TMI Blog2016 (10) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. - S.P. No. 10/Coch/2016 And ITA No.106/Coch/2016 - - - Dated:- 31-10-2016 - S/Shri B. P. Jain, AM George George K., JM Assessee By Dr. K.P. Pradeep, Adv. Revenue By Shri A. Dhanaraj, Sr. DR ORDER Per George George AM: This appeal at the instance of the assessee, is directed against the order of the CIT(A), Kottayam dated 29/01/2016. The relevant assessment year is 2012-13. 2. There are several grounds raised in the Memorandum of Appeal, however, only three issues were argued. The three issues argued by both sides are as follows: i) Whether the CIT(A) is justified in confirming the disallowance made by the Assessing Officer with regard to the claim of deduction u/s. 80P(2) of the Act? ii) Whether the interest received from the Government Treasury is to be included under the head income from other sources or income from business? iii) Whether the CIT(A) is justified in confirming the disallowance of interest paid on deposit amounting to ₹ 17,17,183/-.? 3. We shall take up for adjudication issueswise as under:- i) Whether the CIT(A) is justified in confirming the disallowance made by the Assessing Officer with reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.5 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 co-operative 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 competent authority under the provisions of that Act. The parliament, having defined the term 'cooperative society' for the purposes of the BR Act with reference to, among other things, the registration of a society under any State law relating to co-operative 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 visualise as due reciprocative legislative exercise by the Parliament recognising the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having sbeen classified as primary ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the benefit of deduction u/s. 80P(2) of the Act. ii) Whether the interest received from the Government Treasury is to be included under the head income from other sources or income from business 5. The CIT(A) decided the issue against the assessee by observing as under:- 4.2 Verification of assessment order shows that assessee received interest income of ₹ 1,53,311/- out of the deposits made in Treasury. The issue is similar to the case of Totgar s Co-operative Sale Society Ltd. vs. ITO (2010) (322 ITR 283), in which the Hon. Supreme Court held that the assessee being co-operative society is engaged in providing credit facilities to its members (or) marketing agricultural produce to its members, interest earned by it by investing surplus funds in short term deposits would fall under the head income from other sources taxable u/s. 56 of the Income Tax Act and it cannot be said to be attributable to the activities of society and therefore, the interest did not qualify for deduction u/s. 80P(2)(a)(i) of the Income Tax Act. The same issue has been upheld in favour of Revenue in the case of Mutholy Service Co-operative Bank in I.T.A. No. 11/Coch/2014. 5.1 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) is applicable to the facts of this case. By respectfully following the judgment of the Apex court in Karnataka State Cooperative Bank (supra), the order of the Commissioner of Income-tax(A) is upheld. 5.2 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. Thus this ground of the assessee is allowed. iii) Whether the CIT(A) is justified in confirming the disallowance of interest paid (Rs. 17,17,183) Briefly stated the facts of the issue are as follows: 6. For the year under consideration, the assessee had claimed interest expenditure to the tune of ₹ 3,43,43,667/- . In the course of assessment, the Assessing Officer issued notice u/s. 142(1) of the Act directing the assessee to furnish the details of interest paid. Since the assessee did not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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