THE ORCHARD RESIDENCY CO-OP HOUSING SOCIETY LIMITED,MUMBAI V. WARD 27(3)(1), MUMBAI

ITA 6009/MUM/2024

AI Insights

The case revolves around the disallowance of a deduction claimed by M/s. The Orchard Residency Co-op Housing Society Limited under section 80P(2)(d) of the Income Tax Act, 1961, for interest income from cooperative banks. Initially, the Assessing Officer disallowed the deduction, which was upheld by the Commissioner of Income Tax (Appeals) despite a significant delay in filing the appeal. The society argued that the delay was due to administrative challenges and the COVID-19 pandemic. The Income Tax Appellate Tribunal, after considering various judicial precedents and the specific circumstances of the case, allowed the appeal, emphasizing the cooperative nature of the society and the intent of section 80P to promote cooperative societies.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470601 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Other Referred Cases: Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO, Kaliandas Udyog Bhavan Premises Coop Society Ltd vs ITO, Mavilayi Service Cooperative Bank Ltd. vs CIT, Calicut, Pr.CIT v/s Totagars Co-operative Sales Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN UNAVEKAR; LD.
• Assessee Lawyers: BHUPENDRA SHAH; LD
• Keywords: Set aside; TDS
• Section: 250; 80P; 2(19)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No.6009/M/2024 Assessment Year: 2020-21 M/s. The Orchard Residency Co-op Housing Society Limited, 166 1 to 23 Orchard Residency, LBS Marg, Behind R-City Mall, Ghatkopar (W), Ghatokpar West S.O., Mumbai Maharashtra – 400 086 PAN: AADAT6530A Vs. Ward 27(3)(1), 3rd & 4th Floor, 6th Tower, Railway Station Building, Vashi, Navi Mumbai, Maharashtra – 400 703 (Appellant) (Respondent) Present for: Assessee by : Shri Bhupendra Shah, Ld. A.R. Revenue by : Shri Kiran Unavekar, Ld. Sr. D.R. Date of Hearing : 16 . 01 .2025 Date of Pronouncement : 19.02.2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 10.10.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2020-21. ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 2 2. In the instant case, the Assessee has earned the amounts of Rs.4,53,479/- and Rs.23,66,559/- {totaling to Rs. 28,20,038/-} being interest income from savings bank account and FD account maintained with Saraswat Co-operative Bank and Mumbai District Co-operative Bank as detailed below: SI. No. Particulars Amount (Rs.) Amount (Rs.) 1. Interest on SB A/c with co-operative bank 4,53,479/- Saraswat Co-op Bank - SBGOLD/39 Rs 3, 21, 869/- Saraswat Co-op Bank - SBGOLD/47 Rs 91, 419/- Saraswat Co-op Bank - SBPUB/1842 Rs 27,668/- Mumbai Dist. Cent. Co-op Bank - 00247 Rs 12,503/- 2. Interest on FD with The Saraswat Co-op. Bank 23,66,559/- TOTAL: 28,20,038/- 3. The Assessee therefore by filing its return of income for the AY under consideration on dated 11.02.2021 and declaring gross total income of Rs.35,28,608/-, has also claimed the deduction of such amount of Rs.28,20,038/- u/s 80(2)(d) of the Act. 4. The Assessing Officer (AO) vide order dated 20.08.2022 u/s 143(3) r.w.s. 144B of the Act, disallowed the said deduction claimed by the Assessee. 5. The Assessee, being aggrieved, challenged the said disallowance of deduction made by the AO, by filing first appeal ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 3 before the Ld. Commissioner, however, with a delay of 318 days in filing of the appeal. The Assessee before the Ld. Commissioner in respect of delay has claimed that selection of Managing Committee Members was due and pending and the therefore Administrator was appointed by Co-Operative Registrar to conduct the affairs of the Society and thus the situation leads to non filing of appeal in time. 6. Though the Ld. Commissioner afforded four opportunities to the Assessee, however, in the constrained circumstances dismissed the appeal of the Assessee and upholding the decision of the AO in disallowing the deduction claimed by the Assessee, mainly observing as under: “The Assessee filed no compliance. The Assessee has nowhere specified as to how much time had consumed in conducting the managing committee elections and how long did the elections stretch and has not given any tangible reason for the delay in filing of the appeal, the appeal is fit to be dismissed or inadmissible on that count alone. No details, documents or submissions have been provided by the Assessee to come to any conclusion other than those arrived at by the AO in the order “. 7. The Assessee, being aggrieved, is in appeal before this Court and with regard to the contention of delay in filing of first appeal before the Ld. Commissioner, by filing a petition dated 15.01.2015 has contended as under: “Background: Our society, comprising 550 members, is a non-profit organization. Due to the appointment of an Administrator from March 25, 2021, to March 31, 2022, all society-related work, including maintenance of important documents, was remained pending. The COVID-19 pandemic further exacerbated the delays. After the new committee took over on March 31, 2022, we addressed the pending issues, but the process was time- consuming. ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 4 Facts of the Case: We received the income tax order for AY 2020-21 on August 20, 2022, with an appeal deadline of October 19, 2022. However, due to the aforementioned delays our appeal was filed on August 3, 2023, resulting in a delay of 288 days. Our society has been consistently filing income tax returns since AY 2012-13, claiming bank interest under Section 80P. We have always received refunds from the Income Tax Department without any issues. We employ around 100-115 personnel and incur daily expenses of approximately lakh. To meet these expenses, we collect maintenance charges from members and save a portion in fixed deposits, earning interest that is subject to TDS. We claim this interest under Section 80P. Our Appeal: We respectfully request that you condone the delay in filing our appeal. Our intention is to reclaim the TDS on interest amount deducted by the bank, which is essential for meeting our daily expenses. We assure you that our delay was not intentional, but rather a result of extraordinary circumstances. We humbly request your honour to consider our petition and grant us justice. We are confident that your authority will take a sympathetic view of our situation.” 8. On the contrary, the Ld. D.R. refuted the claim of the Assessee. 9. Heard the parties and perused the material available on record and given thoughtful considerations to the peculiar facts and circumstances of the case and the rival claims of the parties on the point of limitation. With regard to the delay in filling of appeal before the Ld. Commissioner, the Assessee more or less has stated “that due to appointment of administrator from 25.03.2021 to 31.03.2022 of society related work including maintenance of documents ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 5 remained pending. The Covid-19 pandemic further exacerbated the delays, however once the new committee took over charge on 31.03.2022 the pending issues were addressed but the process was time consuming and therefore the delay in filing of the appeal before the Ld. Commissioner has been occurred. The delay was neither intentional nor malafide but because of the extraordinary circumstances and therefore humble prayer is made to the Hon’ble Court to take a sympathetic view and condone the delay”. The reasons stated by the Assessee seems to be plausible, bonafide and unintentional but insufficient and therefore the delay is condoned but with a cost of Rs. 5500/- to be deposited in the Revenue Department under “other heads” without claiming any deduction or exemption on disallowance of the same, but within 15 days of the receipt of this order. 10. Coming to the merits of issue involved, it is observed that the same is pertains to the disallowance of deduction claimed u/s 80P(2)(d) of the Act on account of interest income earned from co- operative bank, which has been dealt with and has been allowed in favour of the Assessees, by various courts including by the Tribunal in the case of Pathare Prabhu Co-operative Housing Society Ltd. vs. ITO (ITA No.1346 & 1347/M/2023 decided on 27.07.2023) (2023) 153 taxmann.com 714 (Mum. – Trib.) by observing and concluding as under: “8. We have considered the submissions of both sides and perused the material available on record. The only dispute raised by the Assessee is against the disallowance of deduction under section 80P(2)(d) of the Act in respect of interest income received from the Co-operative Banks. The Assessee is a registered Co- operative Housing Society and during the assessment year 2018- 19 earned interest income of Rs. 50,39,861 from the investments made in various Co-operative Banks. ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 6 9. Before proceeding further, it is relevant to note the provisions of section 80P of the Act under which the Assessee has claimed the deduction in the present case. As per the provisions of section 80P(1) of the Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an Assessee being a Co-operative Society. Further, section 80P(2)(d) of the Act, reads as under: “80P. Deduction in respect of income of co-operative societies. (1) ...... (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 cooperative society from its investments with any other co-operative society, the whole of such income;” 10. Thus, for the purpose of provisions of section 80P(2)(d) of the Act, two conditions are required to be cumulatively satisfied- (i) income by way of interest or dividend is earned by the Co- operative Society from the investments, and (ii) such investments should be with any other Co-operative Society. Further, the term „co-operative society‟ is defined under section 2(19) of the Act as under: “(19) \"co-operative society\" means a co-operative 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 co-operative societies; 11. In the present case, there is no dispute that the Assessee is a Co Operative Housing Society. Thus, if any income as referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the