MHADA KARMACHARI SAHAKARI PATPEDHI MARYADIT,MUMBAI V. ASSESSMENT UNIT, INCOME TAX DEPARTMENT, MUMBAI

ITA 6372/MUM/2024

AI Insights

The case involves Mhada Karmachari Sahakari Patpedhi Maryadit, a cooperative credit society, which appealed against the disallowance of a deduction claim of Rs. 35,04,451 on interest income from fixed deposits with cooperative banks. The Assessing Officer had denied the deduction, citing that such income does not advance the cooperative movement, referencing the Supreme Court's decision in Totagarh's Co-operative Sales Society Ltd vs. ITO. However, the Tribunal noted that similar cases had been decided in favor of the assessee by the Bombay High Court and other ITAT benches, which recognized the eligibility for deductions under section 80P(2)(a)(i) for interest and dividend income from cooperative banks.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470750 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Other Referred Cases: Totagarh's Co-operative Sales Society Ltd Vs. ITO, University of Mumbai Employees Co-op Credit Society Ltd Vs ITO, Mahapalika Kshetra Madhyamik Shikshak Sahakari Patsanstha Maryadit vs ITO, PCIT vs. Totagars, Co-operative Sale Society, Surat Vankar Sahakari Sangh Ltd. vs. ACIT, K. Subramanian vs. Siemens India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL AGAWANE
• Assessee Lawyers: BHUPENDRA SHAH; RITESH GAWANDE
• Keywords: Set aside; Principle of natural justice
• Section: 80P

