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09-07-2019, The Perunguzhi Service, Section 80P, 234A, 234B, Tribunal Cochin

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3 months 3 days ago #10013 by amit
Section - 80P, 234A, 234B, 68, 80P(2)(a)(i), 2(24)(i)
Order Date - 09-07-2019
Favouring - Assessee Partly allowed for statistical purposes
Court - Tribunal Cochin
Appellant - The Perunguzhi Service Cooperative Bank Ltd.
Respondent - ITO
Justice - Chandra Poojari, AM & George George K, JM
Citation - 719Taxpundit107
Appeal No. - I.T.A. No.158/Coch/2018
Asstt. Year - 2014-2015



This appeal filed by the assessee is directed against the order of the CIT(A), Trivandrum dated 21/02/2018 and pertains to assessment year 2014-15.

The assessee has also filed Stay Petition in S.P. No. 15/Coch/2018 seeking stay of outstanding demand as follows:

Tax Rs. 88,07,365/-
Interest Rs. 61,59,215/-
Total: Rs.1,49,66,580/-

2. The assessee has raised the following grounds of appeal:

A. The orders of the assessing officer as well as the appellate authority to the extent of objections made herein after, are against the facts and circumstances of the case under consideration and hence opposed to the provisions of law.

B. The issue regarding the entitlement of deduction under Section 80P with respect to a co-operative society which is classified as Primary Agricultural Credit Society is covered by M/s Chirakkal Service Co-operative Bank Ltd reported in 384 ITR 490 (Kerala High Court). Hence the decision is binding on the assessing authority as well as the first appellate authority.

C. The issue with respect to the tax on interest earned from the deposit maintained with District Co-operative Banks and Government Treasuries are covered by the decision of this Hon'ble Tribunal in the case of M/s Puthupally Village Service Co-operative Bank as per the order dated 31-10- 2016 in ITA No 279/Coch/2016. Hence the said decision is binding on the assessing authority as well as the appellate authority. Hence the estimation of income for Rs.23, 83, 514 is liable to be deleted.

D. It is settled law that eligibility for deduction/exemption cannot be overlooked on technical grounds, if the assessee otherwise proved its entitlement for the deduction/exemption. In the facts of the case under consideration the appellant is entitled for deduction under Section 80P but only on the technical, the deduction/exemption was denied, which is unreasonable and highly discriminatory.

E. The levy of interest under Section 234 A and 234B is also unsustainable as it is against the provisions of law and facts and circumstances of the case.

F. Section 80P clearly enables the co-operative society to claim gross total income and includes any income referred to in sub-section (2) as allowable deductions, As per clause (i) (a) of sub-section (2) a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is eligible for deduction. The claim of the appellant is fully justified going by the provision and decision rendered against the appellant is wholly unsustainable.

G. The estimation of income alleging deposit receipts are unexplained income taxable under Section 68 of the Income Tax Act, 1961 is highly unreasonable and illegal. Since the said receipts form part of the banking activities, it would come under the purview of deduction under Section 80P. It can be seen that the deposit register maintained by the appellant, as per the instructions from the Registrar of Co-operative Societies would reveal the details of income and the allegation that it is unexplained is highly vitiated and unreasonable.

3. Ground Nos. A, B and D were not pressed as they were general in nature and hence, they are dismissed as not pressed

4. Regarding Ground Nos. C and F the facts of the case are that the Assessing Officer brought to tax a sum of Rs.23,83,514/- rejecting the claim of deduction made under section 80P(2) while treating the same as income from other sources. It was seen that the assessee Society ad surplus funds which in turn weren deposited with the district co-operative bank and was in receipt of interest income amounting to Rs.23,83,514/- over the deposits made with. According to the Assessing Officer, the said amount of interest was liable to be taxed under the head income from other sources since the assessee Society had invested the surplus fund as an ordinary investor. It was further observed that interest income received from such deposits cannot be said to be attributable to the main

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