NEDUMONCAVU RURAL COOPERATIVE SOCIETY LTD NO Q1432,KOLLAM vs. AO W 2, KOLLAM
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Waseem Ahmed & Shri Soundararajan K.
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Waseem Ahmed, Accountant Member and Shri Soundararajan K., Judicial Member ITA No. 07/Coch/2024 SA No. 09/Coch/2024 (Assessment Year: 2017-18) Nedumoncavu Rural Co-op. Income Tax Officer - 2 Society Ltd. 2nd Floor, Aayakar Bhavan 1432, Kuzhumathikaud vs. Near Karbala Junction Kollam 691509 Kollam 691001 [PAN: AADAN0367R] (Appellant) (Respondent)
Appellant by: Shri Sabu C.S., CA Respondent by: Smt. Girly Albert, Sr. D.R. Date of Hearing: 27.09.2024 Date of Pronouncement: 27.09.2024 O R D E R Per Bench This appeal filed by the Revenue is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 29.09.2023 for Assessment Year (AY) 2017-18. Assessee has also filed stay application SA No.09/Coch/2024 seeking stay of collection of outstanding demand of Rs. 4,43,696/-.
The only issue raised by the assessee is that the ld. CIT(A) erred in confirming the order of the AO by denying the benefit of deduction u/s 80P(2)(a)(i) of the Act.
Briefly stated facts are that the assessee in the present case claimed to be a co- operative society and engaged in the activity of banking. The AO during the assessment proceedings denied the deduction to the assessee claimed u/s 80P(2)(a)(i) of the Act.
2 ITA No. 07/Coch/2024 Nedumoncavu Rural Co-op. Society Ltd. 4. On appeal, the ld. CIT(A) allowed the deduction to the assessee u/s 80P(2)(a)(i) of the Act except for the interest earned on the money deposited with the Government Treasury amounting to Rs. 42,71,433 under the provisions of section 80P(2)(d) of the Act.
Being aggrieved by the order of ld. CIT(A), the assessee is in appeal before us.
The ld. AR before us contended that the deposits were made in the Government Treasury under the guidelines of Karnataka Co-operative Act, therefore, the interest income from such deposit is eligible for deduction u/s 80P(2)(a)(i) of the Act.
On the other hand, the ld. DR vehemently supported the orders of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. There is no ambiguity to the fact that the impugned deposits were made by the assessee under guidelines of Karnataka Co-operative Societies Act which can be verified from page 12 of the Paper book. The Hon’ble Supreme Court in the case of CIT versus Karnataka State cooperative apex bank reported in 251 ITR 194 vide order dated 22 August 2001has directed to allow deduction of the same under the provisions of section 80P(2)(a)(i) of the Act. The relevant extract of the judgement is reproduced as under: “There is no doubt, and it is not disputed, that the assessee-co-operative bank is required to place a part of its funds with the State Bank or the Reserve Bank of India to enable it to carry on its banking business. This being so, any income derived from funds so placed arises from the business carried on by it and the assessee has not, by reason of section 80P(2)(a)( i), to pay income-tax thereon. The placement of such funds being imperative for the purposes of carrying on the banking business, the income derived therefrom would be income from the assessee's business. We are unable to take the view that found favour with the Bench that decided the case of M.P. Co-operative Bank Ltd. (supra) that only income derived from circulating or working capital would fall within section 80P(2)(a)( i). There
3 ITA No. 07/Coch/2024 Nedumoncavu Rural Co-op. Society Ltd. is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital.” 8.1 In view of the above, we hold that the assessee is eligible for deduction on the impugned amount of interest income under section 80P(2)(a)(i) of the Act.Hence, the ground of appeal raised by the assessee is hereby allowed.
In the result, the appeal of the assessee is hereby allowed.
Regarding the stay petition, it is pertinent to note that as the main appeal filed by the assessee has been disposed of, we do not find any reason to adjudicate the stay petition filed by the assessee. Accordingly, we dismiss the same as infructuous.
In the result, the stay petition filed by the assessee is dismissed as infructuous.
In the combined result, appeal of the assessee is hereby allowed, and the stay petition filed by the assessee is dismissed as infructuous. Order pronounced on 27th September, 2024 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (Soundararajan K.) (Waseem Ahmed) Judicial Member Accountant Member Cochin, Dated: 27th September, 2024 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File
Assistant Registrar ITAT, Cochin
