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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
PER OM PRAKASH KANT, AM
These three appeals by the Revenue are directed against three separate orders, each dated 20.04.2023, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2014- 15, 2015-16 and 2017-18 respectively.
2. In these appeals, grounds raised are identical and therefore same were heard together and disposed off by way of this Tahnee Heights Co-operative Housing Society Ltd. operative Housing Society Ltd.. 2 to 2215/Mum/2023 ITA Nos.
consolidated order for convenience. In all the three assessment consolidated order for convenience. In all the three assessment consolidated order for convenience. In all the three assessment orders, the Assessing Officer has disallowed the claim of the , the Assessing Officer has disallowed the claim of the , the Assessing Officer has disallowed the claim of the assessee for deduction u/s 80P(2)(d) of the Income assessee for deduction u/s 80P(2)(d) of the Income-ta tax Act, 1961 (in short ‘the Act’). In assessment year 2014 short ‘the Act’). In assessment year 2014-15, the Assessing Officer 15, the Assessing Officer has also disallowed the claim of deduction for interest earned on has also disallowed the claim of deduction for interest earned on has also disallowed the claim of deduction for interest earned on bonds invested in Indian Railway Finance Corporation Ltd. In bonds invested in Indian Railway Finance Corporation Ltd. In bonds invested in Indian Railway Finance Corporation Ltd. In assessment year 2015 assessment year 2015-16, the claim for deduction on sale of scrap ion on sale of scrap was also disallowed by the Ld. Assessing Officer. The Ld. CIT(A) in was also disallowed by the Ld. Assessing Officer. The Ld. CIT(A) in was also disallowed by the Ld. Assessing Officer. The Ld. CIT(A) in all the three assessment years following the decision of the Hon’ble all the three assessment years following the decision of the Hon’ble all the three assessment years following the decision of the Hon’ble Supreme Court in the case of Venktesh Premises CA 2706 of 2018 Supreme Court in the case of Venktesh Premises CA 2706 of 2018 Supreme Court in the case of Venktesh Premises CA 2706 of 2018 allowed the claim of the assessee o allowed the claim of the assessee on the ground that as long as n the ground that as long as amount accrued to the co amount accrued to the co-operative society are for the benefit of all for the benefit of all the members, principle principle of mutuality are involved and involved and therefore the amount received could not amount received could not be taxable even though there is a taxable even though there is a surplus in the end of the yea surplus in the end of the year.
We have heard both the parties on the issue in dispute and We have heard both the parties on the issue in dispute and We have heard both the parties on the issue in dispute and perused the relevant material on record. As far as the grounds of perused the relevant material on record. As far as the ground perused the relevant material on record. As far as the ground the Revenue relating to deduction u/s 80P(2)(d) of the Act in respect the Revenue relating to deduction u/s 80P(2)(d) of the Act the Revenue relating to deduction u/s 80P(2)(d) of the Act of interest earned from deposits in cooperative bank is concerned, of interest earned from deposits in cooperative bank of interest earned from deposits in cooperative bank we find that the coordinate bench of coordinate bench of Tribunal in various decisions Tribunal in various decisions has consistently allowed the claim of deduction u/s 80P(2)(d) of the has consistently allowed the claim of deduction u/s 80P(2)(d) of the has consistently allowed the claim of deduction u/s 80P(2)(d) of the Act on the interest earned on deposits Act on the interest earned on deposits with co-operative bank operative bank, holding that hose cooperative bank cooperative bank are primarily exist exist as cooperative society. . Before us, the Ld. Counsel . Before us, the Ld. Counsel for the assessee has cited the assessee has cited
Tahnee Heights Co-operative Housing Society Ltd. operative Housing Society Ltd.. 3 to 2215/Mum/2023 ITA Nos. decision in the case of Land End Co-Operative Housing Society in Operative Housing Society in decision in the case of ITA No. 3566/Mum/2014 for assessment year 2009 for assessment year 2009-10. The relevant finding of the Tribunal is reproduced as under: relevant finding of the Tribunal is reproduced as under: relevant finding of the Tribunal is reproduced as under:
