SAI PRERNA CO OP SOCIETY LTD, MUMBAI V. ITO WD 17(3)(2), MUMBAI

ITA 5741/MUM/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9860 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 05-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Assessee Lawyers: VIJAYRAO TAMBE; BHARAT KUM
• Keywords: Business income

Judgement Text

, G , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM ITA NO.5741/MUM/2018: ASST.YEAR 2014-2015 M/S SAI PRERNA CO-OPERATIVE SOCIETY LIMITED, NARSHI NATHA STREET MASJID BUNDER (WEST) MUMBAI 400 009. PAN : AADTS5638M. / VS. THE INCOME TAX OFFICER WARD 17(3)(2) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : S/SHRI VIJAYRAO TAMBE & BHARAT KUM AR /RESPONDENT BY : SHRI CHAUDHARY ARUNKUMAR SINGH / DATE OF HEARING : 03.12.2018 / DATE OF PRONOUNCEMENT : 03.12.2018 / O R D E R PER B.R.BASKARAN (AM) : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28.8.2018 PASSED BY THE LEARNED CIT(A)-28, MUMBAI A ND IT RELATES TO ASST.YEAR 2014-2015. 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE REJECTION OF CLAIM FOR DEDUCTION U/S 80P(2)(D) OF THE INCOME-TAX ACT IN RESPECT OF INTEREST RECEIVED ON DEPOSITS KEPT WITH CO- OPERATIVE BANKS. 3. THE ASSESSEE IS A REGISTERED CO-OPERATIVE HOUSIN G SOCIETY. IT EARNED INTEREST INCOME OF RS.1,82,77,027 OUT OF DEPOSITS K EPT WITH CO-OPERATIVE ITA NO.5741/MUM/2018. SAI PRERNA CO-OPERATIVE SOCIETY LTD. 2 BANKS. THE ASSESSEE CLAIMED THE SAME AS DEDUCTION U /S 80P(2)(D) OF THE ACT. THE SAID SECTION READS AS UNDER:- 80P(2)(D) IN RESPECT OF ANY INCOME BY WAY OF INT EREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME; 4. THE ASSESSING OFFICER TOOK THE VIEW THAT THE CO- OPERATIVE BANKS CANNOT BE CONSIDERED AS CO-OPERATIVE SOCIETIES WITH IN THE MEANING OF SECTION 80P(2)(D) OF THE ACT AND ACCORDINGLY DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THE APPEAL BEFORE US. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. THE LEARNED THE LEARNED AR SUBMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE SMC BENCH IN THE CASE OF ITO V. M/S.CITISCAPE C O-OP. HOUSING SOCIETY LTD. [ITA NO.5435-5436/MUM/2017 DATED 08.12.2017]. THE LEARNED AR SUBMITTED THAT THE SMC BENCH HAS NOTED THAT THE HO N'BLE KARNATAKA HIGH COURT HAS CONSIDERED AN IDENTICAL ISSUE AND HAS TAK EN THE VIEW AGAINST THE ASSESSEE IN THE CASE OF PR.CIT V. TOTGARS CO-OPERAT IVE SALE SOCIETY [ITA NO.100066 OF 2016 & ORS. DATED 16.06.2017]. IT WAS ALSO NOTICED THAT THE HON'BLE HIGH COURT OF HIMACHAL PRADESH HAS ALSO CON SIDERED AN IDENTICAL ISSUE AND HAS TAKEN ITS VIEW IN FAVOUR OF THE ASSES SEE IN THE CASE OF CIT V. KANGRA CO-OPERATIVE BANK LTD. (309 ITR 106). ACCORD INGLY, THE TRIBUNAL BY FOLLOWING THE DECISION RENDERED IN THE CASE OF KANG RA CO-OPERATIVE BANK LTD. (SUPRA) HAS HELD THAT THE INTEREST INCOME EARNED ON DEPOSITS KEPT WITH CO- OPERATIVE BANKS WOULD BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT BY FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE S UPREME COURT IN THE CASE ITA NO.5741/MUM/2018. SAI PRERNA CO-OPERATIVE SOCIETY LTD. 3 OF VEGETABLE PRODUCTS LTD. (88 ITR 192). THE LEARNE D AR ALSO SUBMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE CO-ORDINAT E BENCH IN THE CASE OF M/S SEA GREAN CO-OPERATIVE HOUSING SOCIETY LTD. V. ITO [ITA NO.1343/MUM/2017 DATED 31.03.2017] WHEREIN THE TRIB UNAL, BY FOLLOWING THE DECISION RENDERED BY THE CO-ORDINATE BENCH IN THE C ASE OF LAND END CO- OPERATIVE HOUSING SOCIETY LTD. V. ITO [ITA NO.2379/ MUM/2015 DATED 15.01.2016] HAS HELD THAT THE INTEREST INCOME EARNE D BY A CO-OPERATIVE SOCIETY FROM DEPOSITS KEPT WITH CO-OPERATIVE BANKS IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT. 6. ON THE CONTRARY, THE LEARNED DEPARTMENTAL REPRES ENTATIVE SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). 