Naminath Prabhu Co Operative Housing Society Limited, Ahmedabad V. ADIT, CPC, Bengaluru Present Juridiction The ITO, Ward-6(1)(1), Ahmedabad

ITA 395/AHD/2023

AI Insights

The case involves Naminath Prabhu Cooperative Housing Society Ltd., which appealed against the order of the CIT(A) that upheld the disallowance of a deduction claimed under Section 80P(2)(d) for the assessment year 2021-22. The deduction was initially disallowed by the Centralized Processing Centre (CPC), Bengaluru, which processed the return under Section 143(1) of the Income Tax Act. The primary contention was whether the interest income from fixed deposits with cooperative banks qualifies for deduction under Section 80P(2)(d). The Tribunal examined various Supreme Court decisions, particularly focusing on the interpretation of Section 80P in the context of cooperative societies and banks.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299932 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-07-2023
• Assessment Year: 2021-2022
• Appeal Filed On: 18-05-2023
• Other Referred Cases: Citizen Cooperative Society Ltd vs. ITO, The Mavilayi Service Co-operative Bank Ltd & Ors vs. CIT, Calicut & Ors, New Ideal Co-Operative Housing Limited vs. Income Tax Officer, PCIT vs. Totagars Cooperative Sale Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIKASH PANDYA
• Section: 2; 234B; 143(1); 80P; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I .T .A . N o . 3 9 5/ A h d /2 0 2 3 ( A s se ss m e nt Y e a r : 20 21- 22 ) N a m i na t h Pr ab hu C o o pe r at iv e H o us in g Soc ie t y L i mit e d , C - 20 3 , A b hi s h e k A pa r t m en t, B /h . V ya s Wa di , N a v a V ad aj , A h m e da ba d - 3 8 0 02 6 V s.A D IT ( C P C ) B en ga lur u, Pr e se nt J ur is dic tio n I T O , War d - 6 ( 1) ( 1) , A h m e d a b ad [ P A N N o. AA C A N 7 3 5 3 C ] (Appellant) .. (Respondent) Appellant by : Shri Vikash Pandya, A.R. Respondent by : Ms. Saumya Pandey Jain, Sr. D.R. D a t e of H ea r i ng 18.07.2023 D a t e of P r o no u n ce me nt 19.07.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi on 21.03.2023 for A.Y. 2021-22. 2. The grounds of appeal raised by the assessee are as under: “Disallowing the deduction claimed under section 80(P)(2)(d) 1. On the facts and in the circumstances of the case and in law, the Honorable Commissioner of Income Tax (Appeal) erred in upholding the adjustments by way of making disallowance of deduction u/s 80P by Centralized Processing Centre (CPC), Bengaluru to the returned income without giving any intimation for making any adjustments of disallowing the deduction claimed by the Appellant u/s 80P of Rs 4,89,194/-. 2. On the facts and in the circumstances of the case, the Appellant submits that the Honorable Commissioner of Income Tax (Appeal) erred in disallowing claim of deduction of Rs. 4,89,194/- u/s 80P (2)(d) of the Income Tax Act, 1961 in respect of interest income earned on investment in Fixed Deposit with Co operative Bank ITA No. 395/Ahd/2023 Naminath Prabhu Cooperative Housing Society Ltd. vs. ITO Asst.Year–2021-22 - 2 - namely Kalupur Commercial Co-Operative Bank Ltd without mentioning any iota of reasons behind such a take. "Section 80P(2)(d) provides deduction to a Cooperative Society in respect of any Income by way of interest or dividends derived by the co- operative society from its Investments with any other cooperative society, the whole of such income" 3. The Appellant Assessee is a Co-Operative Housing society which is run by it's member for the benefit of it's member. 4. Honourable Supreme Court in the case of Citizen Cooperative Society Ltd (Civil Appeal No 10245 of 2017 vide order dated 8.8.2017) has settled the law that for being considered as a cooperative bank, licence from RBI, in this regard is a sine qua non in absence of the RBI licence as such the Assessee cannot be treated as cooperative bank Hence disallowing the deduction by referring to the provisions of section 80P(4) is completely unsustainable Moreover section BOP(2)(d) provides exemption to interest earned on fixed deposit in cooperative societies: It is nobody's case that cooperative bank are not cooperative societies 5. Moreover similar issue was elaborately dealt by a larger bench of honourable Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd & Drs Vs CIT, Calicut & Ors (Civil Appeal Nos. 7343 7850 of 2019 dated 121 2021 and the issue was decided in favour of the assessee We may gainfully refer to the Hon'ble Apex Court observation in para 21 as under wherein the Hon'ble Apex Court referred to its earlier decision of Citizen Cooperative Society Ltd (supra):- “The following propositions may be culled out from the judgment: (I) That section 80P of the IT Act in a benevolent provision which was enacted by Parliament in order to encourage and promote the growth of the c operative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; (ii) That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of