SEA GREAN CO OPERATOVE HOUSING SOCIETY LTD, MUMBAI V. ITO 21(3)(2), MUMBAI

ITA 1343/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7834 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.1343/MUM/2017 (AY. 2013-14) M/S. SEA GREAN GO-OPERATIVE HOUSING SOCIETY LTD.,PLOT NO.CD-74 RSC 25, 7/15, WORLI SEA FACE, MUMBAI 400 012 ...... APPELLANT VS. THE INCOME TAX OFFICER 21(3)(2), ROOM NO.203, 2 ND FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400012. .... RESPONDENT APPELLANT BY : SHRI BIREN GABHAW ALA RESPONDENT BY : SHRI A.K.NAYAK DATE OF HEARING : 30/03/2017 DATE OF PRONOUNCEMENT : 31/03/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2013-14 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-33,MUMBAI DATED 10/02/2017, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961(IN SHORT THE ACT), DATED 18/01/2016. 2. THE GROUND OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE A ND IN LAW, THE HON. CIT(A) HAS ERRED IN UPHOLDING THAT THE APPELLANT IS NOT ELIGIB LE FOR DEDUCTION U/S. SOP(2)(D) OF 2 ITA NO.1343/MUM/2017 (AY. 2013-14) THE I.T.ACT,1961 AT RS.27,41,747/- RELYING ON THE D ECISIONS OF THE HON. ITAT, AHMEDABAD IN THE CASE OF SBI EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD. (2015) 57 TAXMAN.COM 367 AND THE HON. ITAT, MUMBAI BENCH IN T HE CASE OF SHRI SAIDATTA COOPERATIVE CREDIT SOCIETY LTD. VS. ITO IN ITA NO.2 379/MUM/2015 WITHOUT APPRECIATING THAT THE HON. ITAT, A- BENCH, MUMBAI I N THE CASE OF LANDS END COOPERATIVE HOUSING SOCIETY LTD. IN ITA NO.3566MUM/ 2014, WHEREIN ON AN IDENTICAL ISSUE I.E. CLAIM OF DEDUCTION U/S.SOP(2)( D) OF THE ACT IN RESPECT OF INTEREST ON FIXED DEPOSIT WITH COOPERATIVE BANKS WAS INVOLVE D, HAS HELD THAT THE ASSESSE IS ENTITLED TO THE DEDUCTION FOR INTEREST DERIVED BY I T ON DEPOSITS WITH COOPERATIVE BANKS.' 2.1 BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE AP PELLANT IS A CO-OPERATIVE HOUSING SOCIETY, WHICH HAD, INTER-ALIA, EARNED AN I NTEREST INCOME OF RS.27,41,747/-,ON WHICH DEDUCTION UNDER SECTION80P OF THE ACT WAS DENIED. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID INTERES T IS EARNED ON DEPOSITS WITH A CO-OPERATIVE BANK AND, THEREFORE, IT WAS ELI GIBLE FOR THE BENEFITS OF SECTION 80P(2)(D) OF THE ACT. THE ASSESSING OFFICE R AS WELL AS CIT(A) HOWEVER, DENIED THE EXEMPTION ON THE GROUND THAT TH E PROVISIONS OF SECTION 80P(2)(D) OF THE ACT RESTRICT THE EXEMPTION TO THE INTEREST EARNED FROM ANY OTHER CO-OPERATIVE SOCIETY, WHEREAS THE IMPUGNED I NTEREST INCOME WAS EARNED FROM A CO-OPERATIVE BANK. 3. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE CLAIM OF EXEMPTION HAS BEEN DENIED BY THE LOWER AUT HORITIES ON A WRONG BASIS INASMUCH AS EVEN INTEREST EARNED FROM A CO-OP ERATIVE BANK IS COVERED WITHIN THE SCOPE OF SECTION 80P(2)(D)OF THE ACT, BE CAUSE EVEN A CO-OPERATIVE BANK IS ESSENTIALLY A CO-OPERATIVE SOCIETY. IN THIS CONTEXT, HE HAS RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF LANDS END CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO IN ITA NO.2379/MUM/201 5 DATED 15/01/2016, WHEREIN INTEREST EARNED BY A CO-OPERATIVE HOUSING S OCIETY ON INVESTMENT WITH A CO-OPERATIVE BANK HAS BEEN HELD TO BE ELIGIB LE FOR EXEMPTION UNDER SECTION80P(2)(D) OF THE ACT . BY REFERRING TO THE DISCUSSION MADE BY THE 3 ITA NO.1343/MUM/2017 (AY. 2013-14) TRIBUNAL, THE LD. REPRESENTATIVE FOR THE ASSESSEE P OINTED OUT THAT EVEN THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F TOTAGARS CO- OPERATIVE SALES SOCIETY LTD. VS. ITO,322ITR 283(SC) HAS BEEN CONSIDERED. 4. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE POINTED OUT THAT THE DECISION OF THE SMC BENCH OF MUMBAI TRIBUNAL IN THE CASE OF SHRI SAIDATTA COOPERATIVE CREDIT SOCIETY LTD. VS.ITO IN ITA NO. 2379/MUM/2015DATED 15/1/2016(SUPRA)IS TO THE CONTRA RY AND, THEREFORE, THE CIT(A) WAS JUSTIFIED IN DENYING THE CLAIM FOR E XEMPTION UNDER SECTION 80P(2)(D) OF THE ACT. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE FACTS LIE IN A NARROW COMPASS, INASMUCH AS, THE APPELLANT IS A CO- OPERATIVE SOCIETY, WHOSE INCOME , INTER-ALIA, INCLUDED INTEREST EARNED ON DE POSITS WITH ANOTHER CO- OPERATIVE BANK. ACCORDINGLY, SUCH INCOME WAS CLAIM ED AS EXEMPT UNDER SECTION 80P(2)(D) OF THE ACT. THE CLAIM HAS BEEN D ENIED PRIMARILY ON ACCOUNT OF THE FACT THAT SECTION 80P(2)(D) OF THE ACT RELAT ES TO THE INCOME EARNED FROM A CO-OPERATIVE SOCIETY. IN THIS CONTEXT, THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF LANDS END CO-OPERATIVE HOUS ING SOCIETY LTD. (SUPRA) IS RENDERED UNDER IDENTICAL CIRCUMSTANCES AND THE F OLLOWING DISCUSSION IS RELEVANT:- 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 INTEREST ON INVESTMENT WITH OTHER COOP. BANKS BY FOLLOWING THE DECISION IN THE CASE OF BANDRA SAMRUDDIHI CO-OPERATIVE HOUSING SOCIETY LTD.(SUPRA) WHICH WAS PASSED 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 TOTAGAR S CO-OPERATIVE SALE SOCIETY LTD V/S ITAT (SUPRA) THE HONBLE SUPREME COURT WHILE IN TERPRETING THE SECTION 80P(2)(A)(I) OF THE ACT HELD THAT SURPLUS FUNDS NOT IMMEDIATELY REQUIRED IN THE BUSINESS AND INVESTED IN THE SHORT TERM DEPOSIT WOU LD BE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHERE THE COOPERAT IVE SOCIETY IS ENGAGED IN 4 ITA NO.1343/MUM/2017 (AY. 2013-14) CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND CONSEQUENTLY NO DEDUCTION IS ALLOWABLE U/S 80P(2)(A )(I) OF THE ACT. WHEREAS IN THE CASE BEFORE US THE ISSUE IS WHETHER A CO-OPERATIVE SOCIETY WHICH HAS DERIVED INCOME ON INVESTMENT WITH COOPERATIVE BANKS IS ENTI TLED TO DEDUCTION U/S 80P(2)(D). THE PROVISIONS OF SECTION 80P(2)(D) OF T HE ACT PROVIDE DEDUCTION IN RESPECT OF INCOME BY WAY OF INTEREST OR DIVIDEND ON INVESTMENTS MADE WITH OTHER COOPERATIVE SOCIETY. FOR THE PURPOSES OF BETTER PRO PER UNDERSTANDING OF THESE TWO PROVISIONS THE RELEVANT EXTRACT OF THE SECTION ARE REPRODUCED BELOW: 80P: DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCI ETIES. 1. WHERE, IN THE CASE OF AN ASSESSSEE BEING A CO-OP ERATIVE SOCIETY, THE GROSS TOTAL INCOME, INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT T O 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-SECTION (1) SHALL B E THE FOLLOWING, NAMELY:- (A)IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN - (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS. THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BU SINESS ATTRIBUTABLE TO ANY ONE OR MORE OF MUCH ATTRIBUTES. (D)IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME. 