Kottayam District Co-operative Bank Ltd. vs Commissioner of Income Tax

K.S. Paripoornan, J.—At the instance of the assessee, the Income Tax Appellate Tribunal has referred the following question of law for the decision of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee co-operative society is not entitled to claim exemption u/s 80P(2)(c) of the Income Tax Act, 1961, with regard to the income from letting out a portion of the building belonging to the assessee ?"

The respondent is the Revenue. We are concerned with the assessment year 1978-79. The previous year ended on June 30, 1977. The assessee derived income from letting out a part of the building owned by it, the other part being occupied by the assessee for its own business purposes. The Income Tax Officer initially allowed deduction of Rs. 20,000 u/s 80P(2)(c) of the Income Tax Act, 1961. The matter was taken up in suo motu revision by the Commissioner of Income Tax u/s 263 of the Income Tax Act. He held that the Income Tax Officer was wrong in allowing a sum of Rs. 20,000 as deduction u/s 80P(2)(c) of the Act. The assessee appealed to the Income Tax Appellate Tribunal from the order passed by the Commissioner of Income tax, dated December 18, 1980. The Appellate Tribunal held that the income from letting out a portion of the building was only income from house property and it could not be termed as profits and gains of an activity contemplated by Section 80P(2)(c) of the Act. It is thereafter at the instance of the assessee that the Income Tax Appellate Tribunal has referred the question of law formulated hereinabove for the decision of this court.

We heard counsel. A Bench of this court has, in Kottayam Co-operative Land Mortgage Bank Ltd. Vs. Commissioner of Income Tax, , held that the income derived by a co-operative society, engaged in the business of banking, by letting out the surplus space in the building owned and used by the society, is rental income, and the income thus received by the society cannot partake of the character of profits and gains attributable to an activity carried on by the society. Such income is income from property and is not entitled to exemption u/s 80P(2)(c) of the Act. The reasoning of the above decision squarely applies to this case as well.

In the light of the above Bench decision of this court, we are of the view that the Income Tax Appellate Tribunal was justified in holding that the assessee is not entitled to exemption u/s 80P(2)(c) of the Act with regard to the income derived by it by letting out a portion of the building owned by the society. We answer the question referred to this court in the affirmative, against the assessee and in favour of the Revenue,

A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.