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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY, HON’BLE & SHRI S. RIFAUR RAHMAN, HONBLE
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 18.03.2023 for the A.Y.2011-12.
(A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., 2. Assessee has raised following grounds in its appeal: - “1) On facts and circumstances of the case and in law, the Ld.National Faceless Appeal Centre (NFAC) has erred in declining to condone the delay in filing the appeal. 2) On facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) has erred in confirming the disallowance of deduction of Rs 2,56,358/- under section 80P (2)(d) of the Income-tax Act, 1961 (Act), in respect of interest received from deposits kept in co-operative banks, without appreciating that, the co-operatives banks are registered under the Co- Operatives Societies Act, 1912 with a license to undertake banking activities. 3) On facts and circumstances of the case and in law, the Ld NFAC erred in not following the judgments of jurisdictional Tribunal which has explained the ratio of the Hon'ble Supreme Court and held that deduction under section 80P (2)(d) of the Act is eligible in respect of interest received from the Co- Operative Banks. 4) On facts and circumstances of the case and in law, the Ld. NFAC erred in in confirming the disallowance of deduction of Rs. 2,56,358/- under section 80P (2)(d) of the Act made by the CPC under section 143(1) of the Act, without appreciating that the disallowance is a debatable issue and hence the adjustment is bad in law. 5) The Assessee craves leave to add, amend, alter or delete any or all the above grounds of appeal.
3. At the outset, Ld. AR of the assessee brought to our notice that Ld.CIT(A) has dismissed the ground raised
by the assessee requesting for condonation of delay. Ld.AR of the assessee filed an affidavit before Ld.CIT(A) and requested for condonation of delay, the contents of the affidavit are as under: -
1. I say that the CPC intimation u/s 143(1) order dated 06/08/2014 was received on 08/08/2014 and the last Day for filing the appeal was 06/09/2014. However, the appeal was filed before CIT(A) on 15/05/2021. Thus, there is a delay of 2443 days from the last day for filing the appeal on 06/09/2014, however, the Hon'ble
Page No. 2 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., Supreme Court in the case of Suo moto Writ Petition (C) No. 3 of 2020 dated 10/01/2022 has extended the period of limitation from 15/03/2020 to 28/02/2022 due to COVID-19. Therefore, the effective date of the appeals being time-barred is for 2017 days from 06/09/2014 to 14/03/2020 2. I, say that I received the CPC Intimation u/s 143(1) on 08/08/2014. The same was immediately handed over to their chartered accountant M/s. KVS & Company. However, the chartered accountant did not file any rectification application nor file any appeal before CIT(A).
I, say that I was not aware of the CIT(A) proceedings at all. I became aware of the non-filing of the appeal before CIT(A) when society received an Intimation u/s 245 of the act by email on 30/03/2021 for a proposal to adjustment of refund for A.Y 2020-21 against outstanding demand for AY 2018-19. That time I came to know about the fact that the demand raised under Intimation u/s.143(1)(a) for A.Y.2018-19 including all other assessment years from AY 2011-12 & A.Y.2013-14 to 2015-16 is pending for filing appeal before CIT(A). After that I discontinued the earlier chartered accountant M/s. KVS & Company and appointed a new chartered accountant M/s. Bhatia & Poojari.
I, say that the new chartered accountant forwarded the case papers to the counsel, who asked for further details for the preparation of the appeal. The appeal was prepared on 7th May 2021 and was forwarded to the chartered accountant for approval and my signature. The Chartered accountant forwarded the said papers to me. I forwarded the signed documents to the Chartered accountant. The Appeal was finally filed on 15th May 2021.
5. I, say that due to the above reason, Appeal was delayed by 2017 days. I say that delay was not intentional and the same was due to circumstances beyond my control.
6. I say that whatever is stated in the condonation application is true and correct 1 further say that whatever is stated in the above para's are true to best of my knowledge and I believe it to be true.”
4. Ld. AR of the assessee submitted that the delay is due to not following up the case by the earlier Chartered Accountant and is not intentional and requested the bench to condone the delay.
Page No. 3 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., 5. On the other hand, Ld. DR relied on the order of the Ld.CIT(A) and objected the submissions of the assessee towards the condonation of the delay. He submitted that the submissions made by the Ld. AR of the assessee is general in nature.
Considered the rival submissions and material placed on record, we observe from the affidavit that the delay was due to not following up the case by the earlier Chartered Accountant. In the case of M/s. Midas Polymer Compounds Pvt. Ltd., v. ACIT in ITA.No. 288/Coch/2017 the Coordinate Bench of the Tribunal has considered the issue of condonation of delay and by following various judicial precedents along with the decision of the Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst Katiji and ors. (167 ITR 471) condoned the delay of 2819 days observing as under: - “6. We have heard the rival submissions and perused the record. There was a delay of 2819 days in filing the appeal before the Tribunal. The assessee has stated the reasons in the condonation petition accompanied by an affidavit which has been cited in the earlier para. The assessee filed an affidavit explaining the reasons and prayed for condonation of delay. The reason stated by the assessee is due to inadvertent omission on the part of Shri Unnikrishnan Nair N, CA in taking appropriate action to file the appeal. He had a mistaken belief that the appeal for this year was filed by the assessee as there was separate Counsel to take steps to file this appeal before the ITAT. Therefore, we have to consider whether the Counsel’s failure is sufficient cause for condoning the delay. The Madras High Court considered an identical issue in the case of Sreenivas Charitable Trust v. Dy. CIT (280 ITR 357) and held that mixing up of papers with other papers are sufficient cause for Page No. 4 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., not filing the appeal in time. The Madras High Court further observed that the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reasons for condoning the delay. 6.1 On merit the issue is in favour of the assessee. But there is a technical defect in the appeal since the appeal was not filed within the period of limitation. The assessee filed an affidavit saying that the appeal was not filed because of the Counsel’s inability to file the appeal. The Revenue has not filed any counter affidavit to deny the allegation made by the assessee. While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder: (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non deliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
Page No. 5 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., 6.2 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of nondeliberate delay. In the case on our hand, the issue on merit regarding allowability of deduction u/s. 80IB of the Act was covered in favour of the assessee by the binding Judgment of the jurisdictional High Court. Moreover, no counter-affidavit was filed by the Revenue denying the allegation made by the assessee. It is not the case of the Revenue that the appeal was not filed deliberately. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalise injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay of 2819 days has to be condoned. 6.3 The next question may arise whether 2819 days was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT v. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the delay of condonation and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 2819 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM ) condoned more than six hundred days delay. It is pertinent to mention herein that the view taken by the present author in that case was overruled by the Third Member. 6.4. The Madras High Court in the case of Sreenivas Charitable Trust (supra) held that no hard and fast rule can be laid down in the matter of condonation of delay and the Court should adopt a Page No. 6 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., pragmatic approach and the Court should exercise their discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. Therefore, this Judgment of the Madras High Court (supra) clearly says that in order to advance substantial justice which is of prime importance, the expression "sufficient cause" should receive a liberal construction. In this case, the issue on merit regarding granting of deduction u/s. 80IB was covered in favour of the assessee by the Judgment of the jurisdictional High Court. Therefore, for the purpose of advancing substantial justice which is of prime importance in the administration of justice, the expression "sufficient cause" should receive a liberal construction. In our opinion, this Judgment of the jurisdictional High Court is also squarely applicable to the facts of this case. A similar view was taken by the Madras High Court in the case of Venkatadri Traders Ltd. v. CIT (2001) 168 CTR (Mad) 81 : (2001) 118 Taxman 622 (Mad). 6.5 The Mumbai Bench of this Tribunal in the case of Bajaj Hindusthan Ltd. v. Jt. CIT (AT) (277 ITR 1) has condoned the delay of 180 days when the appeal was filed after the pronouncement of the Judgment of the Apex Court. Furthermore, the Revenue has not filed any counter-affidavit opposing the application of the assessee for condonation of delay. The Apex Court in the case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi (AIR 1978 SC 537) held that non-filing of affidavit in opposition to an application for condonation of delay may be a sufficient cause for condonation of delay. In this case, the Revenue has not filed any counter-affidavit opposing the application of the assessee, therefore, as held by the Apex Court, there is sufficient cause for condonation of delay. The Supreme Court observed that when the delay was of short duration, a liberal view should be taken. "It does not mean that when the delay was for longer period, the delay should not be condoned even though there was sufficient cause. The Apex Court did not say that longer period of delay should not be condoned. Condonation of delay is the discretion of the Court/Tribunal. Therefore, it would depend upon the facts of each case. In our opinion, when there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned irrespective of the duration/period. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay of 2819 days 6.6 In case the delay was not condoned, it would amount to legalise an illegal and unconstitutional order. The power given to the Tribunal is not to legalise an injustice on technical ground but to do substantial justice by removing the injustice. The Parliament
Page No. 7 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., conferred power on this Tribunal with the intention that this Tribunal would deliver justice rather than legalise injustice on technicalities. Therefore, when this Tribunal was empowered and capable of removing injustice, in our opinion, the delay of 2819 days has to be condoned and the appeal of the assessee has to be admitted and disposed of on merit. 6.7 In view of the above, we condone the delay of 2819 days in filing the appeal and admit the appeal for adjudication.”
7. In our opinion, there is sufficient cause for not filing the appeal within the period of limitation, therefore, respectfully following the above said decision and for the sake of overall justice we condone the delay in filing the appeal before Ld.CIT(A) in the interest of natural justice. Accordingly, Ground No.1 raised by the assessee is allowed.
8. Coming to the merits of the case, Ld. AR brought to our notice the relevant facts on record and submitted that assessee Society has made investments as per the statutory requirements governing the Society. Ld.AR submitted that the assessee co-operative society does not fall within the restriction placed in sub-section (4) of section 80P of the Act. In support of his contentions Ld. AR relied on the decision of Coordinate Bench in the case of Amore Commercial Premises Co-Op Society Ltd. v. CPC in ITA.No. 2873/Mum/2022 dated 17.01.2023, New Ideal Cooperative Housing Society Limited v. ITO in ITA.No. 2681/Mum/2019 dated 03.02.2021 and ITO v. M/s. Oberoi Spring Co-Operative Housing Society
Page No. 8 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., Ltd in ITA.No. 786/Mum/2019 dated 28.02.2020. Copy of the orders are placed on record.
9. On the other hand, Ld. DR relied on the order of the lower authorities.
10. Considered the rival submissions and material placed on record. We observe that identical issue i.e. whether the assessee a cooperative society is entitled for deduction u/s. 80P(2)(d) of the Act on the interest income earned from other cooperative banks/societies has been decided by various Coordinate Benches in favour of the assessee. In the case of Kshatriy Gadkari Maratha Cooperative Credit Society Ltd., v. ITO in ITA.No. 3646 & 3647/MUM/2018 dated 26.04.2019 it has been held as under: - “3. The Assessing Officer while completing the assessments u/s.143(3) of the Act denied the deduction u/s. 80P(2)(a)(i) of the Act for the assessee, holding that the assessee is engaged in the banking activities and therefore assessee is not a cooperative society but is a cooperative bank. He also observed that in view of the provisions of Sec. 80P(4) of the Act since assessee is a cooperative bank assessee is not entitled for deduction u/s. 80P of the Act. However, Ld.CIT(A) considering the activities of the assessee and referring to various judicial pronouncements held that assessee cannot be treated as a cooperative bank. Ld.CIT(A) deleted the disallowance made by the Assessing Officer in respect of the income earned from the activities of providing credit facilities to its members. In other words, the Ld.CIT(A) allowed deduction u/s.80P(2)(a)(i) of the Act in respect of the income earned by the assessee in providing credit facilities to its members as cooperative society and not a cooperative bank. No appeal by the Revenue challenging this finding of the Ld.CIT(A). He quantified the deduction to be allowed at ₹.8,07,963/- and ₹.10,34,063/- for the A.Ys. 2013-14 and 2014-15 respectively. However, the Ld.CIT(A) held that the assessee is not entitled for deduction u/s.80P(2)(d) of ₹.15,38,417/- and ₹.17,72,197/- for A.Ys. 2013-14 and 2014-15 respectively on the interest income earned by the assessee from cooperative banks and in coming to such conclusion the Ld.CIT(A) referred to the decision of the Coordinate Bench and also the decision of the Hon'ble Apex court in the case of The Totgar Cooperative
Page No. 9 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., Sales Society Limited v. ITO [322 ITR 283]. He also relied on the Coordinate Bench decision in the case of Vaibhav Cooperative Credit Society v. ITO in ITA.No. 5819/Mum/2014 dated 17.03.2017.