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA No. 6372/Mum/2024 (Assessment Year: 2020-21) Mhada Karmachari Sahakari Patpedhi Maryadit Room No. 47, Ground Floor, Gruhanirman Bhavan, Bandra (E), Mumbai – 400051. Vs. Assessment Unit ITO Ward 23(2)(1) Piramal Chambers, Lalbaugh, Parel, Mumbai – 400012. PAN/GIR No. AAIAM3078P (Applicant) (Respondent) Assessee by Shri Bhupendra Shah & Mr. Ritesh Gawande Revenue by Shri Sunil Agawane, Sr. DR Date of Hearing 28.01.2025 Date of Pronouncement 25.02.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee challenging the impugned order 14.11.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC), Mumbai / CIT(A) for the assessment year 2020-21. The assessee has raised the grounds of appeal: 2 ITA No. 6372/Mum/2024 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai 1. Natural Justice 1.1 The The Additional / Joint / Deputy / Assistant Commissioner of Income Tax / Income tax Officer, OF Assessment Unit, Income Tax Department [\"the A.O.\"], erred in not granting proper, sufficient and adequate opportunity of being heard to the Appellant while framing the assessment / making the impugned additions. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the assessment so framed be held as bad and illegal, as the same is framed in breach of the principles of natural justice. WITHOUT PREJUDICE TO THE ABOVE 2.1 On the facts and circumstances of the case, and in law, the learned the A.O. erred in not allowing deduction of Rs. 35,04,451/- u/s. 80P (2) (a) (i) of the Act in respect of the interest income earned by the Appellant on the deposits kept by it with co-operative banks. It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance of the claim was called for. 2.2. The AO erred in not allowing Deduction of Rs. 35,04,451/- U/s. 80 P (2) (d), as the income from Other Sources of the Appellant. 2.3. The Commissioner of Income-tax (Appeals), Income Tax Department, National Faceless Appeal Centre [\"the CIT(A)\"] erred in upholding the Action of AO. 3 The Appellant craves leave to add, alter, delete or modify all or any the above grounds at the time of hearing. 2. The only ground raised by the assessee in the present appeal is with regard to disallowance of deduction claimed 3 ITA No. 6372/Mum/2024 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai u/s 80P(2)(a)(i) of the Act on interest earned on FDR with cooperative bank amounting to Rs. 35,04,451/- 3. In this regard Ld. AR appearing on behalf of the assessee, reiterated the same arguments as released by him before revenue authorities. Whereas on the contrary, DR appearing on behalf of the revenue relied upon the orders passed by the revenue authorities 4. I have heard the counsels for both the parties and have perused the material placed on record, judgements cited before me and also the orders passed by the revenue authorities 5. From the records, I noticed that the assessee is a cooperative credit Society and earned interest income from Mumbai District Cooperative Bank and Maharashtra State Cooperative Bank and thus claimed deduction u/s 80P(2)(a)(i) of the Act, but the same was denied by the AO by holding that earning of interest from FDR is not an activity for advancement of cooperative movement, while relying upon the decision of Hon’ble Supreme Court in the case of Totagarh’s Co-operative Sales Society Ltd Vs. ITO, 322 ITR 283 and other decisions quoted in the order of Ld. CIT(A). 4 ITA No. 6372/Mum/2024 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai 6 After having heard the counsels at length, I found that the issue in the present appeal is squarely covered by the decision in following cases: a. The University of Mumbai Employees Co-op Credit Society Ltd Vs. ITO, ITA No. 450/Mum/2019, wherein the operative portion is reproduced herein below: We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that the issue involved in present appeal filed by the assessee is squarely covered in favour of the assessee by the decision of Hon'ble Bombay High Court, in the case of M/s. Quepem Urban Credit Society Ltd. vs ACIT (supra), where under identical set of facts, the Hon'ble High Court held that interest and dividend earned from investments with other cooperative banks/societies is entitled for deductions u/s 80P(2)(a)(i) of the I.T.Act, 1961. We, further noted that the ITAT Mumbai 'D' bench, in the case of Mahapalika Kshetra Madhyamik Shikshak Sahakari Patsanstha Maryadit vs ITO (supra) had considered an identical issue and held that where assessee, a co-operative credit society had not undertaken any of banking business and was providing credit facilities to its members only and not to general public, it would not hit by provisions of section 80P(4) of the I.T.Act, 1961 and thus, entitled for deduction u/s 80P(2)(a)(i) of the I.T.Act, 1961. In this case, on perusal of facts available on record, there is no dispute with regard to the fact that the assessee is not carried out any banking business to public at large, but was engaged in the providing credit facilities to its members only. Therefore, we are of the considered view that income earned by the assessee, including interest and dividend received from investments with other co- operative society/co-operative banks is entitled for deduction u/s 80P(2)(a) (i) of the I.T.Act, 1961. Hence, we direct the Ld. AO to allow the benefit of deduction u/s 80P(2)(a) (i) of the Act, in respect of interest and dividend earned from investments with other co-operative bank/societies. 5 ITA No. 6372/Mum/2024 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai 8. In the result, appeal filed by the assessee is allowed. b. LG Power and Industrial Solutions Ltd Employees Co.Op credit Society Ltd, ITA No. 2044/Mum/2021, wherein the operative portion is reproduced herein below: 5. Both sides heard, orders of authorities below examined. Undisputedly the assessee has received interest and dividend income from deposits/investments with Co-operative Bank. The Assessing Officer and CIT(A) has disallowed the assessee's claim of deduction under section 80P(2)(d) of the Act in respect of said income of Rs.10,74,752/-. 6. The Hon'ble Karnataka High court in the subsequent judgment in the case of PCIT vs. Totagars, Co-operative Sale Society reported as 392 ITR 74 has held that for the purpose of section 80P(2)(d) of the Act, co-operative bank should be considered as cooperative society. Similar view has been taken by the Hon'ble Gujarat High court in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT, 421 ITR 134. 7. However, on the same issue Hon'ble Karnataka High court in the subsequent judgment in the case of PCIT vs. Totagars, Co- operative Sale Society 395 ITR 611 (Karnataka) has taken a contrary view holding that interest income earned from deposit with the cooperative bank does not qualify for deduction under section 80P(2)(d) of the Act. It would be relevant to mention here that the Hon'ble High Court while rendering the later judgement has not considered the earlier decision rendered in the case of Totagars, Co-operative Sale Society (supra). 8. No judgement by the Hon'ble Jurisdictional High Court on this issue was brought to our notice. The Hon'ble Bombay High Court in the case of K. Subramanian vs. Siemens India Ltd. 156 ITR 11 has held that when two conflicting decisions of non-jurisdictional High Courts are available, the view that 6 ITA No. 6372/Mum/2024 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai favours the assessee is to be preferred. Accordingly, following the first decision of Hon'ble Karnataka High Court in the case of Totagars Co-operative Sale Society (supra) and the decision in the case of Hon'ble Gujarat High Court in the case of Vankar Sahakari Sangh (supra). I hold that the assessee is eligible to claim deduction under section 80P(2)(d) of the Act in respect interest / dividend income from co-operative bank. 9. The CIT(A) has placed reliance on the decision of Hon'ble Supreme Court of India in the case of Totgars Co-operative Sale Society Ltd. vs. ITO(supra) to disallow assessee's claim of deduction under section 80P(2)(d) of the Act. 1 find that the aforesaid decision is distinguishable on facts. In the said case assessee's claim of deduction under section 80P(2)(d) of the Act was not rejected for the reason that the assessee falls within the ambit of section 80P(4) of the Act. Hence, ratio laid down by Hon'ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (supra) would not apply in the present appeal. 10. In the result, impugned order is set-aside and appeal by assessee is allowed. 7. Respectfully, following the view taken by the Hon’ble Coordinate Benches of Mumbai ITAT, I hold that AO was not justified in disallowing the claim of deduction. Therefore I set aside the order of CIT(A) and allow the deduction claimed by the assessee u/s 80(P)(2)(d) of the Act. Consequently, this grounds raised by the assessee stands allowed. 7 ITA No. 6372/Mum/2024 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai 8. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 25.02.2025. Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER Mumbai, Dated 25/02/2025 KRK, PS आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ\f / The Appellant 2. \r\u000eथ\f / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय \rितिनिध, आयकर अपीलीय अिधकरण, मु\u0003बई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, स\u000eािपत \rित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai "