VASANT VALLEY ASTER TOWER CO-OP. HSG. SOC. YTD., Mumbai V. ITO, WARD 30(2)(7), Mumbai

ITA 433/MUM/2023

AI Insights

The case revolves around the dispute concerning the eligibility of a cooperative housing society to claim a deduction under Section 80P(2)(d) of the Income Tax Act, 1961, for interest income received from cooperative banks. The Income Tax Officer initially disallowed the deduction, which was upheld by the Commissioner of Income Tax (Appeals). The appellant, Vasant Valley Aster Tower Co-Op. Housing Society Ltd., contested this decision in the Income Tax Appellate Tribunal. The Tribunal, referencing various precedents and judicial interpretations, concluded that the interest income from cooperative banks qualifies for deduction under Section 80P(2)(d), thus reversing the decisions of the lower authorities.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113571 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 13-02-2023
• Other Referred Cases: Lands End Co-operative Housing Society Ltd. Vs. ITO, Kaliandas Udyog Bhavan Premises vs. ITO, M/s Sea Green Cooperative Housing and Society Ltd. Vs. ITO, Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO, Shri Sai Datta Co-operative Credit Society Ltd. Vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Set aside
• Section: 143(3); 143(1); 80P; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 433/MUM/2023 (Assessment Year: 2017-18) Vasant Valley Aster Tower Co-Op. Housing Society Ltd., CTS No. 152-153 A, V V Aster Tower CHS Ltd., Off Gen. A.K. Vaidya Marg, Malad (East), Mumbai - 400097 [PAN: AAAAV3147Q] Income Tax Officer, Ward 30(2)(7), Mumbai, Kautilya Bhawan, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 ............... Vs ................ Appellant Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri J.P. Purohit Ms. Naina K. Kumar Date Conclusion of hearing Pronouncement of order : : 18.04.2023 25.04.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 16/12/2022, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2017-18, whereby the Ld. CIT(A) had dismissed the appeal of the Appellant against the Assessment Order, dated 29/11/2019, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). ITA No.433/Mum/2023 (Assessment Year 2017-18) 2 2. The Appellant has raised following grounds of appeal: “1 In the facts and circumstances of the case the learned CIT (Appeals) erred in confirming the action of the learned assessing officer in making a disallowance of Rs. 24,35,082/- being the amount of Interest received from Co-Operative Banks (Co- operative Society). 3. Brief facts of the case are that the Appellant is a registered Co- operative Society under the Maharashtra Cooperative Societies Act, 1960. The Appellant filed return of income for the Assessment Year 2017-18 on 31/10/2017 declaring total income as ‘Nil’ after claiming deduction of INR 24,35,082/- under Section 80P(2)(d) of the Act. The case of the Assessee was selected for scrutiny. The return of income was processed under Section 143(1) of the Act. Subsequently, the case of the Appellant was selected for scrutiny and order under Section 143(3) of the Act on 29/11/2019, assessing total income of the Appellant at INR 24,35,082/- after disallowing the claim of deduction of INR 24,35,082/- made by the Appellant under Section 80P(2)(d) of the Act on the ground that interest income earned by the Appellant from Co-operative Banks was not eligible for deduction under Section 80P(2)(d) of the Act. 4. Being aggrieved, the Appellant preferred appeal before the CIT(A) against the Assessment Order dated 29/11/2019, which was dismissed by the CIT(A) vide order dated 16/12/2022. 5. Being aggrieved, the Appellant has preferred the present appeal against the order passed by the CIT(A). 6. We have considered the rival submissions and perused the material on record. We note that the Assessing Officer and the CIT(A) had denied deduction under Section 80P(2)(d) of the Act on the ground that a co- operative bank is not a co-operative society and therefore, interest ITA No.433/Mum/2023 (Assessment Year 2017-18) 3 received from a Co-operative Bank is not eligible for deduction under Section 80P(2)(d) of the Act. We find that the issue raised in the present appeal stands decided in favour of the Appellant by various decisions of the Tribunal wherein the Tribunal has held that benefit of deduction under Section 80P(2)(d) of the Act would be available in respect of interest received from a co-operative bank as it continues to be a co-operative society. 7. The Mumbai Bench of the Tribunal has, in the case of Lands End Co- operative Housing Society Ltd. Vs. ITO : 3566/Mum/2014, vide order dated 15.01.2016, held that: “8.3. We have heard............. xx xx From the close perusal of the provisions of ..............................