M/S.CO-OPERATIVE INSURANCE SOCIETY LTD,TRIVANDRUM vs. THE ITO, WD-2(1), TRIVANDRUM

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ITA 445/COCH/2019Status: DisposedITAT Cochin01 October 2019AY 2015-166 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that deduction under Section 80P(2)(d) is only for income from investments in co-operative societies, not co-operative banks. However, it allowed the issue to be examined by the AO for deduction under Section 80P(2)(a)(i) for income from banking/credit facilities to members.

What were the facts?

The assessee, a co-operative society, claimed deduction under Section 80P(2)(d) for interest income earned from investments in co-operative banks. The Assessing Officer and CIT(A) disallowed this deduction, stating it was not from investments in co-operative societies.

What were the issues?

Whether interest income from investments in co-operative banks is eligible for deduction under Section 80P(2)(d) and if it can be considered as income from business eligible for deduction under Section 80P(2)(a)(i).

Which sections of the Income-tax Act were involved?

Section 80P(2)(d),Section 80P(2)(a)(i),Section 143(3)

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

For Appellant: Shri R. Krishnan, CA
For Respondent: Smt. A.S. Bindhu, Sr. DR
Hearing: 26/09/2019Pronounced: 01/10/2019

and are being disposed of by this consolidated order. Identical grounds were raised in these appeals. They read as follows:

1) The learned officers below erred in denying deduction u/s. 80P(2)(d) of the Act.

2) The learned officers ought to have noted that the appellant was registered as a co-operative society and therefore the provisions of section 80P(2) applied in the case of the appellant.

3) The learned officers below ought to have appreciated that the income of the appellant from investments in banks and other co-operative societies were assessable under the head ‘business’

4) The learned Commissioner of Income-tax(Appeals) ought to have noticed that the Assessing Officer had not examined the case of the appellant in detail and had merely refused deduction u/s. 80P(2)(d) which is bad in law.

3.

The brief facts of the case are as follows:

The assessee is a co-operative society.. For the assessment years 2014-15 and 2015-16, the assessee filed its returns of income on 29/03/2016 and 10/03/2017 respectrively. The assessee had claimed deduction u/s. 80P(2)(d) of the I.T. Act for assessment years 2014-15 and 2015-16 amounting to Rs. 55,77,859/- and Rs.55,45,288/- respectively. The Assessing Officer completed the assessments under section 143(3) of the I.T. Act for the assessment years 2014-15 and 2015-16 vide orders dated 22/12/2016 and 30/12/2017 by disallowing the claim of deduction under section 80P(2)(d) of the Act. The reason for disallowing the deduction was that interest income which was received by the & 445//Coch/2019 & S.P. Nos. 45&46/Coch/2019 assessee was not from investments made with co-operative societies but with co-operative Banks.

4.

Aggrieved by the orders of assessment for the assessment years 2014-15 and 2015-16, the assessee has preferred appeals to the first appellate authority.

The CIT(A) confirmed the view taken by the Assessing Officer by relying on the order of the Tribunal in the case of The Kerala State Homeopathic Co-operative Pharmacy Ltd. in ITA 283,284/Coch/2018 order dated 15/10/2018.

5.

Aggrieved by the orders passed by the CIT(A) for the assessment years 2014-15 and 2015-16, the assessee has filed the present appeals before the Tribunal. The Ld. AR relied on the grounds. The Ld. DR on the other hand supported the orders of the income tax authorities.

6.

We have heard the rival submissions and perused the record. The Cochin Bench of the Tribunal in the case of The Kerala State Homeopathic Co-operative Pharmacy Ltd. cited supra had held that deduction u/s. 80P(2)(d) of the I.T. Act is to be granted only with regard to interest/dividend income earned from investments with co-operative societies. The assessee even before us did not prove that income on which deduction is claimed u/s. 80P(2)(d) of the I.T. Act is out of investment with co-operative societies. Therefore in the light of the co- ordinate bench order of the Tribunal in the case of The Kerala State & 445//Coch/2019 & S.P. Nos. 45&46/Coch/2019 Homeopathic Co-operative Pharmacy Ltd. (supra), we hold that the assessee is not entitled to claim deduction u/s. 80P(2)(d) of the I.T. Act.

7.

However, the assessee had raised the ground that it is entitled for deduction u/s. 80P(2)(a)(i) of the I.T. Act. The Cochin Bench of the Tribunal in the case of ITO vs. M/s. Trivandrum District Electricity Board Employees Co-operative Society in (order dated 01/08/2019) had held that when a co-operative society received interest from investment in the course of its business of banking/providing credit facilities to its members, the same shall be assessed as income from business and hence entitled for deduction u/s. 80P(2)(a)(i) of the I.T. Act. The Cochin Bench of the Tribunal in the case of ITO vs. M/s. Trivandrum District Electricity Board Employees Co-operative Society (supra) had followed the principles laid down by the following judicial pronouncements:

(i) CIT vs. Karnataka State Co-operative Bank (251 ITR 194) (SC)

(ii) Vaveru Co-operative Rural Bank Ltd. vs. CIT (2017) 396 ITR 371 (The Telungana and Andhra Pradesh High Court.

(iii) Muttom Service Co-operative Bank Ltd. (ITA No. 106/Coch/2016)

(iv) The Mangalam Service Co-operative Bank Ltd. vs. ITO (ITA No. 495/Coch/2017 – order dated 17/10/2017)

8.

In the light of the above order of the Cochin Bench of Tribunal in the case of ITO vs. M/s. Trivandrum District Electricity Board Employees Co-operative & 445//Coch/2019 & S.P. Nos. 45&46/Coch/2019 Society (supra), we restore this issue to the file of the Assessing Officer to examine whether the assessee is entitled for claim of deduction u/s. 80P(2)(i)(a) of the Act with regard to interest income it had received from co-operative Bank.

The Assessing Officer shall follow the dictum laid down by the order of the Cochin Bench of the Tribunal in the case of ITO vs. M/s. Trivandrum District Electricity Board Employees Co-operative Society (supra). It is ordered accordingly. Hence the appeals of the assessee are partly allowed for statistical purposes.

9.

Since we have disposed of the assessee’s appeals, the Stay Petitions filed by the assessee in S.P. Nos. 45&46/Coch/2019 have become infructuous and are dismissed as such.

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