“8.3 We have heard the rival submissions and perused the material on 8.3 We have heard the rival submissions and perused the material on 8.3 We have heard the rival submissions and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by record. We find that the CIT(A) enhanced the income of the assessee by record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u rejecting the deduction u/s 80P(2)(d) of the Act of Rs.14,88,107/ /s 80P(2)(d) of the Act of Rs.14,88,107/- being interest on investment with other Coop. banks by following the decision interest on investment with other Coop. banks by following the decision interest on investment with other Coop. banks by following the decision in the case of Bandra Samruddihi Co in the case of Bandra Samruddihi Co-operative Housing Society operative Housing Society Ltd.(Supra) which was passed on the basis of the decision passed by Ltd.(Supra) which was passed on the basis of the decision passed by Ltd.(Supra) which was passed on the basis of the decision passed by the Hon'ble Supreme Court in the case of Totagar's Co n'ble Supreme Court in the case of Totagar's Co-operative Sale operative Sale Society Ltd. In the case of Totagar's Co Society Ltd. In the case of Totagar's Co-operative Sale Society Ltd v/s operative Sale Society Ltd v/s ITAT (supra) the Hon'ble Supreme Court while interpreting the section ITAT (supra) the Hon'ble Supreme Court while interpreting the section ITAT (supra) the Hon'ble Supreme Court while interpreting the section 80P(2)(a)(i) of the Act held that surplus funds not 80P(2)(a)(i) of the Act held that surplus funds not immediately required immediately required in the business and invested in the short term deposit would be in the business and invested in the short term deposit would be in the business and invested in the short term deposit would be assessable under the head "income from other sources" where the Co assessable under the head "income from other sources" where the Co assessable under the head "income from other sources" where the Co- operative society is engaged in carrying on business of banking or operative society is engaged in carrying on business of banking or operative society is engaged in carrying on business of banking or providing credit facilities to its providing credit facilities to its members and consequently no deduction members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co the issue is whether a co-operative society which has derived income on operative society which has derived income on investment with cooperative banks is entitled to deduction u/s investment with cooperative banks is entitled to deduction u/s investment with cooperative banks is entitled to deduction u/s 80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide The provisions of Section 80P(2)(d) of the Act provide The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on deduction in respect of income by way of interest or dividend on deduction in respect of income by way of interest or dividend on investments made with other Cooperative society. For the purposes of investments made with other Cooperative society. For the purposes of investments made with other Cooperative society. For the purposes of better proper understanding of these two provisions the relevant ex better proper understanding of these two provisions the relevant ex better proper understanding of these two provisions the relevant extract of the section are reproduced below: 80P: Deduction in respect of income of the section are reproduced below: 80P: Deduction in respect of income of the section are reproduced below: 80P: Deduction in respect of income of co-operative Societies. operative Societies.
Where, in the case of an assesssee being a co 1. Where, in the case of an assesssee being a co-operative society, the operative society, the gross total income, includes any income referred to in sub gross total income, includes any income referred to in sub gross total income, includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the shall be deducted, in accordance with and subject to the shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub provisions of this section, the sums specified in sub-section (2), in section (2), in computing the total income of the assessee. computing the total income of the assessee.
The sums referred to in sub 2. The sums referred to in sub-section (1) shall be the following, section (1) shall be the following, namely:- (a) In the case of a co e case of a co-operative society engaged in- (i) Carrying on the business of banking or providing credit facilities to its (i) Carrying on the business of banking or providing credit facilities to its (i) Carrying on the business of banking or providing credit facilities to its members. The whole of the amount of profits and gains of business attributable to The whole of the amount of profits and gains of business attributable to The whole of the amount of profits and gains of business attributable to any one or more of much attributes. any one or more of much attributes. (d)In respect of any income by way of interest or dividends derived by f any income by way of interest or dividends derived by f any income by way of interest or dividends derived by the co-operative society from its investments with any other co operative society from its investments with any other co operative society from its investments with any other co-operative society, the whole of such income." society, the whole of such income."
Tahnee Heights Co-operative Housing Society Ltd. operative Housing Society Ltd.. 4 to 2215/Mum/2023 ITA Nos.
