HORIZON CO OP HOUSING SOC. LTD, MUMBAI V. ITO 21(1)(4), MUMBAI

ITA 1760/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9888 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Opportunity of being heard
• Section: 143(3); 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO.1760/MUM/2017 ASSESSMENT YEAR: 2013 - 14 HORIZON CO. OP. HOUSING SOCIETY LTD. 1, HORIZON SOCIETY, S.K. AHIRE MARG, DOORDARSHAN, WORLI, MUMBAI - 400018. VS. INCOME TAX OFFICER - 21(1)(4), PIRAMAL CHAMBERS, LALBAUG PAREL, MUMBAI. PAN NO. AA AAH1685F (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. JAY BHANSALI , AR REVENUE BY: MR. M.C. OMI NINGSHEN, DR DATE OF HEARING : 20/04/2017 DATE OF PRONOUNCEMENT : 14/07/2017 ORDER PER N.K. PRADHAN, A.M THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2013 - 14 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 33 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). ITA NO. 1760/MUM/2017 2 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: - 1. THE LD. CIT(A) ERRED I N LAW AND FACTS IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION OF INTEREST ON DEPOSITS WITH CO - OPERATIVE BANKS (CO - OPERATIVE SOCIETY) OF RS.1,23,30,631/ - U/S 80P(2)(D) OF THE ACT. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF THE CASE AND PROVISIONS OF LAW. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF CLAIM U/S 80P(2)(D) OF INTEREST RECEIVED BY THE ASSESSEE ( C O - OP. S OCIETY) FROM ANOTHER CO - OP. SOCIETY ( C O - OP. B ANK) ON THE BASIS OF IRRELEVANT CASE LAWS AND DECISION S IN THE CASE OF SBI EMPLOYEES CO - OP. CREDIT SOCIETY LTD. AND SAIDATTA CO - OP. CREDIT SOCIETY LTD (REMANDED). 3. THE LD. CIT(A)/ AO ERRED IN LAW AND FACTS IN HOLDING THAT CO - OPERATIVE BANKS ARE NOT CO - OPERATIVE SOCIETY AS DEFINED U/S 2(19) OF THE ACT 4. THE LD. C IT(A)/ AO OUGHT TO HAVE APPRECIATED THAT CO - OPERATIVE BANK REGISTERED UNDER MAHARASHTRA / BOMBAY CO - OPERATIVE SOCIETIES ACT IS A CO - OPERATIVE SOCIETY AS DEFINED U/S 2(19) OF THE ACT HENCE INTEREST RECEIVED BY ASSESSEE FROM COOPERATIVE BANK IS ELIGIBLE FOR DEDUCTION U/S 80P (2) (D) OF THE ACT. 5. THE LD. AO ERRED IN LAW AND FACTS IN HOLDING THAT INCOME OF THE ASSESSEE IS NOT TAX EXEMPT UNDER THE PRINCIPLE OF MUTUALITY EVEN WHEN THE ASSESSEE'S OBJECTS ARE AND ITS EXISTENCE IS FOR SERVICE TO ITS MEMBERS (FLAT OWN ERS - MEMBERS OF THE SOCIETY). 3. BRIEFLY STATE D , THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A C O - OPERATIVE H OUSING S OCIETY REGISTERED UNDER MAHARASHTRA C O - OPERATIVE SOCIETIES ACT, 1960 . IT MANAGES AND MAINTAINS BUILDING FOR ITS MEMBERS. IT HAS EARNED TOTAL INTEREST OF RS.1,23,30,631/ - ON SAVING BANK ACCOUNT AND FIXED DEPOSITS DURING THE YEAR FROM C O - OPERATIVE B ANK. DURING THE YEAR, THE ASSESSEE HAS DECLARED GROSS TOTAL INCOME OF RS.1,23,30,631/ - AND CLAIMED DEDUCTION U/S 80P (2)(D) OF RS .1,23,30,631/ - , BEING INTEREST RECEIVED FROM C O - OPERATIVE B ANK. IN RESPONSE TO A QUERY RAISED BY THE ASSESSING OFFICER (AO), THE ASSESSEE HAS SUBMITTED THAT THE C O - OPERATIVE B ANK SUCH AS SARASWAT C O - OPERATIVE BANK ITA NO. 1760/MUM/2017 3 LTD. (FROM WHERE THE ASSESSEE IS DERIVING THE INTEREST INCOME ON WHICH THE DEDUCTION U/S 80P (2)((D) IS CLAIMED) IS REGISTERED UNDER MAHARASHTRA CO - OPERATIVE SOCIETIES ACT 1960 AND THEREFORE, IT SHOULD BE TREATED AS A C O - OPERATIVE SOCIETY FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 80P(2)(D) IN THE HANDS OF THE ASSESSEE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOVE EXPLANATION OF THE ASSESSEE BECAUSE VIDE FINANCE ACT, 2006, DEDUCTION FROM INCOME OF C O - OPERATIVE B ANK AS PER PROVISIONS OF SECTION 80P OF THE ACT HAS BEEN WITHDRAWN BY WAY OF INSERT ION OF SECTION 80P(4) W.E.F. 01.04.2007 BY WAY OF DIFFERENTIATING A C O - OPERATIVE B ANK FROM A C O - OPERATIVE S OCIETY. THE AO ALSO HAS OBSERVED THAT THE VERY BASIS OF FUNCTIONING OF ANY C O - OPERATIVE S OCIETY WOULD BE THE PRINCIPLE OF MUTUALITY, WHICH IS NOT SAT ISFIED IN THE CASE OF INTEREST EARNED BY THE ASSESSEE FROM THE C O - OPERATIVE B ANK. THE AO ALSO HAS RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (2010) 188 TAXMAN 282 WHEREIN IT HAS BEEN HELD THAT INTEREST EARNED ON DEPOSITS WITH OTHER BANKS WOULD FALL UNDER THE HEAD INCOME FROM OTHER SOURCES U/S 56 AND NOT U/S 28 OF THE ACT. RELIANCE WAS ALSO PLACED BY THE AO ON THE DECISION IN THE CASE OF COMM ON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION (2010) 192 TAXMAN 238 (BOM), WHEREIN IT HAS BEEN HELD THAT INTEREST INCOME EARNED BY THE ASSESSEE ON MONEY INVESTED IN FIXED DEPOSITS OF BANK COULD NOT POSSESS SAME CHARACTER OF MUTUALITY AS SURPLUS F UND DERIVED BY ASSESSEE FROM CONTRIBUTION OF THE MEMBERS AND THE SAME COULD BE EXIGIBLE TO TAX AS INCOME FROM OTHER SOURCES. THUS, THE AO HAS CONCLUDED THAT A C O - OPERATIVE B ANK IS A C OMMERCIAL B ANK AN D DOES NOT FALL UNDER THE PURVIEW OF A C O - OPERATIVE S OC IETY REFERRED IN SECTION ITA NO. 1760/MUM/2017 4 80P (2)(D) OF THE ACT. THEREFORE, HE DISALLOWED THE CLAIM OF DEDUCTION OF RS.1,23,30,631/ - MADE BY THE ASSESSEE U/S 80P(2)(D) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A). THE LD . CIT(A) HAS OBSERVED THAT THE PROVISIONS OF SECTION 80P (4) SHALL NOT APPLY IN RELATION TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LD. CIT(A) FOLLOWED TH E ORDER OF THE TRIBUNAL IN THE CASE OF SBI EMPLOYEES CO - OPERATIVE CREDIT SOCIETY LTD . (2015) 57 TAXMANN.COM 367 AND SHRI SAIDATTA CO - OPERATIVE CREDIT SOCIETY LTD. VS. ITO IN ITA NO. 2379/MUM/2015 FOR AY 2010 - 11 DATED 15.01.2016 AND CONFIRMED THE DISALLOWAN CE OF RS.1,23,30,631/ - MADE BY THE AO U/S 80P (2)(D) OF THE ACT. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE C O - OPERATIVE S OCIET Y IS DEFINED U/S 2(19) OF THE ACT AND THE SAME READS AS UNDER: 2(19) CO - OP. SOCIETY MEANS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE CO - OP. 