HIRA PREM MILAN CO-OP OPERATIVE HOUSING SOCIETY LTD , MUMBAI V. CIT APPEALS, MUMBAI

ITA 1309/MUM/2023

AI Insights

The case involves Hira Prem Milan Co-operative Housing Society Ltd, which appealed against the order of the Commissioner of Income-tax, National Faceless Appeal Centre, Delhi. The primary issues were the eligibility for deduction under section 80P(2)(d) for interest income and the taxability of income arising from surplus funds under the concept of mutuality. The CIT(A) had partly allowed the appeal, denying deduction for interest income from Co-operative Banks but allowing it under the mutuality concept for other incomes. The Tribunal found that further examination of the nature of the interest income was necessary to determine eligibility for deduction under section 80P(2)(d) and the applicability of the mutuality concept.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 108399 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 05-07-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 17-04-2023
• Other Referred Cases: PCIT vs Totagar's Co-operative Society ([2017] 83 taxmann.com 140 (Karnataka))
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 143(1); 80P

Judgement Text

1 ITA 1309/Mum/2023 Hira Prem Milan Co-op.Hsg Sty Ltd IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H”, MUMBAI BEFORE SHRI VIKAS AWASTHY (JUDICIAL MEMBER) AND MS. PADMAVATHY S. (ACCOUNTANT MEMBER) I.T.A. No.1309/Mum/2023 (Assessment year 2016-17) Hira Prem Milan Co-operative Housing Sociey Ltd Plot No/.563, 564, 28th Road, Khar West, Mumbai-400 052 PAN : AAAAH0832L vs CIT APPEALS National Faceless Appeal Centre Delhi APPELLANT RESPONDENT Assessee represented by Shri Haresh Hardhwani Department represented by Smt. Usha Gaikwad, SR. AR. Date of hearing 06-07-2023 Date of pronouncement 06 -07-2023 O R D E R PER : MS PADMAVATHY S. (AM) This appeal of the assessee is against the order of the Commissioner of Income- tax, National Faceless Appeal Centre, Delhi (in short, ‘the CIT(A)’) dated 09/09/2021 for A.Y. 2016-17. 2. The issues contended by the assessee through the grounds of appeal pertain to the assessee claiming deduction u/s.80P(2)(d) towards interest income and that the income arising out of surplus funds of the society is not taxable under the concept of mutuality. 2 ITA 1309/Mum/2023 Hira Prem Milan Co-op.Hsg Sty Ltd 3. The assessee is a co-operative housing society which is a mutual organization of its members. The assessee filed the return of income or the A.Y. 2016-17 declaring NIL income on 29/09/2016. The return was processed under section 143(1) whereby an adjustment of Rs.14,51,500/- was made under section 143(1)(d) which was claimed as a deduction under section 80P by the assessee in the return of income. Aggrieved, the assessee filed appeal before the CIT(A). The assessee submitted before the CIT(A) that the income earned by the assessee is exempt under concept of mutuality as well as under section 80P. The assessee further submitted that contributions from members are collected towards maintenance of the society's building and the amount accumulated in certain specific funds such as repair fund, sinking fund, etc are invested in bank deposits earning interest. The assessee accordingly claimed that the assessee is eligible for claiming deduction u/s.80P and also on the principle of mutuality the surplus cannot be taxed. The CIT(A) after considering the submissions of the assessee held that the interest income earned by the assessee to the tune of Rs.10,07,988/- is not eligible for deduction under section 80P(2)(d) since the same is earned from investments in Co- operative Banks and the CIT(A) in this regard relied on the decision of Karnataka High Court in the case of PCIT vs Totagar's Co-operative Society ([2017] 83 taxmann.com 140 (Karnataka)). However the CIT(A) allowed the claim towards the balance amount of Rs.4,43,508/- on the basis of mutuality concept. Aggrieved, assessee is in appeal before the Tribunal. 3. The Ld.AR submitted that the accumulated funds are kept in Banks which used as and when the expense arises especially major expenses like repairs to building, etc., and that there is no contribution from non-members whatsoever. The ld AR further submitted that the assessee is not carrying on any business activity and the members contribute not with an idea to trade, but with an idea of rendering mutual help. 3 ITA 1309/Mum/2023 Hira Prem Milan Co-op.Hsg Sty Ltd Therefore it was submitted that the receipt in their hands is not really the profit, as no man can make a profit out of himself, just as he cannot enter into a trade or business with himself. The ld AR argued that in every case in which it is claimed that any income or surplus is exempt from taxation on the ground that it is an income or surplus earned by a mutual concern, the following three conditions need to be scrutinized based on the facts and circumstances and the Assesses claiming an exemption of this nature must establish that i. the identity of contributors and recipients, ii. the instrumentality of the Assesses in the matter of carrying out the mandates of its members, and iii. the impossibility of the Assessees deriving any profit from contribution made to it. The ld AR drew our attention to the fact that similar issue existed in A.Y. 2010-11 wherein the Learned CIT (Appeals) has accepted assessee's contention. The Ld.AR also submitted that the intimation under section 143(1)(d) is without jurisdiction since the Assessing Officer has not informed the assessee about the proposed adjustment. However, the Bench during the course of hearing pointed out that in the intimation there is mention that communication in this regard was sent to the email id [e-mail] and the Ld.AR did present any further arguments on this count. 5. The Ld.DR relied on the order of the CIT(A). 6. We heard the parties and perused the material on record. The assessee is contending the additions on the ground of concept of mutuality as well as section 4 ITA 1309/Mum/2023 Hira Prem Milan Co-op.Hsg Sty Ltd 80P(2)(d). On perusal of records it is noticed that the contributions from members for the years under consideration is Rs.25,33,920/- and the interest income is Rs.10,07,988/-. The assessee against both these incomes has claimed a deduction of Rs.20,90,412/- which resulted in the surplus of Rs.14,51,497/-. The CIT(A) partly allowed the allowed the appeal where has denied the benefit of section 80P(2)(d) to the interest income earned by the assessee amounting to Rs. 10,07,988/- by relying on the decision of the Hon'ble Karnataka High Court in the case of Totagar's Co-operative Society(supra) and held that the interest income earned by the assessee from investment in Co-operative Banks are not eligible for deduction u/s.80P(2)(d). The CIT(A) allowed the claim for the balance amount under the Mutuality Concept. In the given case, the details of interest income have not be examined in detail as to whether the same is earned from investment in cooperative bank or cooperative society or any other bank which is very important for the reason that the coordinate bench of the Tribunal, has been consistently holding the view that the interest income derived by a co-operative society by way of investment made with a co-operative bank would be entitled to claim of deduction under section 80P(2)(d) of the Act. Further the alternate submission of the assessee that the surplus is not taxable under mutuality concept also needs to be factually examined. Therefore it is necessary for the lower authority to examine the nature of interest income for the purpose of deciding whether the same is to be exempt on the concept of mutuality and to decide whether the assessee is eligible for deduction under section 80P(2)(d). We, therefore, remit the issue back to the Assessing Officer with a direction to verify the nature of surplus and decide in accordance with law. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly. 5 ITA 1309/Mum/2023 Hira Prem Milan Co-op.Hsg Sty Ltd 7. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court at the time of hearing on 06/07/2023. Sd/- sd/- (VIKAS AWASTHI) (PADMAVATHY S) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 06 th July, 2023 Pavanan प्रतितिति अग्रेतििCopy of the Order forwarded to : 1. अिीिार्थी/The Appellant , 2. प्रतिवादी/ The Respondent. 3. आयकर आयुक्त CIT 4. तवभागीय प्रतितिति, आय.अिी.अति., मुबंई/DR, ITAT, Mumbai 6. गार्ड फाइि/Guard file. BY ORDER, //True Copy// Asstt. Registrar / Senior Private Secretary ITAT, Mumbai