INCOME TAX OFFICER-19(3)(1), MUMBAI V. TAHNEE HEIGHTS CO-OPERATIVE HOUSING SOCIETY LIMITED, MUMBAI

ITA 2213/MUM/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6659 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 04-10-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 15-06-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 2213, 2214 & 2215/MUM/2023 Assessment Year: 2014-15, 2015-16 & 2017-18 ITO-19(3)(1), Piramal Chamber, Room No. 405, Lalbaug, Mumbai- 400012. Vs. Tahnee Heights Co-operative Housing Society Ltd., Ground floor, Tahnee Heights, 66 Nepean Sea Road, Malabar Hill, Mumbai-400006. PAN No. AAAAT 6303 N Appellant Respondent Assessee by : Mr. Samir Saraiya, CA Revenue by : Mr. P.D. Chogule, CIT-DR Date of Hearing : 05/10/2023 Date of pronouncement : 10/10/2023 ORDER PER OM PRAKASH KANT, AM These three appeals by the Revenue are directed against three separate orders, each dated 20.04.2023, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2014- 15, 2015-16 and 2017-18 respectively. 2. In these appeals, grounds raised are identical and therefore same were heard together and disposed off by way of this consolidated order for convenience. In all the three assessment orders, the Assessing Officer has disallowed the claim of the assessee for deduction u/s 80P(2)(d) of the Income short ‘the Act’). In assessment year 2014 has also disallowed the claim of deduction for interest earned on bonds invested in Indian Railway Finance Corporation Ltd. In assessment year 2015 was also disallowed by the Ld. Assessing Officer. The Ld. CIT(A) in all the three assessment years following the decision of the Hon’ble Supreme Court in the case of Venktesh Premises CA 2706 of 2018 allowed the claim of the assessee o amount accrued to the co the members, principle amount received could not surplus in the end of the yea 3. We have heard both the parties on the issue in dispute and perused the relevant material on record. As far as the ground the Revenue relating to deduction u/s 80P(2)(d) of the Act of interest earned from deposits in cooperative bank we find that the coordinate bench of has consistently allowed the claim of deduction u/s 80P(2)(d) of the Act on the interest earned on deposits holding that hose cooperative bank society. . Before us, the Ld. Counsel Tahnee Heights Co-operative Housing Society Ltd. ITA Nos. consolidated order for convenience. In all the three assessment , the Assessing Officer has disallowed the claim of the assessee for deduction u/s 80P(2)(d) of the Income-ta short ‘the Act’). In assessment year 2014-15, the Assessing Officer has also disallowed the claim of deduction for interest earned on bonds invested in Indian Railway Finance Corporation Ltd. In assessment year 2015-16, the claim for deduction on sale of scrap was also disallowed by the Ld. Assessing Officer. The Ld. CIT(A) in all the three assessment years following the decision of the Hon’ble Supreme Court in the case of Venktesh Premises CA 2706 of 2018 allowed the claim of the assessee on the ground that as long as amount accrued to the co-operative society are for the benefit of all principle of mutuality are involved and amount received could not be taxable even though there is a surplus in the end of the year. We have heard both the parties on the issue in dispute and perused the relevant material on record. As far as the ground the Revenue relating to deduction u/s 80P(2)(d) of the Act of interest earned from deposits in cooperative bank coordinate bench of Tribunal in various decisions has consistently allowed the claim of deduction u/s 80P(2)(d) of the Act on the interest earned on deposits with co-operative bank cooperative bank are primarily exist . Before us, the Ld. Counsel for the assessee has cited operative Housing Society Ltd.. 2 ITA Nos. 2213 to 2215/Mum/2023 consolidated order for convenience. In all the three assessment , the Assessing Officer has disallowed the claim of the tax Act, 1961 (in 15, the Assessing Officer has also disallowed the claim of deduction for interest earned on bonds invested in Indian Railway Finance Corporation Ltd. In ion on sale of scrap was also disallowed by the Ld. Assessing Officer. The Ld. CIT(A) in all the three assessment years following the decision of the Hon’ble Supreme Court in the case of Venktesh Premises CA 2706 of 2018 n the ground that as long as for the benefit of all involved and therefore the taxable even though there is a We have heard both the parties on the issue in dispute and perused the relevant material on record. As far as the grounds of the Revenue relating to deduction u/s 80P(2)(d) of the Act in respect of interest earned from deposits in cooperative bank is concerned, Tribunal in various decisions has consistently allowed the claim of deduction u/s 80P(2)(d) of the operative bank, exist as cooperative the assessee has cited decision in the case of ITA No. 3566/Mum/2014 relevant finding of the Tribunal is reproduced as under: “8.3 We have heard the rival submissions and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u interest on investment with other Coop. banks by following the decision in the case of Bandra Samruddihi Co Ltd.(Supra) which was passed on the basis of the decision passed by the Hon'ble Supreme Court in the case of Totagar's Co Society Ltd. In the case of Totagar's Co ITAT (supra) the Hon'ble Supreme Court while interpreting the section 80P(2)(a)(i) of the Act held that surplus funds not in the business and invested in the short term deposit would be assessable under the head "income from other sources" where the Co operative society is engaged in carrying on business of banking or providing credit facilities to its is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co 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 of 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 ex 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 gross total income, includes any income referred to in sub there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub computing the total income of the assessee. 2. The sums referred to in sub namely:- (a) In the case of a co (i) Carrying on the business of banking or providing credit facilities to its members. The whole of the amount of profits and gains 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 the co-operative society from its investments with any other co society, the whole of such income." Tahnee Heights Co-operative Housing Society Ltd. ITA Nos. decision in the case of Land End Co-Operative Housing Society in ITA No. 3566/Mum/2014 for assessment year 2009 relevant finding of the Tribunal is reproduced as under: 8.3 We have heard the rival submissions and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u/s 80P(2)(d) of the Act of Rs.14,88,107/ 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 n'ble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. In the case of Totagar's Co-operative Sale Society Ltd v/s ITAT (supra) the Hon'ble Supreme Court while interpreting 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 would be assessable under the head "income from other sources" where the Co operative society is engaged in 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 entitled to deduction u/s The provisions of Section 80P(2)(d) of the 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 proper understanding of these two provisions the relevant ex of the section are reproduced below: 80P: Deduction in respect of income operative Societies. 1. Where, in the case of an assesssee being a co-operative society, the gross total income, includes any income referred to in sub 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-section (1) shall be the following, e case of a co-operative society engaged in- (i) Carrying on the business of banking or providing credit facilities to its The whole of the amount of profits and gains of business attributable to any one or more of much attributes. f any income by way of interest or dividends derived by operative society from its investments with any other co society, the whole of such income." operative Housing Society Ltd.. 3 ITA Nos. 2213 to 2215/Mum/2023 Operative Housing Society in for assessment year 2009-10. The relevant finding of the Tribunal is reproduced as under: 8.3 We have heard the rival submissions and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by /s 80P(2)(d) of the Act of Rs.14,88,107/- being interest on investment with other Coop. banks by following the decision operative Housing Society Ltd.(Supra) which was passed on the basis of the decision passed by operative Sale operative Sale Society Ltd v/s ITAT (supra) the Hon'ble Supreme Court while interpreting the section immediately required in the business and invested in the short term deposit would be assessable under the head "income from other sources" where the Co- operative society is engaged in carrying on business of banking or members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us operative society which has derived income on investment with cooperative banks is entitled to deduction u/s The provisions of Section 80P(2)(d) of the 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 proper understanding of these two provisions the relevant extract of the section are reproduced below: 80P: Deduction in respect of income operative society, the gross total income, includes any income referred to in sub-section (2), shall be deducted, in accordance with and subject to the section (2), in section (1) shall be the following, (i) Carrying on the business of banking or providing credit facilities to its The whole of the amount of profits and gains of business attributable to f any income by way of interest or dividends derived by operative society from its investments with any other co-operative 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 of banking or providing credit facilities to its members if the said income is assessable as income from business whereas deduction in respect of income by way interest and dividend derived by assessee from its investments 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 not as income from other sources if it carries on business of the banking or providing credit Housing Society Ltd Vs. I.T.O. facilities to its members and has incom business whereas for claiming u/s 80P(2)(d) it must have income of interest and dividend on investments with other Co may or may not be engaged in the banking for providing credit facilities to its members and not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble Supreme Court in the case of Totagar's operative Sale Society Ltd.(Supra) held that a society has surplus 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 sh assessed 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 from 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 s included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/ interest received/deri No.3566/Mum/2014 Lands End Co I.T.O. therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directed accordingly. 3.1 Further, the Ld. Counsel of the assessee has also relied on the decision of the Tribunal in the case of sale society ltd. ITA No. 376 to 379/Bang/2023 years 2015-16 to 2018 decision of the Co-ordinate Bench of the Tribunal in the case of Tahnee Heights Co-operative Housing Society Ltd. ITA Nos. From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) t the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business 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 respect of income by way interest and dividend derived by assessee from its investments 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 assessable as business income and not as income from other sources if it carries on business of the banking or providing credit ITA No.3566/Mum/2014 Lands End Co Housing Society Ltd Vs. I.T.O. facilities to its members and has income assessable 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 society may or may not be engaged in the banking for providing credit facilities to its members and the head under which the income is assessable is not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble Supreme Court in the case of Totagar's operative Sale Society Ltd.(Supra) held that a society has surplus 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 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 come and not as income from 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 such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/- in respect of interest received/derived by it on deposits with coop. banks and No.3566/Mum/2014 Lands End Co-operative Housing Society Ltd Vs. therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directed accordingly.” . Counsel of the assessee has also relied on the decision of the Tribunal in the case of the Totgars sale society ltd. ITA No. 376 to 379/Bang/2023 16 to 2018-19. The Ld. Counsel also relied on the ordinate Bench of the Tribunal in the case of operative Housing Society Ltd.. 4 ITA Nos. 2213 to 2215/Mum/2023 From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) t the former deals with deduction in respect of profits and operative society carrying on business of banking or providing credit facilities to its members if the said income latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s of its income assessable as business income and not as income from other sources if it carries on business of the banking ITA No.3566/Mum/2014 Lands End Co-operative e assessable under the head business whereas for claiming u/s 80P(2)(d) it must have income of operative society may or may not be engaged in the banking for providing credit facilities the head under which the income is assessable is not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble Supreme Court in the case of Totagar's Co- operative Sale Society Ltd.(Supra) held that a society has surplus 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 ort term deposits shall be treated and assessed 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 come and not as income from 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 ociety if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the in respect of ved by it on deposits with coop. banks and ITA operative Housing Society Ltd Vs. therefore the appeal of the assessee is allowed by reversing the order of . Counsel of the assessee has also relied on the Totgars co-operative sale society ltd. ITA No. 376 to 379/Bang/2023 for assessment 19. The Ld. Counsel also relied on the ordinate Bench of the Tribunal in the case of M/s Ishwar Bhawan Housing Ltd. 3269/Mum/2022 for assessment year decision of the Tribunal in the case of Premises Co-op Society for assessment years 3.2 In these decisions the Co claim of the assessee u/s 80P( earned from deposits with co following the decision assessee for deduction u/s 80P(2)(d) of the Act in respect of interest earned on deposit with co grounds of appeal of the revenue are accordingly dismissed three assessment years. 3.3 In respect of ground raised by the Revenue interest of Rs.2,84,104/ Corporation Ltd. on concerned, we find that the assessee has claimed the said interest as exempted u/s 10(15) of the Act b Act said exemption has to be notified in the official gazette but no such notification has us or before the lower authorities we restore this issue back to the file of the Assessing Officer with the direction to the assessee to produce necessary evi support of claim including notification in the official gazette Tahnee Heights Co-operative Housing Society Ltd. ITA Nos. Housing Ltd. in ITA No. 3285 and for assessment years 2020-21 and 2021 ion of the Tribunal in the case of Amore op Society in ITA No. 2873 and 2874/Mum/2022 s 2020-21 and 2021-22. In these decisions the Co-ordinate Bench has allowed th claim of the assessee u/s 80P(2)(d) of the Act in respect of interest earned from deposits with co-operative banks. Respectfully following the decisions cited above, we allow the claim of the assessee for deduction u/s 80P(2)(d) of the Act in respect of interest earned on deposit with co-operative bank. The appeal of the revenue are accordingly dismissed years. n respect of ground raised by the Revenue in AY 2014 interest of Rs.2,84,104/- received from Indian Railway Financial d. on bond invested by the assessee societ e find that the assessee has claimed the said interest as exempted u/s 10(15) of the Act but under the provisions of the ct said exemption has to be notified in the official gazette but no s been produced by the assessee either before us or before the lower authorities, therefore in the interest of justice we restore this issue back to the file of the Assessing Officer with the direction to the assessee to produce necessary evi support of claim including notification in the official gazette operative Housing Society Ltd.. 5 ITA Nos. 2213 to 2215/Mum/2023 ITA No. 3285 and 21 and 2021-22 and Amore Commercial in ITA No. 2873 and 2874/Mum/2022 ordinate Bench has allowed the Act in respect of interest operative banks. Respectfully cited above, we allow the claim of the assessee for deduction u/s 80P(2)(d) of the Act in respect of interest bank. The corresponding appeal of the revenue are accordingly dismissed for all in AY 2014-15 for received from Indian Railway Financial invested by the assessee society is e find that the assessee has claimed the said interest ut under the provisions of the ct said exemption has to be notified in the official gazette but no been produced by the assessee either before therefore in the interest of justice we restore this issue back to the file of the Assessing Officer with the direction to the assessee to produce necessary evidence in support of claim including notification in the official gazette. The ground Nos. 7 to 8 of the appeal of the Revenue are accordingly allowed for statistical purposes. 