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. HE STATES THAT T HE CO - OPERATIVE BANKS IN MAHARASHTRA ARE REGISTERED AS CO - OPERATIVE S OCIETIES UNDER BOMBAY/ MAHARASHTRA CO - OPERATIVE ACT , HENCE CO - OPERATIVE B ANKS ARE CO - OPERATIVE SOCIETIES A S DEFINED U/S 2(19) OF THE ACT. THE LD. COUNSEL THUS SUBMITS THAT T HE INTEREST RECEIVED BY THE ASSESSEE ( CO - OPERATIVE HOUSING S OCIETY) FRO M CO - OPERATIVE BANK (CO - OPERATIVE SOCIETY REGISTERED UNDER MCS ACT) IS INTEREST RECEIVED BY ONE CO - OPERATIVE S OCIETY FROM OTHER CO - OPERATIVE S OCIETY AND ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT. ITA NO. 1760/MUM/2017 5 5.1 THE LD. COUNSEL OF THE ASSESSEE ALSO RELIES ON THE DECISION IN THE CASE OF PRINCIP AL CIT VS. TOTAGARS CO - OPERATIVE SALE SOCIETY (2017) 78 TAXMANN.COM 169 (KARNATAKA), SINDHUDURGH ZILA MADHYAMIK ADHYAPAK VS. ITO (ITA NO. 1825/PN/2013) FOR THE AY 2010 - 11, LANDS END CO - OPERATIVE HOUSING SOCIETY LTD. VS. ITO (ITA NO. 3566/MUM/2014) FOR THE AY 2009 - 10. 6. ON THE OTHER HAND , THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION OF INTEREST OF RS.1, 23,30,631/ - MADE BY THE AO U/S 80P(2)(D). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUED RAISED IN THIS APPEAL IS SUMMARIZED HERE . THE ASSESSEE CLAIMS THAT C O - OPERATIVE B ANKS IN MAHARASHTRA ARE REGISTERED AS C O - OPERATIVE S OCIETIES UNDER BOMBAY/MAHARASHTRA CO - OPERATIVE SO CIETIES ACT AND HENCE SARASWAT CO - OPERATIVE BANK LTD. IS A C O - OPERATIVE S OCIETY AS DEFINED U/S 2(19) OF THE ACT. ON THE CONTRARY , IT IS THE CONTENTION OF THE AO THAT C O - OPERATIVE B ANK LIKE SARASWAT CO - OPERATIVE BANK LTD. IS COMMERCIAL BANK AND DOES NOT FAL L UNDER PURVIEW OF A C O - OPERATIVE S OCIETY REFERRED IN SECTION 80P(2)(D) OF THE ACT. 7.1 WE ARE OF THE CONSIDERED VIEW THAT THE PRIMARY OBJECTS OF ANY SOCIETY AR E PRESCRIBED IN THE BYE LAWS. IN ORDER TO BECOME A BANK, THE PRINCIP AL BUSINESS OF THE CO - OPE RATIVE SOCIETY SHOULD BE TRANSACTION OF BANKING BUSINESS. A PERUSAL OF THE AUDITED ACCOUNTS WOULD INDICATE THE SAME. THE FIRST AND FOREMOST REQUIREMENT IN INDIA TO DO BUSINESS OF BANKING IS TO OBTAIN A LICENCE FROM THE RESERVE BANK OF INDIA (RBI). WITHOUT A VALID LICENCE FROM RBI, NOBODY CAN DO BUSINESS OF BANKING . ALSO URBAN CO - OPERATIVE BANK IS KNOWN AS ITA NO. 1760/MUM/2017 6 PRIMARY CO - OPERATIVE BANK. IT IS A BIGGER ENTITY AND FALL UNDER THE BANKING REGULATION ACT. IT IS ALSO REGULATED BY STATE GOVERNMENT AND RBI. PRIMARY C O - OPERATIVE BANKS, POPULARLY CALLED URBAN CO - OPERATIVE BANKS, WHOSE NET WORTH IS RS.1,00,000/ - AND ABOVE, WHO ARE RECOGNIZED AS BANKS, A RE MEMBERS OF PAYMENT SYSTEM AND ALSO ENJOY DEPOSIT INSURANCE. ALSO SOME URBAN CO - OPERATIVE BANKS ARE CONFERRED WITH SC HEDULED STATUS BY THE RBI. 7.2 WE FIND THAT THE ABOVE FACTUAL ASPECTS HAVE NOT BEEN EXAMINED EITHER BY THE AO OR THE LD. CIT(A). THEREFORE, WE DEEM IT PROPER TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE A F RESH ASSESSMENT AFTER EXAMINING THE FACTS MENTION ED AT PARA 7.1 HERE - IN - ABOVE. NEEDLESS TO SAY , THE AO WOULD GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE ASSESSMENT ORDER. THE ASSESSEE IS DIRECTED TO FILE THE REQUIRED DETAILS BEFORE THE AO. AS WE HAVE RESTORED THE MATTER TO THE FILE OF THE AO TO MAKE A FRESH ASSESSMENT, WE ARE NOT ADVERTING TO THE CASE LAWS RELIED ON BY BOTH THE SIDES. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN THE OPEN C OURT ON 14/07/2017 SD/ - SD/ - ( D.T. GARASIA ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/07/2017 RAHUL SHARMA, SR. P.S. ITA NO. 1760/MUM/2017 7 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