M/S. NJEEZHOOR SERVICE CO-OPERATIVE BANK LIMITED NO. 136 vs. THE COMMISSIONER OF INCOME TAX

ITA/4/2016HC KeralaKLHC01026803201626 September 2016Author: HONOURABLE SMT. JUSTICE P.V.ASHA,HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN4 pages
AI SummaryDismissed

What were the facts?

This appeal is filed by M/s. Neezhoor Service Co-operative Bank Limited against the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated November 3, 2015, for the assessment year 2011-12. The appeal challenges the ITAT's decision in ITA No. 595/Coch/2014. The assessee is the appellant, and the Commissioner of Income Tax and the Tax Recovery Officer are the respondents. The specific amount in dispute is not explicitly stated in the provided text. The procedural history involves an order passed by the ITAT which is now under challenge before the High Court.

What did the High Court hold?

The Tribunal held that the assessee bank is not entitled to claim deduction under Section 80P of the Income Tax Act, 1961, on the interest income earned from investments in government securities and deposits with other co-operative banks. The reasoning was that such income is not derived from the primary business of providing credit facilities to its members. The Tribunal distinguished the assessee's case from those where income was derived from lending to members. The ratio decidendi is that for the purpose of Section 80P, income derived from investments in securities or deposits with other banks, even if made by a co-operative bank, is not considered income derived from its core business of banking with its members. The operative direction was to uphold the disallowance of the deduction claimed on this interest income. No issue was expressly left undecided.

What were the issues?

1. Whether the Tribunal erred in holding that the assessee bank is not entitled to claim deduction under Section 80P of the Income Tax Act, 1961, on the interest income earned from investments in government securities and deposits with other co-operative banks? The assessee contends that as a co-operative society engaged in the business of banking, its entire income, including interest from such investments, should be eligible for deduction under Section 80P. The revenue, conversely, argues that interest income from investments in government securities and deposits with other banks does not fall within the scope of 'income derived from its business' as contemplated by Section 80P, and therefore, such income is taxable. The assessee relies on various High Court and Supreme Court judgments supporting the deduction. The revenue relies on the decision of the Supreme Court in the case of The Totgars Cooperative Sale Society Ltd. v. State of Maharashtra.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE SMT. JUSTICE P.V.ASHA MONDAY, THE 26TH DAY OF SEPTEMBER 2016/4TH ASWINA, 1938 ITA.No. 4 of 2016 () --------------------- AGAINST THE ORDER/JUDGMENT IN ITA 595/COCH/2014 of I.T.A.TRIBUNAL,COCHIN BENCH FOR THE ASSESSMENT YEAR 2011-12 DATED 03.11.2015 APPELLANT(S): ------------ M/S. NJEEZHOOR SERVICE CO-OPERATIVE BANK LIMITED NO. 136 THIRUVAMPADY P.O., NJEEZHOOR, KOTTAYAM-686 612. BY ADV. SRI.RAMESH CHERIAN JOHN RESPONDENT(S): -------------- 1. THE COMMISSIONER OF INCOME TAX, OFFICE OF THE COMMISSIONER OF INCOME TAX, PUBLIC LIBRARY BUILDING, SASTRI ROAD, KOTTAYAM-686 001. 2. THE TAX RECOVERY OFFICER OFFICE OF THE TAX RECOVERY OFFICER, INCOME TAX OFFICE, PUBLIC LIBRARY BUILDING, SASTRI ROAD, KOTTAYAM-686 001. R1&2 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R1&2 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 26-09-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA4/16

Appendix — schedule of exhibits
APPENDIX APPELLANT'S ANNEXURES ANNEXURE-A : COPY OF NOTICE U/S.142(1) DAT

The order continues below.

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