Assessee, the same shall be allowed as a deduction. It is pertinent to note that since the Assessee is registered under the Maharashtra Co-operative Societies Act, 1960, it is required to invest or deposit its funds in one of the modes provided in section 70 of the aforesaid Act, which includes investment or deposit of funds in the District Central Co-operative Bank or the State Cooperative Bank. Accordingly, the Assessee ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 7 kept the deposits in Co-operative Banks registered under the Maharashtra Co-operative Societies Act and earned interest, which was claimed as a deduction under section 80P(2)(d) of the Act. The AO denied the deduction under section 80P(2)(d) of the Act on the basis that the Co-operative Bank is covered under the provisions of section 80P(4) of the Act. We find that the Hon’ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. vs CIT, Calicut, [2021] 431 ITR 1 (SC) while analyzing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Cooperative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. The Hon’ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, we are of the considered view that section 80P(4) of the Act is of relevance only in a case where the Assessee, who is a Co-operative Bank, claims a deduction under section 80P of the Act which is not the facts of the present case. Therefore, we find no merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the Assessee. 12. As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the Assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) of the Act. In Kaliandas Udyog Bhavan Premises Coop Society Ltd vs ITO, in ITA No. 6547/ Mum./2017, vide order dated 25/04/2018, while dealing with the provisions of section 80P(2)(d) vis-à-vis section 80P(4) of the Act, the coordinate bench of the Tribunal observed as under: “7. ……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 ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 8 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 jeopardize the claim of deduction of a cooperative 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 cooperative society from its investments made with any other cooperative 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: '(19) \"Co-operative society\" means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative 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 Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative 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.” 13. We find that the learned CIT(A) has placed reliance upon the decision of the Hon‟ble Karnataka High Court in Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 395 ITR 611 (Karn.), wherein it was held that interest earned by the Assessee, a Co- operative Society, from surplus deposits kept with a Cooperative ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 9 Bank, was not eligible for deduction under section 80P(2)(d) of the Act. We find that in an earlier decision the Hon’ble Karnataka High Court in Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 392 ITR 74 (Karn.) held that according to section 80P(2)(d) of the Act, the amount of interest earned from a Co-operative Society Bank would be deductible from the gross income of the Co-operative Society in order to assess its total income. Thus, there are divergent views of the same Hon’ble High Court on the issue of eligibility of deduction under section 80P(2)(d) of the Act in respect of interest earned from Co-operative Bank. No decision of the Hon’ble jurisdictional High Court was brought to our notice on this aspect. We have to, with our highest respect to both the views of the Hon'ble High Court, adopt an objective criterion for deciding as to which decision of the Hon'ble High Court should be followed by us. We find guidance from the judgment of the Hon'ble Supreme Court in CIT v. Vegetable Products Ltd., [1972] 88 ITR 192. In the aforesaid decision, the Hon'ble Supreme Court has laid down a principle that \"if two reasonable constructions of a taxing provisions are possible, that construction which favours the Assessee must be adopted\". 14. Therefore, in view of the above, we uphold the plea of the Assessee and direct the AO to grant the deduction under section 80P(2)(d) of the Act to the Assessee in respect of interest income earned from investment with Cooperative Banks. Accordingly, we set aside the impugned order passed by the learned CIT(A) for the assessment year 2018-19. As a result, grounds raised by the Assessee are allowed.” 11. As the issue is covered in favour of the Assessee, as observed above, hence in view of the judgments referred to above, this Court is inclined to allow the claim of the Assessee, as claimed u/s 80P(2)(d) of the Act, thus the same is allowed and the addition is deleted. ITA No.6009/M/2024 M/s. The Orchard Residency Co-op Housing Society Limited 10 12. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 19.02.2025. Sd/- (NARENDER KUMAR CHOUDHRY) JUDICIAL MEMBER * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai. "