RAYAT SAHKAARI PATPEDHI, MUMBAI V. ACIT 18 (3), MUMBAI

ITA 1130/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4555 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATI
• Keywords: Business income; Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1130/M/2019 ASSESSMENT YEAR: 2014-15 M/S. RAYAT SAHKAARI PATPEDHI, OFFICE NO.115, 1STS FLOOR, AP MARKET, SS GATAKWAD MARG, DHOBI TALAO, MUMBAI 400 002 PAN: AAAAR7082G VS. ACIT 18(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI R. BHOOPATI, SR. D.R. DATE OF HEARING : 11.02.2020 DATE OF PRONOUNCEMENT : 18.02.2020 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 20.12.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2014-15. 2. DURING THE COURSE OF HEARING, NEITHER ASSESSEE N OR HIS AUTHORIZED REPRESENTATIVE APPEARED TO ATTEND THE HE ARING NOR ANY APPLICATION SEEKING ADJOURNMENT WAS FILED. THER EFORE , WE ARE DISPOSING OFF THE APPEAL AFTER HEARING THE LD. D.R. AND GOING THROUGH THE FACTS OF THE CASE. 3. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINS T THE ORDER OF LD. CIT(A) CONFIRMING THE ORDER OF AO WHEREIN THE A O HAS ITA NO.1130/M/2019 M/S. RAYAT SAHKAARI PATPEDHI 2 DISALLOWED THE CLAIM UNDER SECTION 80P(2)(D) TO THE TUNE OF RS.3,88,522/- BEING INTEREST RECEIVED FROM THE CO-O PERATIVE BANK. 4. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAS EARN ED INTEREST OF RS.3,88,522/- FROM SARASWAT CO-OPERATIVE BANK LT D. AND CLAIMED THE SAME AS EXEMPT UNDER SECTION 80P(2)(D) OF THE ACT. ACCORDING TO THE AO, THE SAID INTEREST IS NOT ELIGI BLE TO BE COVERED UNDER SECTION 80P(2)(D) OF THE ACT AS THE I NCOME BY WAY OF DIVIDEND OR INTEREST EARNED FROM INVESTMENTS IN ANOTHER CO- OPERATIVE SOCIETY IS COVERED UNDER THE PROVISIONS O F SECTION 80P(2)(D) AND NOT FROM THE COOPERATIVE BANK . FINA LLY, THE AO REJECTED THE CLAIM OF THE ASSESSEE AND BROUGHT TO TAX THE SAID INTEREST INCOME OF RS.3,88,522/-. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DIS MISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT CO-OPERATIVE BANK IS A COMMERCIAL AND DOES NOT FALL UNDER THE PURVIEW OF C O-OPERATIVE SOCIETY AS REFERRED TO IN SECTION 80P(2)(D) OF THE ACT AND THUS DISMISSED THE APPEAL OF THE ASSESSEE. 6. AFTER HEARING THE LD. D.R. AND PERUSING THE MATE RIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE LD. CIT(A) HAS UPHELD THE ORDER OF THE AO WHEREIN THE AO HAS REJECTED THE CLAIM OF RS.3,88,522/- UNDER SECTION 80P(2)(D) ON THE GROUND THAT SARASWAT CO-OPERATIVE BANK LTD. IS NOT A COOPERATIV E SOCIETY AND THEREFORE THE EXEMPTION CAN NOT BE ALLOWED. LD. CI T(A) HELD THAT THE CO-OPERATIVE BANK IS A COMMERCIAL BANK AND THER EFORE JUSTIFIED THE ORDER OF AO. HOWEVER, IN THE PRESENT CASE, THE ISSUE ITA NO.1130/M/2019 M/S. RAYAT SAHKAARI PATPEDHI 3 IS SETTLED BY THE VARIOUS JUDICIAL FORUMS WHEREIN I T HAS BEEN HELD THAT COOPERATIVE BANK IS A COOPERATIVE SOCIETY AND ANY INTEREST INCOME ACCRUING TO THE COOPERATIVE SOCIETY IS ELIGI BLE FOR DEDUCTION UNDER SECTION 80P(2)(D). THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF M/S. LANDS END COOP. HOUSING SOCIETY LTD. VS I.T.O. ITA NO.3566/MUM/2014 ASSESSMENT YEAR 2009-10 ORDER DATE D 15.1.2016. THE OPERATIVE PART IS REPRODUCED AS UNDE R:- 8.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE FIND THAT THE CIT(A) ENHANCED THE INCOME OF THE ASS ESSEE BY REJECTING THE DEDUCTION U/S 80P(2)(D) OF THE ACT OF RS.14,88,107/- BEING IN TEREST ON INVESTMENT WITH OTHER COOP. BANKS BY FOLLOWING THE DECISION IN THE CASE O F BANDRA SAMRUDDIHI CO- OPERATIVE HOUSING SOCIETY LTD.