From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) 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 deduction in respect of profits and t the former deals with deduction in respect of profits and t the former deals with deduction in respect of profits and gain of business in case of the co gain of business in case of the co-operative society carrying on business operative society carrying on business of banking or providing credit facilities to its members if the said income of banking or providing credit facilities to its members if the said income of banking or providing credit facilities to its members if the said income is assessable as income from business whereas is assessable as income from business whereas latter provides for latter provides for deduction in respect of income by way interest and dividend derived by deduction in respect of income by way interest and dividend derived by deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is assessee from its investments with other cooperative society. Thus it is assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s amply clear that a cooperative society can only avail deduction u/s amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect 80P(2)(d)(i) in respect of its income assessable as business income and of its income assessable as business income and not as income from other sources if it carries on business of the banking not as income from other sources if it carries on business of the banking not as income from other sources if it carries on business of the banking or providing credit or providing credit Lands End Co ITA No.3566/Mum/2014 Lands End Co-operative Housing Society Ltd Vs. I.T.O. Housing Society Ltd Vs. I.T.O. facilities to its members and has incom facilities to its members and has income assessable under the head e assessable under the head business whereas for claiming u/s 80P(2)(d) it must have income of business whereas for claiming u/s 80P(2)(d) it must have income of business whereas for claiming u/s 80P(2)(d) it must have income of interest and dividend on investments with other Co interest and dividend on investments with other Co-operative society operative society may or may not be engaged in the banking for providing credit facilities may or may not be engaged in the banking for providing credit facilities may or may not be engaged in the banking for providing credit facilities to its members and to its members and the head under which the income is assessable is the head under which the income is assessable is not material for the claim of deduction under this section. Now will not material for the claim of deduction under this section. Now will not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble evaluate the assessee's case in the light of the decision of the Hon'ble 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 Supreme court. The Honble Supreme Court in the case of Totagar's 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 operative Sale Society Ltd.(Supra) held that a society has surplus funds operative Sale Society Ltd.(Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged which are invested in short term deposits where the society is engaged 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 in the business of banking or providing credit facilities to its members in in the business of banking or providing credit facilities to its members in that case the said income from sh that case the said income from short term deposits shall be treated and ort term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) 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) would not be available meaning thereby that 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 is available only in respect of income which is assessable as business is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to come and not as income from other sources. Whereas in distinction to come 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 this , the provisions of section 80(P)(2)(d) of the Act provides for this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or deduction in respect of income of a coop society by way of interest or deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop s dividend from its investments with other coop society if such income is ociety if such income is included in the gross total income of the such coop society. In view these included in the gross total income of the such coop society. In view these included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the facts and circumstances we are of the considered view that the facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/ assessee is entitled to the deduction of Rs. 14,88,107/- in respect of in respect of interest received/deri interest received/derived by it on deposits with coop. banks and ved by it on deposits with coop. banks and ITA No.3566/Mum/2014 Lands End Co No.3566/Mum/2014 Lands End Co-operative Housing Society Ltd Vs. operative Housing Society Ltd Vs. I.T.O. therefore the appeal of the assessee is allowed by reversing the order of therefore the appeal of the assessee is allowed by reversing the order of therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directed accordingly. the CIT(A). The AO is directed accordingly.” 3.1 Further, the Ld. Counsel of the assessee has also relied on the . Counsel of the assessee has also relied on the . Counsel of the assessee has also relied on the decision of the Tribunal in the case of the Totgars Totgars co-operative decision of the Tribunal in the case of sale society ltd. ITA No. 376 to 379/Bang/2023 for assessment sale society ltd. ITA No. 376 to 379/Bang/2023 sale society ltd. ITA No. 376 to 379/Bang/2023 years 2015-16 to 2018 16 to 2018-19. The Ld. Counsel also relied on the 19. The Ld. Counsel also relied on the ordinate Bench of the Tribunal in the case of M/s decision of the Co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of Tahnee Heights Co-operative Housing Society Ltd. operative Housing Society Ltd.. 5 to 2215/Mum/2023 ITA Nos.
Ishwar Bhawan Housing Housing Ltd. Ltd. in ITA ITA No. No. 3285 3285 and and 3269/Mum/2022 for assessment year for assessment years 2020-21 and 2021 21 and 2021-22 and ion of the Tribunal in the case of Amore Amore Commercial decision of the Tribunal in the case of Premises Co-op Society op Society in and 2874/Mum/2022 in ITA No. 2873 and 2874/Mum/2022 for assessment years s 2020-21 and 2021-22.
3.2 In these decisions the Co In these decisions the Co-ordinate Bench has allowed th ordinate Bench has allowed the claim of the assessee u/s 80P( claim of the assessee u/s 80P(2)(d) of the Act in respect of interest Act in respect of interest earned from deposits with co earned from deposits with co-operative banks. Respectfully operative banks. Respectfully following the decision following the decisions cited above, we allow the claim of the cited above, we allow the claim of the assessee for deduction u/s 80P(2)(d) of the Act in respect of interest assessee for deduction u/s 80P(2)(d) of the Act in respect of interest assessee for deduction u/s 80P(2)(d) of the Act in respect of interest earned on deposit with co earned on deposit with co-operative bank. The bank. The corresponding grounds of appeal of the revenue are accordingly dismissed appeal of the revenue are accordingly dismissed for all appeal of the revenue are accordingly dismissed three assessment years. years.
