DCIT 1(3), MUMBAI vs. THE MAHARASHTRA STATE CO OP BANK LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे सद�य राजे राजे�� राजे �� �� केकेकेके अनुसार �� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 10.10.2011 of the CIT(A)-2,Mumbai, the A.O.(Assessing Officer) has filed the present appeal for the above mentioned assessment year. 2.Assessee-company engaged in the business of banking, filed its return of income on 31.10.2005 declaring total income at Rs.Nil. The AO completed the assessment u/s.143(3) on 20.11.2007 at a total income of Rs.Nil. Reassessment u/s. 143(3) r.w.s 147 of the Act was completed on 30.11.2010 determining the income of the assessee at Rs.1.32crores.

3.The solitary ground of appeal is about allowing the deduction u/s.80P(2)(a)(i) of the Act, claimed by the assessee. During the assessment proceedings the AO found that the assessee had received an amount of Rs.1.32 crores as interest on income tax refund. He held that same was derived from non banking activity and therefore, was not eligible for deduction u/s.80P(2)(ai).He taxed the said income under the head ‘income from other sources’.

4.Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority (FAA) .Before him, the assessee contended that it was engaged in banking business, that the issue stands decided in favour of the assessee by the order of the Tribunal (ITA/7108/Mum/2004-AY 2000-01,dt20.1.2010)-(SB). The FAA referring to the above judgment held that assessee was entitled to deduction u/s. 80P(2)(ai) on the amount of interest received u/s. 244A of the Act.

8791/M/11-maharashtra state Co-op Bank 5.Before us, the Departmental Representative (DR) referred to the case of Totgars Co- operative Sales Society Ltd. (188taxman 282) of the Hon'ble Supreme Court. The Authorised Representative (AR) referred to the case of the Special Bench (supra), delivered in the case of the assessee. He further stated that facts of Totgars Co-op Sales Society Ltd. were distinguishable from the facts of the case under consideration. In that case the assessee was a Co-op Society, that it had invested surplus funds in short term deposit and Government Securities, that the Hon’ble Apex Court had held that interest earned by it would be taxable u/s. 56 of the Act. 6.We have heard the rival submissions and perused the material before us. In our opinion the Co-op Society cannot be equated with a Co-op Bank, that the facts of Totgars Co-op Sales Society Ltd.(supra), are not applicable to the facts under appeal. We find that in the case of Haryana State Co-op Apex Bank Ltd. (322 ITR 404) the Hon’ble Punjab &Haryana High Court has held that Co-op Apex bank could not be subjected to income tax in respect of interest received by it on refund of excess income tax paid and that the amount in question would qualify u/s. 80P(2)(ai). The Hon’ble Court also referred to the judgment of Hon’ble Madras High Court delivered in the case of Madurai District Co-op Bank Ltd. (239 ITR 700). Respectfully following the above two judgments we hold that the order of FAA does not suffer from any legal infirmity. Therefore, confirming his order we decide the effective ground of appeal against the AO.