9911796707
TMI Blog2022 (10) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... P of the Act. 3. The CIT [A] erred in upholding the view of the Assessing Officer that the interest earned by the appellant from investment in District Co-operative Bank is INCOME FROM OTHER SOURCES and not INCOME FROM BUSINESS OR PROFESSION, thereby denying exemption available to your appellant under section 80P of the Act. 4. The CIT[A] erred in holding that since the profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted and accordingly interest earned from deposits with co op banks cannot be deducted by wrongly referring to para 33 and 45 of the judgement of the hon SC in the case of Mavilayil Service Cop Bank. 5. Where investments were made by cooperative societies with co-operative banks, in the course of its banking business/providing credit facilities to its members, such income shall form part of banking activities of the assessees and the same was entitled to deduction under section 80P(2)(a)(i). 2. The assessee is a primary Co-operative Society having its principal office at Kunnathur East, Sasthamkotta, Kollam. For the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 2,58,708/- The South Indian Bank Ltd 6,54,446/- State Bank of Travancore 0 Sub Total(2) 9,13,154/- Interest received Grand total (1) + (2)Rs. - (A) 3,55,01,304 Total receipts as shown in the assessment order Rs. - (B) 18,03,17,783/- Gross total income as per Assessment order Rs. - ( C) 42,02,695/- Percentage of interest received to total receipts (A)/(B)x100 -(D) 19.69% Income assessed as I come from other sources (C) x (D) i.e (E) Rs.8,27,510/- 7.1 From the above, it is clear that a major portion of the investment income was interest receipt from other cooperative societies. Section 80P(2(d) provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in another cooperative society. Therefore, interest income received from other cooperative societies are eligible for deduction u/s 80P(2)(d) of the act and cannot be assessed as "income from other source." 7.2 As regards the interest from treasury and banks, we find on identical facts, the Cochin Bench of the Tribunal in the case of the Muttom Service Cooperative Bank Ltd in ITA No. 372/Coch/2010 had decided the matter in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 8. In the result, the appeal filed by the assessee is allowed." 5. Further, it is noted that in the case of Ms. The Kizhathadiyoor Service Co-operative Bank Ltd. in ITA No.140/Coch/2018 dated 23.7.2018, the Tribunal held as under:- "7. The only other ground in ITA No.140/Coch/2018 is with regard to the issue whether interest earned on investment with subtreasuries and Banks was eligible for deduction u/s 80P(2)(a)(i) of the I.T. Act. 7.1 We have heard the rival submissions and perused the material on record. The Tribunal had decided the issue in favour of the assessee in assessee's own case in in ITA No.525/Coch/2014 (order dated 20.7.2016) concerning the assessment year 2009-10. In view of the above order of the Tribunal in assessee's own case, we hold that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a has itself clarified that the business of the appellant does not amount to that of a cooperative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80-P. (para 20) Following propositions may be culled out from the judgment: (I) That section 80P is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the cooperative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; (II) That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub-section (2) of section 80P must be given by way of deduction; (III) That this Court in Kerala State Cooperative Marketing Federation Ltd. and Ors. (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; (IV) This is for the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2) (a)(i). Unlike the facts in Citizen Cooperative Society Ltd. (supra), the Kerala Act expressly permits loans to non-members under section 59(2) and (3). Giving of loans by a primary-agricultural credit society to non-members is not illegal, unlike the facts in Citizen Cooperative Society Ltd. (supra). Impugned Full Bench judgment is set aside. (para 47)" 7. The lower authorities have no benefit of judgement of Hon'ble Apex Court in the case of The Mavilayi Service Co-operative Bank Ltd. & Ors. vs. CIT (supra), we are of the view that in the interest of justice and equity the issue of deduction u/s 80P(2)(a)(i) of the Act needs to be examined de novo in the light of the judgement of the Hon'ble Apex Court, referred supra. Therefore, the issue raised on merits is restored to the files of the AO. The AO shall take a decision in accordance with law after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly. 8. In the result, both the appeals filed by the assessee are partly allowed for statist ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