3.3 In respect of ground raised by the Revenue n respect of ground raised by the Revenue in AY 2014 in AY 2014-15 for interest of Rs.2,84,104/ interest of Rs.2,84,104/- received from Indian Railway Financial received from Indian Railway Financial Corporation Ltd. on d. on bond invested by the assessee societ invested by the assessee society is concerned, we find that the assessee has claimed the said interest e find that the assessee has claimed the said interest e find that the assessee has claimed the said interest as exempted u/s 10(15) of the Act b as exempted u/s 10(15) of the Act but under the provisions of the ut under the provisions of the Act said exemption has to be notified in the official gazette but no ct said exemption has to be notified in the official gazette but no ct said exemption has to be notified in the official gazette but no such notification has s been produced by the assessee either before been produced by the assessee either before us or before the lower authorities us or before the lower authorities, therefore in the interest of justice therefore in the interest of justice we restore this issue back to the file of the Assessing Officer with we restore this issue back to the file of the Assessing Officer with we restore this issue back to the file of the Assessing Officer with the direction to the assessee to produce necessary evidence in the direction to the assessee to produce necessary evi the direction to the assessee to produce necessary evi support of claim including notification in the official gazette. The support of claim including notification in the official gazette support of claim including notification in the official gazette
Tahnee Heights Co-operative Housing Society Ltd. operative Housing Society Ltd.. 6 to 2215/Mum/2023 ITA Nos. ground Nos. 7 to 8 of the appeal of the Revenue are accordingly . 7 to 8 of the appeal of the Revenue are accordingly . 7 to 8 of the appeal of the Revenue are accordingly allowed for statistical purposes. allowed for statistical purposes.
3.4 As far as the ground No. 7 in the appeal As far as the ground No. 7 in the appeal for the assessment year 2015-16 concerning disallowance of deduction in respect of erning disallowance of deduction in respect of erning disallowance of deduction in respect of scrap sale is considered scrap sale is considered, the Ld. Counsel of the assessee the Ld. Counsel of the assessee submitted that issue in dispute is covered in favour of the assessee by the Co- that issue in dispute is covered in favour of the assessee that issue in dispute is covered in favour of the assessee ordinate Bench of the Tribunal in the case of the assessee in ITA ordinate Bench of the Tribunal in the case of the assessee in ITA ordinate Bench of the Tribunal in the case of the assessee in for assessment year 2004 35 for assessment year 2004-05. In para 2 of the order of the para 2 of the order of the Tribunal (supra), it is mentioned that the controversy was , it is mentioned that the controversy was , it is mentioned that the controversy was whether income in respect of sale scrap of Rs.20,26,500/ in respect of sale scrap of Rs.20,26,500/- could be allowed could be allowed on basis of mutuality or not. The Tribunal (supra) in para 4.2 of the of mutuality or not. The Tribunal (supra) in para 4.2 of the of mutuality or not. The Tribunal (supra) in para 4.2 of the order have allowed the claim of the assessee observing as under: allowed the claim of the assessee observing as under: allowed the claim of the assessee observing as under:
“4.2 The principles of mutuality has been elaborated by the 4.2 The principles of mutuality has been elaborated by the 4.2 The principles of mutuality has been elaborated by the Honble Supreme Court in the case of CIT vs. Bankipur Club Ltd. Honble Supreme Court in the case of CIT vs. Bankipur Club Ltd. Honble Supreme Court in the case of CIT vs. Bankipur Club Ltd. (226 ITR 97) wherein the Hon'ble Supreme Court has held that for TR 97) wherein the Hon'ble Supreme Court has held that for TR 97) wherein the Hon'ble Supreme Court has held that for applying the principle of mutuality, "there must be complete applying the principle of mutuality, "there must be complete applying the principle of mutuality, "there must be complete identity between the contributors and the participators." In our identity between the contributors and the participators." In our identity between the contributors and the participators." In our opinion, the claim of the assessee that on the principles of opinion, the claim of the assessee that on the principles of opinion, the claim of the assessee that on the principles of mutuality, the sale proceeds has to be excluded while computing the sale proceeds has to be excluded while computing the sale proceeds has to be excluded while computing the income of the assessee on the principles of mutuality as there the income of the assessee on the principles of mutuality as there the income of the assessee on the principles of mutuality as there is a complete identity of contributors and participators. is a complete identity of contributors and participators. is a complete identity of contributors and participators. Accordingly, the addition in respect of the sale proceed is Accordingly, the addition in respect of the sale proceed is Accordingly, the addition in respect of the sale proceed is deleted.” 3.5 Respectfully following the finding of the Tribunal, the pectfully following the finding of the Tribunal, the pectfully following the finding of the Tribunal, the assessee is eligible for deduction for income from the scrap deduction for income from the scrap sale amounting to sale amounting to Rs.1,97,000/-. The ground No. 7 of the appeal he ground No. 7 of the appeal he ground No. 7 of the appeal of Revenue is accordingly dismissed dismissed.
Tahnee Heights Co-operative Housing Society Ltd. operative Housing Society Ltd.. 7 to 2215/Mum/2023 ITA Nos.
In the result, the appeal of the R In the result, the appeal of the Revenue for assessment year evenue for assessment year 2014-15 is partly allowed for statistical purposes whereas appeal 15 is partly allowed for statistical purposes whereas appeals 15 is partly allowed for statistical purposes whereas appeal for assessment year 2015 for assessment year 2015-16 and 2017-18 are dismissed. 18 are dismissed.