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 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 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 co-op 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 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 therefore the appeal of the assessee is ITA No.433/Mum/2023 (Assessment Year 2017-18) 4 allowed by reversing the order of the CIT(A). The AO is directed accordingly.” (Emphasis supplied) 8. Similarly, in the case of Kaliandas Udyog Bhavan Premises vs. ITO: ITA No. 6547/Mum/2017, dated 24.04.2018, the Mumbai Bench of the Tribunal has, after examining the judgment of the Hon’ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 and taking into account the insertion of 80P(4) vide the Finance Act, 2006, while allowing deduction to a co-operative society under Section 80P(2)(d) of the Act in respect of interest received from a co-operative bank observed that the judgment of Hon’ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra) was wrongly relied upon by the Revenue as the adjudication by the Hon’ble Supreme Court in the aforesaid case was in context of Section 80P(2)(a)(i), and not on the entitlement of a co- operative society towards deduction under Section 80P(2)(d) of the Act in respect of the interest income received from co-operative bank. The relevant extract of the decision of the Tribunal read as under: “7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further we may herein reproduce the relevant extract of the said statutory provision, viz Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2)(d) (1) Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there 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. ITA No.433/Mum/2023 (Assessment Year 2017-18) 5 (2) The sums referred to in sub-section (1) shall be the following namely:- (a)......................................................................... (b)......................................................................... (c)........................................................................ (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” Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term “co- operative society‟ had been defined under Sec. 2(19) of the Act, as under: ITA No.433/Mum/2023 (Assessment Year 2017-18) 6 “(19) “Co-operative society” means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies;” We are of the considered view, that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co- operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 32 (Mum) (ii) M/s Sea Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of ITA No.433/Mum/2023 (Assessment Year 2017-18) 7 Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had also held that the interest income earned by the assessee on its investments held with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the cooperative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT(A) on the judgment of the Hon‟ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C.) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon‟ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT “F” bench, Mumbai in the case of M/s Vaibhav Cooperative Credit Society Vs. ITO-15(3)(4) (ITA No. 5819/Mum/2014, dated 17.03.2017 is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee co-operative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec, 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT „SMC‟ Bench, Mumbai in the case of Shri Sai Datta Co-operative Credit Society Ltd. Vs. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination, That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative ITA No.433/Mum/2023 (Assessment Year 2017-18) 8 society would not be entitled to claim of deduction under Section 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a co-operative society on its investments held with a co operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 9. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside the order of the lower authorities and conclude that the interest income of Rs.27,48,553/- earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d).” (Emphasis supplied) Same view has been taken by the Tribunal in the case of M/s Sea Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017, Mystique Rose Cooperative Housing Society Ltd.: vs. ITO 22(2)(3) (ITA No. 1290/Mum/2021) dated 30.03.2022 and Sonmarg Co-operative Housing Society Limited vs. CIT(A): (ITA No. 1334/Mum/2021) dated 29.03.2022. 9. We are in agreement with the above decisions of the Tribunal and therefore, hold that the Appellant is entitled to claim deduction under Section 80P(2)(d) of the Act in respect of interest received from co- ITA No.433/Mum/2023 (Assessment Year 2017-18) 9 operative banks amounting to INR 24,35,082/-. Accordingly, disallowance of INR 24,35,082/- made by the Assessing Officer and confirmed by CIT(A) is deleted and Ground No.1 raised by the Appellant is allowed. 10. In result, the present appeal preferred by the Appellant is allowed. Order pronounced on 25.04.2023. Sd/- Sd/- (B.R. Baskaran) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 25.04.2023 Alindra, PS ITA No.433/Mum/2023 (Assessment Year 2017-18) 10 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai