ACIT, CIRCLE-32(1), MUMBAI V. THE MAROL CO-OPERATIVE INDUSTRIAL ESTATE LTD, MUMBAI

MA 82/MUM/2024

AI Insights

The case revolves around the Revenue Department's challenge to the Tribunal's earlier decision allowing a deduction for interest/dividend income earned from cooperative banks under section 80P(2)(d) of the Income Tax Act. The Revenue contended that the facts of the current case, involving a cooperative housing society, differed from those in the Pathare Prabhu Cooperative Housing Society Ltd. case, which had set a precedent. However, the Tribunal, referencing various judgments and the specific provisions of the Act, upheld the deduction, emphasizing that the cooperative society's income from investments in cooperative banks qualifies for deduction under section 80P(2)(d).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781701 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 30-03-2024
• Other Referred Cases: Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO, Mavilayi Services Co-operative Bank Ltd. vs. CIT, Pr. CIT vs. Totagars Co-operative Sale Society, CIT vs. Vegetable Products Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI; LD.; WAY OF THIS MISCELLANEOUS
• Keywords: Set aside; Business income

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) Assessment Year: 2017-18 Asst. Commissioner of Income Tax, Circle 25(1), Mumbai Vs. M/s. The Marol Co- operative Industrial Estate Limited, Marol Bhavan, Mathurdas Vasanji Road, J.B. Nagar, Andheri (E), Mumbai – 400 059 PAN: AAAAT0060A (Appellant) (Respondent) Present for: Assessee by : None Revenue by : Shri Leyaqat Ali Aafaqui, Ld. Sr. D.R. Date of Hearing : 25.07.2025 Date of Pronouncement : 30.09.2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This miscellaneous application has been preferred by the Revenue Department against the order dated 13.09.2023 passed by the Tribunal in ITA No.2027/M/2023. 2. Though the Revenue has not filed proper application which is under consideration and therefore needs no adjudication, however in the interest of justice, this Court is inclined to decide the controversy raised by the Revenue by way of this miscellaneous application which is emanated from the order dated 13.09.2023 passed by the Tribunal in ITA No.2027/M/2023, whereby the Hon’ble Tribunal by considering various judgments including by the Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 2 Tribunal specifically in the case of Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO (ITA No.1346 & 1347/M/2023 decided on 27.07.2023) (2023) 153 taxmann.com 714 (Mum. – Trib.) wherein the issue whether the interest/dividend income earned from co-operative bank is allowable as deduction u/s 80P(2)(d) of the Act or not, was considered and ultimately answered in affirmative by allowing the identical deduction claimed by the Assessee on account of interest/dividend income earned from co- operative bank u/s 80P(2)(d) of the Act. The co-ordinate Bench of the Tribunal in the aforesaid case, before coming to the conclusion, also analyzed the various provisions of the Act relevant to the issue as well as various judgments of the Hon’ble Apex Court and the Hon’ble High Courts respectively in the case of Mavilayi Services Co-operative Bank Ltd. vs. CIT (2021) 123 taxmann.com 1430/395, Pr. CIT vs. Totagars Co- operative Sale Society (2017) 78 taxmann.com 169/392, Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 392 ITR 74 (Karn.) and CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 and thus respectfully following the said judgments, the SMC Bench allowed the identical claim u/s 80P(2)(d) of the Act, vide impugned order dated 30.10.2023 in ITA Nos.2027/M/2023, which is sought to be rectified. 3. The Revenue, being aggrieved, preferred the instant miscellaneous application mainly on the reason that since the two Totgar’s Co-operative Sale Society cases considered therein, have been decided on different questions of law, and the Hon’ble ITAT has wrongly relied on Pathare Prabhu Co-operative Housing Society Ltd. (supra), therefore the decision of the Hon’ble ITAT, needs to be rectified on following ground: \"Since the assessee in the current case is a co-operative housing society unlike Totagars Cooperative Sale Society which was in the business of providing credit facilities to its members, the facts Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 3 are different. Therefore, the interest earned on deposit of surplus funds by the assessee in current case is not its' business income and therefore deduction under Sec.80P(2)(d) is not allowed irrespective of whether the deposits were kept with cooperative banks or co-operative society\". 4. The Ld. D.R. supported the aforesaid ground and relied on the orders passed by the authorities below. 5. Heard the Ld. D.R. and perused the material available on record. As it is observed above that Hon’ble Co-ordinate Bench of the Tribunal in Pathare Prabhu Co-operative Housing Society Ltd. (supra) has elaborately discussed various relevant provisions of law, as well as both the decisions rendered by the Hon’ble Karnataka High Court in the case of Pr. CIT vs. Totgar’s Co-operative Sale Society (2017) 395 ITR 611 (Krn.) and Pr.CIT vs. Totgar’s Co- operative Sale Society (2017) 392 ITR 74 (Kar) and the judgment passed by the Hon’ble Apex Court in the case of CIT Vs. Vegetable Products Ltd. (supra) to the effect “if two reasonable constructions of a taxing provision are possible, that construction which favours the Assessee must be adopted. For clarity and brevity, the conclusion drawn by the Hon’ble co-ordinate Bench of the Tribunal is reproduced herein below: “8. We have considered the submissions of both sides and perused the material available on record. The only dispute raised by the assessee is against the disallowance of deduction under section 80P(2)(d) of the Act in respect of interest income received from the Co-operative Banks. The assessee is a registered Co- operative Housing Society and during the assessment year 2018- 19 earned interest income of Rs. 50,39,861 from the investments made in various Co-operative Banks. 9. Before proceeding further, it is relevant to note the provisions of section 80P of the Act under which the assessee has claimed the deduction in the present case. As per the provisions of section 80P(1) of the Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an assessee being a Co-operative Society. Further, section 80P(2)(d) of the Act, reads as under: Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 4 “80P. Deduction in respect of income of co-operative societies. (1) ...... (2) The sums referred to in sub-section (1) shall be the following, namely:– (a) ..... (b) ..... (c) ..... (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income;” 10. Thus, for the purpose of provisions of section 80P(2)(d) of the Act, two conditions are required to be cumulatively satisfied- (i) income by way of interest or dividend is earned by the Co- operative Society from the investments, and (ii) such investments should be with any other Co-operative Society. Further, the term „co-operative society‟ is defined under section 2(19) of the Act as under: “(19) \"co-operative society\" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ; 11. In the present case, there is no dispute that the assessee is a CoOperative Housing Society. Thus, if any income as referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as a deduction. It is pertinent to note that since the assessee is registered under the Maharashtra Co-operative Societies Act, 1960, it is required to invest or deposit its funds in one of the modes provided in section 70 of the aforesaid Act, which includes investment or deposit of funds in the District Central Co-operative Bank or the State Cooperative Bank. Accordingly, the assessee kept the deposits in Co-operative Banks registered under the Maharashtra Co-operative Societies Act and earned interest, which was claimed as a deduction under section 80P(2)(d) of the Act. The AO denied the deduction under section 80P(2)(d) of the Act on the basis that the Co-operative Bank is covered under the provisions of section 80P(4) of the Act. We find that the Hon‟ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. vs CIT, Calicut, [2021] 431 ITR 1 (SC) while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Cooperative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. The Hon’ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 5 function at par with other commercial banks i.e. which lend money to members of the public. Thus, we are of the considered view that section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction under section 80P of the Act which is not the facts of the present case. Therefore, we find no merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the assessee. 12. As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) of the Act. In Kaliandas Udyog Bhavan Premises Coop Society Ltd vs ITO, in ITA No. 6547/ Mum./2017, vide order dated 25/04/2018, while dealing with the provisions of section 80P(2)(d) vis-à-vis section 80P(4) of the Act, the coordinate bench of the Tribunal observed as under: “7. ……Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a cooperative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co- operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other cooperative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 6 term 'co-operative society' had been defined under Sec. 2(19) of the Act, as under: '(19) \"Co-operative society\" means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;' We are of the considered view, that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a co-operative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.” 13. We find that the learned CIT(A) has placed reliance upon the decision of the Hon’ble Karnataka High Court in Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 395 ITR 611 (Karn.), wherein it was held that interest earned by the assessee, a Co-operative Society, from surplus deposits kept with a Cooperative Bank, was not eligible for deduction under section 80P(2)(d) of the Act. We find that in an earlier decision the Hon’ble Karnataka High Court in Pr.CIT v/s Totagars Co- operative Sales Society, [2017] 392 ITR 74 (Karn.) held that according to section 80P(2)(d) of the Act, the amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Thus, there are divergent views of the same Hon‟ble High Court on the issue of eligibility of deduction under section 80P(2)(d) of the Act in respect of interest earned from Co-operative Bank. No decision of the Hon‟ble jurisdictional High Court was brought to our notice on this aspect. We have to, with our highest respect to both the views of the Hon'ble High Court, adopt an objective criterion for deciding as to which decision of the Hon'ble High Court should be followed by us. We find guidance from the judgment of the Hon'ble Supreme Court in CIT v. Vegetable Products Ltd., [1972] 88 ITR 192. In the aforesaid decision, the Hon'ble Supreme Court has laid down a principle that \"if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted\". Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 7 14. Therefore, in view of the above, we uphold the plea of the assessee and direct the AO to grant the deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with Cooperative Banks. Accordingly, we set aside the impugned order passed by the learned CIT(A) for the assessment year 2018-19. As a result, grounds raised by the assessee are allowed.” (Highlighted for clarity) 6. On the aforesaid facts and circumstances, it goes to show that the Hon’ble Tribunal in the order dated 13.09.2023 passed in ITA No.2027/M/2023, has thus rightly followed the decision of the Hon’ble co-ordinate Bench of the Tribunal in Pathare Prabhu Co- operative Housing Society Ltd. case (supra) and therefore the impugned order does not require any interference, as the same is neither suffering from any perversity and impropriety nor illegality, and therefore there is no mistake as such is apparent from record. 7. In the result, the miscellaneous application filed by the Revenue Department stands dismissed. Order pronounced in the open court on 30.09.2025. Sd/- Sd/- (NARENDRA KUMAR BILLAIYA) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Printed from counselvise.com MA No.82/M/2024 (Arising out of ITA No.2027/M/2023) M/s. The Marol Co-operative Industrial Estate Limited 8 Dy/Asstt. Registrar, ITAT, Mumbai. Printed from counselvise.com "