7. HAVING HEARD THE RIVAL CONTENTIONS, WE NOTICED T HAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE AS IT IS SUPPORTED BY T HE ORDER PASSED BY THE SMC BENCH IN THE CASE OF CITISCAPE CO-OPERATIVE HOU SING SOCIETY LTD. (SUPRA) AND ALSO THE DECISION RENDERED BY THE DIVIS ION BENCH IN THE CASE OF SEA GREAN CO-OPERATIVE HOUSING SOCIETY LTD. (SUPRA) . FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE DIVISION BENCH IN THE CASE OF SEA GREAN CO-OPER ATIVE HOUSING SOCIETY LTD.(SUPRA): 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. THE FACTS LIE IN A NARROW COMPASS, INASMUCH AS, THE APPELLANT IS A CO- OPERATIVE SOCIETY, WHOSE INCOME , INTER-ALIA, INCLU DED INTEREST EARNED ON DEPOSITS WITH ANOTHER COOPERATIVE BANK. A CCORDINGLY, SUCH INCOME WAS CLAIMED AS EXEMPT UNDER SECTION 80P (2)(D) OF THE ACT. THE CLAIM HAS BEEN DENIED PRIMARILY ON ACCOUNT OF THE FACT THAT SECTION 80P(2)(D) OF THE ACT RELATES TO THE INCOME EARNED FROM A CO-OPERATIVE SOCIETY. IN THIS CONTEXT, THE DECISION OF THE MUMBAI ITA NO.5741/MUM/2018. SAI PRERNA CO-OPERATIVE SOCIETY LTD. 4 TRIBUNAL IN THE CASE OF LANDS END CO-OPERATIVE HOUS ING SOCIETY LTD. (SUPRA) IS RENDERED UNDER IDENTICAL CIRCUMSTAN CES AND THE FOLLOWING 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 INC OME OF THE ASSESSEE BY REJECTING THE DEDUCTION U/S 80P(2)(D) O F THE ACT OF RS.14,88,107/- BEING INTEREST ON INVESTMENT WITH OT HER COOP. BANKS BY FOLLOWING THE DECISION IN THE CASE OF BANDRA SAM RUDDIHI CO- OPERATIVE HOUSING SOCIETY LTD.(SUPRA) WHICH WAS PAS SED ON THE BASIS OF THE DECISION PASSED BY THE HONBLE SUPREME COURT IN THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. IN THE CASE OF TOTAGARS CO-OPERATIVE SALE SOCIETY LTD V/S ITAT (S UPRA) THE HONBLE SUPREME COURT WHILE INTERPRETING THE SECTIO N 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 TH E COOPERATIVE SOCIETY IS ENGAGED IN CARRYING ON BUSINESS OF BANKI NG OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND CONSEQUENTLY N O DEDUCTION IS ALLOWABLE U/S 80P(2)(A)(I) OF THE ACT. WHEREAS IN T HE CASE BEFORE US THE ISSUE IS WHETHER A CO-OPERATIVE SOCIETY WHICH H AS 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 THE ACT PROVIDE DEDUCTION IN RESPECT OF INCOME BY WAY O F INTEREST OR DIVIDEND ON INVESTMENTS MADE WITH OTHER COOPERATIVE SOCIETY. FOR THE PURPOSES OF BETTER PROPER UNDERSTANDING OF THES E 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 INCOM E 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 TOTA L INCOME OF THE ASSESSEE. 2. THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE THE FOLLOWING, NAMELY:- (A)IN THE CASE OF A CO-OPERATIV E SOCIETY ENGAGED IN- (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS. THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MO RE OF MUCH ATTRIBUTES. ITA NO.5741/MUM/2018. SAI PRERNA CO-OPERATIVE SOCIETY LTD. 5 (D)IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR D IVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH I NCOME. 