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 RESPECT OF PROFITS AND GAIN OF BUSINESS IN CASE OF THE CO-OPERATIVE SOCIETY CARRYING ON BUSINE SS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IF THE SAID INCOME IS ASS ESSABLE AS INCOME FROM BUSINESS WHEREAS LATTER PROVIDES FOR DEDUCTION IN RESPECT OF INCOME BY WAY INTEREST AND DIVIDEND DERIVED BY ASSESSEE FROM ITS INVESTMENTS W ITH OTHER COOPERATIVE SOCIETY. THUS IT IS AMPLY CLEAR THAT A COOPERATIVE SOCIETY C AN ONLY AVAIL DEDUCTION U/S 80P(2)(D)(I) IN RESPECT OF ITS INCOME ASSESSABLE 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 A SSESSABLE UNDER THE HEAD BUSINESS WHEREAS FOR CLAIMING U/S 80P(2)(D) IT MUST HAVE INCOME OF INTEREST AND DIVIDEND ON INVESTMENTS WITH OTHER CO-OPERATIVE SOC IETY MAY OR MAY NOT BE ENGAGED IN THE BANKING FOR PROVIDING CREDIT FACILIT IES TO ITS MEMBERS AND THE HEAD UNDER WHICH THE INCOME IS ASSESSABLE IS NOT MATERIA L FOR THE CLAIM OF DEDUCTION UNDER THIS SECTION. NOW WILL EVALUATE THE ASSESSEE S CASE IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT. THE HONBLE SUPREME CO URT IN THE CASE OF TOTAGARS CO-OPERATIVE SALE SOCIETY LTD.(SUPRA) HELD THAT A S OCIETY HAS SURPLUS FUNDS WHICH ARE INVESTED IN SHORT TERM DEPOSITS WHERE THE SOCIE TY IS ENGAGED IN THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS IN THAT CASE THE SAID INCOME 5 ITA NO.1343/MUM/2017 (AY. 2013-14) FROM SHORT TERM DEPOSITS SHALL BE TREATED AND ASSES SED AS INCOME 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 FRO M OTHER SOURCES. 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 INTEREST OR DIVIDEND FROM ITS INVESTMENTS WITH OTHER COOP SOCIETY IF SUC H INCOME IS INCLUDED IN THE GROSS TOTAL INCOME OF THE SUCH COOP SOCIETY. IN VIEW THES E FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENT ITLED TO 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. 5.1 IT IS CLEAR THAT THE TRIBUNAL IN THE CASE OF L ANDS END CO-OPERATIVE HOUSING SOCIETY LTD. (SUPRA) HAS CONSIDERED A SIMI LAR SITUATION AND ALLOWED THE CLAIM OF THE ASSESSEE. WE FIND THAT THE CIT(A) HAS PLACED RELIANCE ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LTD 57 TAXMAN.COM 367. IT IS FURTHER NOTED BY THE CIT(A) THAT THE SAID DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL HAS BEEN REFERRED TO BY THE SMC BEN CH OF MUMBAI TRIBUNAL IN THE CASE OF SHRI SAIDATTA COOPERATIVE CREDIT SO CIETY LTD. (SUPRA). IN OUR VIEW, THE RELIANCE PLACED BY THE CIT(A) ON THE JUD GMENT OF THE AHMEDABAD BENCH OF THE TRIBUNAL IS QUITE UNTENABLE, INASMUCH AS, IN THE SAID CASE THE INTEREST INCOME IN QUESTION WAS EARNED FROM DEPOSIT S KEPT WITH STATE BANK OF INDIA. OBVIOUSLY, STATE BANK OF INDIA IS NOT A CO-OPERATIVE SOCIETY SO AS TO JUSTIFY THE CLAIM THAT SUCH INTEREST EARNINGS FA LL WITHIN THE SCOPE OF SECTION 80P(2)(D) OF THE ACT. FURTHER, THE RELIANCE PLACED BY THE CIT(A) ON THE DECISION OF THE SMC BENCH OF MUMBAI TRIBUNAL IN THE CASE OF SHRI SAIDATTA COOPERATIVE CREDIT SOCIETY LTD.(SUPRA) IS ALSO OF NO AVAIL, INASMUCH AS, THE BENCH MERELY SET-ASIDE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER FOR EXAMINATION AFRESH, WHEREAS IN THE CASE OF LANDS E ND CO-OPERATIVE HOUSING SOCIETY LTD(SUPRA), THE CLAIM OF EXEMPTION UNDER SE CTION 80P(2)(D) OF THE ACT 6 ITA NO.1343/MUM/2017 (AY. 2013-14) WITH RESPECT TO THE INTEREST EARNED FROM A CO-OPERA TIVE BANK HAS BEEN UPHELD. THEREFORE, IN VIEW OF THE SAID PRECEDENT, THE CLAIM OF THE ASSESSEE DESERVES TO BE ALLOWED. WE HOLD SO. 6. IN VIEW OF THE ABOVE, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION UN DER SECTION 80P(2)(D) OF THE ACT WITH RESPECT TO THE INTEREST INCOME EARNED FROM A CO-OPERATIVE BANK. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/2017 SD/- SD/- (AMARJIT SINGH ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 31/03/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI