of the above, especially the judgment in 203 ITR 1027 (SC), order of the Assessing Officer be upheld. 5. The learned AR, on the other hand, submitted that the issues raised in the appeal are covered in favour of the assessee by the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (supra) and the orders of the Cochin Bench of the Tribunal in the case of The Kizhathadiyoor SCB v. ITO in ITA No.525/Coch/2016 da .....

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w: 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 coop .....

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societies for the time being; it cannot but be taken that the purpose of the societies so registered under the State Law and its objects have to be understood as those which have been approved by the competent authority under such State law. This, we visualize as due reciprocative legislative exercise by the Parliament recognizing the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural cred .....

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clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating to such applicants. 16. The position of law being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cciv) of section 5 of the BR Act having regard to the primary object or principal business of each of the appellants. It is also clear fro .....

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we have stated herein above. For this reason, it cannot but be held that the appellants are entitled to exemption from the provisions 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 h .....

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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 hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. Therefore, we see no reason to interfere with the order of the CIT(A) and we uphold the same. It is orde .....

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