3.4 As far as the ground No. 7 in the appeal year 2015-16 concerning disallowance of deduction in respect of scrap sale is considered that issue in dispute is covered in favour of the assessee ordinate Bench of the Tribunal in the case of the assessee in ITA No. 4035 for assessment year 2004 Tribunal (supra), it is mentioned that the controversy was income in respect of sale scrap of Rs.20,26,500/ on basis of mutuality or not. The Tribunal (supra) in para 4.2 of the order have allowed the claim of the assessee observing as under: “4.2 The principles of mutuality has been elaborated by the Honble Supreme Court in the case of CIT vs. Bankipur Club Ltd. (226 ITR 97) wherein the Hon'ble Supreme Court has held that for applying the principle of mutuality, "there must be complete identity between the contributors and the participators." In our opinion, the claim of the assessee that on the principles of mutuality, the sale proceeds has to be excluded while computing the income of the assessee on the principles of mutuality as there is a complete identity of contributors and participators. Accordingly, the addition in respect of the sale proceed is deleted.” 3.5 Respectfully following the finding of the Tribunal, the is eligible for deduction for income from the scrap Rs.1,97,000/-. The ground No. 7 of the appeal accordingly dismissed Tahnee Heights Co-operative Housing Society Ltd. ITA Nos. . 7 to 8 of the appeal of the Revenue are accordingly allowed for statistical purposes. As far as the ground No. 7 in the appeal for erning disallowance of deduction in respect of scrap sale is considered, the Ld. Counsel of the assessee that issue in dispute is covered in favour of the assessee ordinate Bench of the Tribunal in the case of the assessee in ITA 35 for assessment year 2004-05. In para 2 of the order of the , it is mentioned that the controversy was in respect of sale scrap of Rs.20,26,500/- could be allowed of mutuality or not. The Tribunal (supra) in para 4.2 of the allowed the claim of the assessee observing as under: 4.2 The principles of mutuality has been elaborated by the Honble Supreme Court in the case of CIT vs. Bankipur Club Ltd. TR 97) wherein the Hon'ble Supreme Court has held that for applying the principle of mutuality, "there must be complete identity between the contributors and the participators." In our opinion, the claim of the assessee that on the principles of the sale proceeds has to be excluded while computing the income of the assessee on the principles of mutuality as there is a complete identity of contributors and participators. Accordingly, the addition in respect of the sale proceed is pectfully following the finding of the Tribunal, the deduction for income from the scrap sale amounting to he ground No. 7 of the appeal dismissed. operative Housing Society Ltd.. 6 ITA Nos. 2213 to 2215/Mum/2023 . 7 to 8 of the appeal of the Revenue are accordingly the assessment erning disallowance of deduction in respect of the Ld. Counsel of the assessee submitted that issue in dispute is covered in favour of the assessee by the Co- ordinate Bench of the Tribunal in the case of the assessee in ITA para 2 of the order of the , it is mentioned that the controversy was whether could be allowed of mutuality or not. The Tribunal (supra) in para 4.2 of the allowed the claim of the assessee observing as under: 4.2 The principles of mutuality has been elaborated by the Honble Supreme Court in the case of CIT vs. Bankipur Club Ltd. TR 97) wherein the Hon'ble Supreme Court has held that for applying the principle of mutuality, "there must be complete identity between the contributors and the participators." In our opinion, the claim of the assessee that on the principles of the sale proceeds has to be excluded while computing the income of the assessee on the principles of mutuality as there is a complete identity of contributors and participators. Accordingly, the addition in respect of the sale proceed is pectfully following the finding of the Tribunal, the assessee sale amounting to he ground No. 7 of the appeal of Revenue is 4. In the result, the appeal of the R 2014-15 is partly allowed for statistical purposes whereas appeal for assessment year 2015 Order pronounced in the open Court on Sd/ (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 10/10/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Tahnee Heights Co-operative Housing Society Ltd. ITA Nos. In the result, the appeal of the Revenue for assessment year 15 is partly allowed for statistical purposes whereas appeal for assessment year 2015-16 and 2017-18 are dismissed. nounced in the open Court on 10/10/2023. Sd/- Sd/ RAHUL CHAUDHARY) (OM PRAKASH KANT MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai operative Housing Society Ltd.. 7 ITA Nos. 2213 to 2215/Mum/2023 evenue for assessment year 15 is partly allowed for statistical purposes whereas appeals 18 are dismissed. /10/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, Registrar) ITAT, Mumbai