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 DE DUCTION IN RESPECT OF PROFITS AND GAIN OF BUSINESS IN CASE OF THE CO-O PERATIVE 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 T HAT A COOPERATIVE SOCIETY CAN ONLY AVAIL DEDUCTION U/S 80P(2)(D)(I) I N RESPECT OF ITS INCOME ASSESSABLE AS BUSINESS INCOME AND NOT AS INC OME FROM OTHER SOURCES IF IT CARRIES ON BUSINESS OF THE BANKING OR PROVIDING CREDIT 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 FO R PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THE HEAD UNDER WHICH THE INCOME IS ASSESSABLE IS NOT MATERIAL FOR THE CLAIM OF DEDU CTION UNDER THIS SECTION. NOW WILL EVALUATE THE ASSESSEES CASE IN T HE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT. THE HONBLE S UPREME COURT IN THE CASE OF TOTAGARS 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 BUSINE SS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IN THAT CASE THE SAID INCOME FROM SHORT TERM DEPOSITS SHALL BE TREATED AN D 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 ASSESS ABLE AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES. WHEREA S 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 WI TH OTHER COOP SOCIETY IF SUCH INCOME IS INCLUDED IN THE GROSS TOT AL INCOME OF THE SUCH COOP SOCIETY. IN VIEW THESE FACTS AND CIRCUMST ANCES WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED T O THE DEDUCTION OF RS. 14,88,107/- IN RESPECT OF INTEREST RECEIVED/DER IVED 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 A O IS DIRECTED ACCORDINGLY. ITA NO.5741/MUM/2018. SAI PRERNA CO-OPERATIVE SOCIETY LTD. 6 5.1 IT IS CLEAR THAT THE TRIBUNAL IN THE CASE OF L ANDS END CO- OPERATIVE HOUSING SOCIETY LTD. (SUPRA) HAS CONSIDER ED A SIMILAR SITUATION AND ALLOWED THE CLAIM OF THE ASSESSEE. WE FIND THAT THE CIT(A) HAS PLACED RELIANCE ON THE DECISION OF THE A HMEDABAD 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 A HMEDABAD BENCH OF THE TRIBUNAL HAS BEEN REFERRED TO BY THE SMC BEN CH OF MUMBAI TRIBUNAL IN THE CASE OF SHRI SAIDATTA COOPERATIVE C REDIT SOCIETY LTD. (SUPRA). IN OUR VIEW, THE RELIANCE PLACED BY T HE CIT(A) ON THE JUDGMENT OF THE AHMEDABAD BENCH OF THE TRIBUNAL IS QUITE UNTENABLE, INASMUCH AS, IN THE SAID CASE THE INTERE ST INCOME IN QUESTION WAS EARNED FROM DEPOSITS KEPT WITH STATE B ANK OF INDIA. OBVIOUSLY, STATE BANK OF INDIA IS NOT A CO-OPERATIV E 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 RELIA NCE PLACED BY THE CIT(A) ON THE DECISION OF THE SMC BENCH OF MUMBAI T RIBUNAL IN THE CASE OF SHRI SAIDATTA COOPERATIVE CREDIT SOCIET Y LTD.(SUPRA) IS ALSO OF NO AVAIL, INASMUCH AS, THE BENCH MERELY SET -ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATIO N AFRESH, WHEREAS IN THE CASE OF LANDS END CO-OPERATIVE HOUSING SOCIE TY LTD(SUPRA), THE CLAIM OF EXEMPTION UNDER SECTION 80P(2)(D) OF T HE ACT WITH RESPECT TO THE INTEREST EARNED FROM A CO-OPERATIVE BANK HAS BEEN UPHELD. THEREFORE, IN VIEW OF THE SAID PRECEDENT, T HE CLAIM OF THE ASSESSEE DESERVES TO BE ALLOWED. WE HOLD SO. 8. IN VIEW OF THE FOREGOING, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW DE DUCTION U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTEREST EARNED BY THE ASSESS EE FROM THE DEPOSITS KEPT WITH CO-OPERATIVE BANKS. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 03.12 .2018 SD/- SD/- (AMARJIT SINGH) (B.R.BASKARAN) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER MUMBAI; DATED : 03 RD DECEMBER, 2018. DEVDAS* ITA NO.5741/MUM/2018. SAI PRERNA CO-OPERATIVE SOCIETY LTD. 7 # $%&'&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-28, MUMBAI 5. %&' (()* , ! )* , / DR, ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI