TMI Blog2017 (7) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... DR ORDER Per George George K, JM; These seven appeals, at the instance of the various assessees, are directed against separate orders of the CIT(A). 2 Since common issue is involved in all these appeal, they were heard together and are being disposed off by this consolidated order for the sake of convenience and brevity. 3 I shall first take up for adjudication the appeal in ITA No.261/Coch/2017 concerning the Azhikode Service Cooperative Bank. ITA No. 261/Coch/2017 4 Briefly stated the facts in relation to the above case 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. For the assessment year 2012-13, the return of income was filed on 30.9.2012, by declaring nil income after claiming the entire total income of ₹ 1,00,769/- as deduction u/s 80P of the I T Act. The assessment was taken up for scrutiny and the assessment u/s 143(3) was completed vide order dated 30.10.2014, wherein, the claim of deduction u/s 80P was denied by the Assessing Officer. The reason for denying the claim of deduction u/s 80P(2) of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasury ~ 4,03,088/-. The ratio of the decision of Hon. ITAT Cochin Bench, in Muttom Service Cooperative Bank Lt, VS. ITO and Kizhathadiyoor Service Co- operative Bank Ltd VS. ITO is squarely applicable to the appellant's case and the learned CIT (A) is bound tofollow the same. It is clearly stated in the above cases that the interest earned by a Co-operative Bank on investments with Sub Treasury is eligible for deduction U/S 80P (2) 3. The learned CIT (A) has erred in putting reliance on the decision of Supreme Court in Tortgar's Co-operative Sale Society VS. ITO. The ratio of the above cases is not applicable to the appellant's case. The Hon. ITAT (Cochin Bench) in Muttom Service CoITA operative bank VS ITO has held that the decision of the Hon Supreme Court in Tortgar's Co-operative Sale Society VS. ITO 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 other activities like Tortgar's Co-operative Sale Society which is engaged in marketing the agricultural produce of the members. 4. On the above grounds and such other grounds as may be adduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a Co- operative bank carrying on excursively banking business and as it does not possess a licence from Reserve Bank of India to carry on business, it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society, Therefore, there was no error committed by the Assessing Authority. The said order was not prejudicial to the interest of the Revenue. The condition precedent for the commissioner to invoke the power under Section 263 is that the twin condition should be satisfied. The order should be erroneous and it should be prejudicial to the interest of the revenue. 7.1 From the above judgment of the Hon ble Karnataka High Court, it is quite clear that a primary agricultural credit society or a primary cooperative agricultural and rural development bank who do not have license from Reserve Bank of India to carry on the business of banking, is not a cooperative bank, hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the assessee-Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, deposit/ security. was invested In a short-term Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, tv that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar s Co-operative Sale Society Ltd vs ITO (supra), the assessee cooperative society was to provide credit facility to its members and market the agricultural produce. The assessee is not in the business of banking. Therefore, this Tribunal is of the opinion that the judgment of the Apex court in Totgar s Co-operative Sale Society Ltd (supra) is not applicable in respect of the co-operative society whose business is banking. Admittedly, the assessee has invested funds in state promoted treasury small savings fixed deposit scheme. Since Government of India has withdrawn India Vikas Patra, as a small savings instrument, funds invested at the discretion of the bank is one of the activities of the banking as per the Banking Regulation Act. Since the assessee co-operative society is in the 4 ITA No.372/Coch/2010 business of banking the investment in the state promoted treasury small savings fixed deposit certificate scheme is a banking activity, therefore, the interest accrued on such investment has to be treated as business income in the course of its banking activity. Once it is a business income, the assessee is entitled for deduction u/s 80P(2)((a)(i). therefore, this Tribunal is of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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