(SUPRA) WHICH WAS PAS SED ON THE BASIS OF THE DECISION PASSED BY THE HONBLE SUPREME COURT IN THE CASE OF TOTAGARS CO-OPERATIVE SALE SOCIETY LTD. IN THE CASE OF TOTAGARS CO-OPERATIVE SALE SOCIETY LTD V/S ITAT (SUPRA) THE HONBLE SUPREME COURT WHILE INTERPRETING THE SE CTION 80P(2)(A)(I) OF THE ACT HELD THAT SURPLUS FUNDS NOT IMMEDIATELY REQUIRED IN THE BUSINESS AND INVESTED IN THE SHORT TERM DEPOSIT WOULD BE ASSESSABLE UNDER TH E HEAD INCOME FROM OTHER SOURCES WHERE THE COOPERATIVE SOCIETY IS ENGAGED I N CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS AND CONSEQUENTLY NO DEDUCTION IS ALLOWABLE U/S 80P(2)(A)(I) OF THE ACT. WHEREAS I N THE CASE BEFORE US THE ISSUE IS WHETHER A CO-OPERATIVE SOCIETY WHICH HAS DERIVED IN COME ON INVESTMENT WITH COOPERATIVE BANKS IS ENTITLED TO DEDUCTION U/S 80P( 2)(D). THE PROVISIONS OF SECTION 80P(2)(D) OF THE ACT PROVIDE DEDUCTION IN RESPECT O F INCOME BY WAY OF INTEREST OR DIVIDEND ON INVESTMENTS MADE WITH OTHER COOPERATIVE SOCIETY. FOR THE PURPOSES OF BETTER PROPER UNDERSTANDING OF THESE TWO PROVISIONS THE RELEVANT EXTRACT OF THE SECTION ARE REPRODUCED BELOW: 80P: DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES. 1. WHERE, IN THE CASE OF AN ASSESSSEE BEING A CO-OP ERATIVE SOCIETY, THE GROSS TOTAL INCOME, INCLUDES ANY INCOME REFERRED TO IN SU B-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 2. THE SUMS REFERRED TO IN SUB-SEC TION (1) SHALL BE THE FOLLOWING, NAMELY:- (A)IN THE CASE OF A CO-OPERATIV E SOCIETY ENGAGED IN- (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CR EDIT FACILITIES TO ITS MEMBERS. THE WHOLE OF THE AMOUNT OF PROFITS AND GAI NS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF MUCH ATTRIBUTES. (D)IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY T HE CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SO CIETY, THE WHOLE OF SUCH INCOME. ITA NO.1130/M/2019 M/S. RAYAT SAHKAARI PATPEDHI 4 FROM THE CLOSE PERUSAL OF THE PROVISIONS OF U/S 80P (2)(A)(I) AND 80P(2)(D) IT IS CLEAR THAT THE FORMER DEALS WITH DEDUCTION IN RESPE CT OF PROFITS AND GAIN OF BUSINESS IN CASE OF THE CO-OPERATIVE SOCIETY CARRYING ON BUS INESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IF THE SAID INCOME IS ASSESSABLE AS INCOME FROM BUSINESS WHEREAS LATTER PROVIDES FOR DEDUCTION IN R ESPECT OF INCOME BY WAY INTEREST AND DIVIDEND DERIVED BY ASSESSEE FROM ITS INVESTMEN TS WITH OTHER COOPERATIVE SOCIETY. THUS IT IS AMPLY CLEAR THAT A COOPERATIVE SOCIETY CAN ONLY AVAIL DEDUCTION U/S 80P(2)(D)(I) IN RESPECT OF ITS INCOME ASSESSABL E AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES IF IT CARRIES ON BUSINESS OF THE BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HAS INCOME ASS ESSABLE UNDER THE HEAD BUSINESS WHEREAS FOR CLAIMING U/S 80P(2)(D) IT MUST HAVE INC OME OF INTEREST AND DIVIDEND ON INVESTMENTS WITH OTHER CO-OPERATIVE SOCIETY MAY OR MAY NOT BE ENGAGED IN THE BANKING FOR PROVIDING CREDIT FACILITIES TO ITS MEMB ERS AND THE HEAD UNDER WHICH THE INCOME IS ASSESSABLE IS NOT MATERIAL FOR THE CLAIM OF DEDUCTION UNDER THIS SECTION. NOW WILL EVALUATE THE ASSESSEES CASE IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT. THE HONBLE SUPREME COURT IN THE CASE OF TOTAGARS CO-OPERATIVE SALE SOCIETY LTD.(SUPRA) HELD THAT A SOCIETY HAS SU RPLUS FUNDS WHICH ARE INVESTED IN SHORT TERM DEPOSITS WHERE THE SOCIETY IS ENGAGED IN THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IN THAT CASE THE SAID INCOME FROM SHORT TERM DEPOSITS SHALL BE TREATED AND ASSESSED AS INCO ME FROM OTHER SOURCES AND DEDUCTION U/S 80(P)(2)(A)(I) WOULD NOT BE AVAILABLE MEANING THEREBY THAT DEDUCTION U/S 80(P)(2)(A)(I) IS AVAILABLE ONLY IN RESPECT OF INCOME WHICH IS ASSESSABLE AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCE S. WHEREAS IN DISTINCTION TO THIS , THE PROVISIONS OF SECTION 80(P)(2)(D) OF THE ACT PROVIDES FOR DEDUCTION IN RESPECT OF INCOME OF A COOP SOCIETY BY WAY OF INTER EST OR DIVIDEND FROM ITS INVESTMENTS WITH OTHER COOP SOCIETY IF SUCH INCOME IS INCLUDED IN THE GROSS TOTAL INCOME OF THE SUCH COOP SOCIETY. IN VIEW THESE FACT S AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED T O THE DEDUCTION OF RS. 14,88,107/- IN RESPECT OF INTEREST RECEIVED/DERIVED BY IT ON DEPOSITS WITH COOP. BANKS AND THEREFORE THE APPEAL OF THE ASSESSEE IS ALLOWED BY REVERSING THE ORDER OF THE CIT(A). THE AO IS DIRECTED ACCORDINGLY. CONSIDERING THE FACTS OF THE CASE OF THE ASSESSEE IN THE LIGHT OF COORDINATE BENCH DECISION AS REFERRED TO ABOVE, WE ARE INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.02.2020. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18.02.2020. * KISHORE, SR. P.S. ITA NO.1130/M/2019 M/S. RAYAT SAHKAARI PATPEDHI 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.