TMI Blog2017 (10) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... Amaljith P.J., CA Revenue By Shri A Dhanaraj, Sr DR ORDER Per George George K, JM; This appeal at the instance of the assessee is directed against the order of the CIT(A), Kozhikode dated 30/05/2017. The relevant assessment year is 2013-14. 2 Briefly stated the facts in relation to the above cases are as follows: The assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act 1969. It is providing credit facilities to its members. The assessment was completed by denying the deduction u/s 80P(2) of the I T Act, 1961. The reason for denying the claim of deduction u/s 80P(2) of the Act was that the assessee was doing the business of banking and in view of insertion of sub section(4) to section 80P, the assessee is not entitled to the benefit of section 80P. 3 Aggrieved by the order of the Assessing Officer denying the benefit of deduction u/s 80P(2) of the Act, the assessee preferred 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-op Bank Ltd vs CIT reported in 384 ITR 490, allowed the claim of deduction u/s 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers. ( ITA No 261/Coch/2017 others - order dated 12th July 2017). The findings of the Tribunal read as follows: 7 I have heard the rival submissions and perused the material on record. The solitary issue for my consideration is whether interest received on investments with subtreasury is liable to be assessed under the head income from other sources or income from business . If the same is to be assessed under the head income from business , the assessee would be entitled to deduction u/s 80P(2) of the I T Act, in respect of interest received on such investments. The assessee admittedly is providing credit facilities to its members. Section 5(b) of the banking regulation Act 1948 defines banking as the accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawal by cheque, draft, order, otherwise. Now the question is whether a cooperative society or a primary agricultural society can do banking business and whether by doing such an activity, it loses the eligibility for deduction u/s 80P2(1). The Hon ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regards the grant of 80P deduction. 7.2 In the instant case, the assessee do not posses any banking license from the Reserve Bank of India and is not exclusively carrying on any banking facility; but it is carrying on business of lending money to its members and therefore is covered u/s 80P(2) of the Act. The judgment of the Hon ble Apex Court in the case of M/s Totgars Cooperative Sales Society Ltd. (supra) relied by the CIT(A) is distinguishable on facts. The Hon ble Apex Court in the case of M/s Totgars Cooperative Sales Society Ltd (supra) was dealing with the case where the assessee apart from providing credit facilities to its members was also marketing agricultural produces grown by its members. Sale consideration received from the marketing of agricultural produce of its members was retained by the assessee in that case and was invested in short term deposits/securities. Such amount retained by assessee s society was shown as a liability in the balance sheet and therefore, to that extent interest income cannot be attributable neither to the activity mentioned in section 80P(2)(a)(i) or u/s 80P(2)(a)(iii) of the Act. This distinguishable feature has been taken note by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(l) of the Act. In tact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME- TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly, it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order: Appeal is allowed. 7.4 The Cochin Bench of the Tribunal in the case of the Kizhathadiyoor Service Coop Bank Ltd., on identical facts has rendered a decision in favour of the assessee. The relevant finding of the Cochin Bench of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank (supra) in ITA No. 525/Coch/2014, read as follows: 7.2 As regards the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 7.5 In view of the judgment of the Hon ble Karnataka High Court in the case of Tumkur Merchantgs Souharda Credit Coop Ltd (supra)and Cochin Bench of the Tribunal in the case of Service Coop Bank Ltd.,(supra), I am of the view that the assessee is entitled to the benefit of deduction u/s 80P(2) with regard to interest received on deposits made by the assessee with sub treasury. It is ordered accordingly. 8 In the result, the appeal filed by the assessee in ITA No.261/Coch/2017 is allowed. ITA No. 208/Coch/2017; ITA No 209/Coch/2017 ITA No. 210/Coch/2017; I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
