9911796707
TMI Blog2018 (1) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... instance of the assessee are directed against the consolidated order of the CIT(A) dated 29.06.2017. The relevant assessment years are 2007-2008 and 2013-2014. 2. Since common issue is raised in these appeals, they were heard together and are being disposed off by this consolidated order. We shall first adjudicate ITA No.584/Coch/2017 concerning assessment year 2007-2008. ITA No.584/Coch/2017 : Asst Year 2007-2008 3. Two issues are raised in ITA No.584/Coch/2017, viz., (i) Whether the assessee-society is entitled to deduction u/s 80P(2) of the income-tax Act, in respect of interest received on deposits with Sub-Treasuries. (ii) Income of ₹ 64,925 received on account of sale of fertilizers amongst the agriculturists is eligible for deduction u/s 80P(2) of the income-tax Act. 3.1 During the course of hearing of the appeal, the learned AR did not press issue No.(ii) viz., whether income of ₹ 64,925 received on account of sale of fertilizers amongst the agriculturists is eligible for deduction u/s 80P(2) of the income-tax Act. Hence the ground relating to deduction u/s 80P(2) of the Income-tax Act, with regard to the income on account of sale of fertil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, directed to tax this under the provisions of Income Tax Act, 1961. 6. The assessee being aggrieved by the denial of benefit of section 80P(2) of the income-tax Act, interest earned on deposits with Sub-treasury has filed the present appeal before the Tribunal. The learned Counsel for the assessee submitted that this issue is covered in favour of the assessee by the order of the Cochin Bench of the Tribunal in the case of M/s.Kuttiatoor Panchayath Service Co-operative Bank Ltd. v. ITO Ors. In ITA No.226 227/Coch/2017 Ors., order dated 1st December, 2017. The learned Departmental Representative, on the other hand, supported the orders of the CIT(A) and the AO. 7. We have heard the rival submissions and perused the material on record. The solitary issue for our consideration is whether interest received on investments with sub-treasury 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, hit by the provisions of section 80P(4) of the Act. The judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Co-op Bank Ltd (supra), is also in support of the assessee as regards the grant of deduction u/s 80P of the income-tax Act. 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 (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 members. It was net the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 the opinion that the judgment of the Larger Bench of the apex Court in Karnataka State Cooperative Apex Bank (supra) is applicable to the facts of this case. By respectfully following the judgment 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 sour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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