section 80P must be given by way deduction; (iii) That this Court in Kerala State Cooperative Marketing Federation Ltd and Ors (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied. (V) That section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2) This proviso specifically excludes only co- operative banks, which are cooperative societies who must possess a licence from the ITA No. 395/Ahd/2023 Naminath Prabhu Cooperative Housing Society Ltd. vs. ITO Asst.Year–2021-22 - 3 - RBI to do banking business Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the ma of section 80P(4).” (VI) Same view was also taken into consideration by Honourable ITAT Mumbai in case of New Ideal Co-Operative Housing Limited vs. Income Tax Officer TA No. 2681/Mum/2019) 6. The Appellant submits that the adjustments made to the Returned Income be deleted and deduction claimed u/s 80P be allowed. Attracted Section-143(1) 2. On the facts and in the circumstances of the case and in law, that a cooperative society will not get exemption on the interest earned on deposits in cooperative bank is not something which is a subject matter of adjustment under section 143(1)(a) of the Act. Additional Income tax demand of Rs. 1,52,627/- is wrong and contrary to the facts and circumstances of the case, provisions of the Act and the Rules made thereunder. 3. Attracted Section-Section 234B & 234C Issue- Levying Interest under section 234B & 234C is void ab initio. On the facts and in the circumstances of the case and in law, the CPC erred in charging interest u/s 234B of Rs. 34,588/- AND u/s 234C of Rs. 9,863/- which is wrong and contrary to the facts and circumstances of the case, provisions of the Act and the Rules made thereunder.” 3. The assessee is a cooperative housing society filed its return of income for A.Y. 2021-22 on 07.12.2021. The assessee claimed deduction of Rs. 4,89,194/- under Section 80P(2)(d) of the Income Tax Act. The return of income was processed under Section 143(1) of the Act by the CPC wherein the said deduction was not granted and the total income was computed under Section 143(1) at Rs. 6,38,270/- thereby resulting into demand of Rs. 1,91,510/-. 4. Being aggrieved by the intimation under Section 143(1) of the Act the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee. ITA No. 395/Ahd/2023 Naminath Prabhu Cooperative Housing Society Ltd. vs. ITO Asst.Year–2021-22 - 4 - 5. The Ld. A.R. submitted that the CIT(A) was not right in disallowing claim of deduction of Rs. 4,89,194/- under Section 80P(2)(d) of the Act in respect of interest income earned on investment in Fixed Deposit with other Cooperative Bank namely Kalupur Commercial Cooperative Bank Ltd. The Ld. A.R. relied upon the decision of Hon’ble Apex Court in case of Mavilayi Service Cooperative Bank Ltd. & ors. vs. CIT 431 ITR 1 (SC). The Ld. A.R. also relied upon the decision of the Tribunal in case of Amore Commercial Premises Cooperative Society Ltd. vs. CPC ITA No. 2873&2874/M/2022 order dated 17.01.2023. 6. The Ld. D.R. relied upon the order of the CIT(A) and pointed out that the Hon’ble Apex Court in case of PCIT vs. Totagars Cooperative Sale Society 395 ITR 611 has categorically mentioned that only the primary agricultural credit societies with their limited work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under Section 80P of the Act. 7. Heard both the parties and perused all the relevant material available on record. The decision of Hon’ble Apex Court in case of Totagars Cooperative Sale Society Ltd. vs. ITO 322 ITR 283 (SC) the principle laid down was elaborately taken into account by the Apex Court in case of Mavilayi Service Cooperative Bank Ltd. (supra). The Hon’ble Apex Court categorically stated that the cooperative societies which earned interest income on its investment made with cooperative bank would be eligible for claim of deduction under Section 80P(2)(d) of the Act. Thus, the interpretation given by the CIT(A) while dismissing the appeal of the assessee is not correct and therefore, in light of the decision of the Hon’ble ITA No. 395/Ahd/2023 Naminath Prabhu Cooperative Housing Society Ltd. vs. ITO Asst.Year–2021-22 - 5 - Apex Court in case of Mavilayi Service Cooperative Bank Ltd. (supra) is applicable in the present case. Hence, the appeal of the assessee is allowed. 8. In result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 19/07/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 19/07/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 18.07.2023 2. Date on which the type draft is placed before the Dictating Member 18.07.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .07.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .07.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 19.07.2023 7. Date on which the file goes to the Bench Clerk 19.07.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................