4. Ld. DR vehemently supported the orders of the authorities below.
Heard rival submissions, perused the orders of the authorities below. The issue in the case of The Totgar Cooperative Sales Society Limited v. ITO (supra) is as to whether the interest on surplus funds is eligible for deduction u/s. 80P(2)(a)(i) of the Act or is it assessable to tax under the head other sources. It was not the question as to whether the assessee a cooperative society engaged in the business of providing credit facilities to its members is entitled for deduction u/s. 80P(2)(d) of the Act on the interest income from cooperative Banks or cooperative societies. The facts in the case before the Hon'ble Supreme Court were that assessee which was engaged in providing credit facilities to its members also marketing the agricultural produce of its members had surplus funds from the sale proceeds of the produce. Assessee earned interest income on deposits from such surplus funds which were parked in the banks and government securities as short term deposits. The Hon'ble Supreme Court held that the interest earned on such deposits not being attributable to the business of providing credit facilities to the members or marketing of agricultural produce of the members is assessable as “other income” and not as “business profits”. Therefore, this decision has no application to the facts of the assessee case.
6. In the case before me, the issue is, whether the assessee is entitled for deduction u/s. 80P(2)(d) of the Act on the interest earned from investments in cooperative banks/cooperative societies.
7. Provisions of section 80P(2)(d) reads as under: - “(d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income.”
8. As could be seen from the above, the provisions of section 80P(2)(d) of the Act are very clear and assessee is entitled for deduction u/s.80P(2)(d) of the Act in respect of interest or dividends received from investments made with any other cooperative societies. The decision on which the Ld.CIT(A) placed reliance i.e. The Totgar Cooperative Sales Society Limited v. ITO (supra), is not on the issue of whether the assessee is entitled for exemption u/s. 80P(2)(d) of the Act vis-à-vis the interest income earned by the cooperative society from investments in other cooperative societies. Hence the decision of Hon'ble Supreme Court in the case of The Totgar Cooperative Sales Society Limited v. ITO (supra) has no application to the facts of the assessee’s case.
At this stage it is relevant to note that in the case of Pr.CIT v. Totgar Cooperative Sales Society Limited [392 ITR 74] the Hon'ble Karnataka High Court considered the meaning of the word “cooperative society” within the provisions of section 80P(2)(d) and held that cooperative society includes cooperative bank for the purpose of deduction u/s.80P(2)(d) of the Act. Therefore, it has been held that interest received by the cooperative society from the cooperative bank is eligible for deduction u/s. 80P(2)(d) of the Act. While holding so, the Hon'ble High Court also considered the decision of the Hon'ble Supreme Court in the case of the very same assessee reported in 322 ITR 283 as The Totgar Cooperative Sales Society Limited v. ITO. The Hon'ble High Court held as under: -
Page No. 10 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., “5. The learned counsel for the Revenue has pleaded that two substantial questions of law are raised in the present appeal, namely, 1. Whether the learned Tribunal was justified in deleting the additions made by the Assessing Authority being the disallowed deduction claimed u/S 80P(2)(d) of the Income Tax Act and in the light of the decision of the Supreme Court with regard to the same exact assessee as the present one, namely, The Totgars Co-operative Sale Society Ltd., Vs. Income Tax Officer in Civil Appeal Nos.1622 to 1629/2010 decided by the Apex Court on 08.02.2010 or not? 2. Whether, in the facts and circumstances of the case, the Tribunal is justified in not following the decision rendered by the Hon’ble Supreme Court in Civil Appeal No. 1622 of 2010, wherein the Apex Court has to be held that the words used in Section 80P “the whole of the amount of profits and gains of business” emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society and as such interest earned on funds which are not required for business purposes falls under the category of “other income” taxable under the Income Tax Act? 6. According to the learned counsel, the present appeal should be admitted on these two substantial questions of law.
However, the contention being taken by the learned counsel is untenable. For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Cooperative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to be a Co-operative Society, then any interest earned by the Co- operative Society from a Cooperative Bank would necessarily be deductable under Section 80P(1) of the Act.
8. The issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover, the word “Cooperative Society” are the words of a large extent, and denotes a genus, whereas the word “Co- operative Bank” is a word of limited extent, which merely demarcates and identifies a particular species of the genus Cooperative Societies. Co- Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co- operative Societies. Thus the Cooperative Bank which is a species of the genus would necessarily be covered by the word “Co-operative Society”.
9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Cooperative Society. Therefore, a Co-operative Society Bank would be included in the words ‘Co-operative Society’.
Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Cooperative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.
11. The learned counsel has relied on the case of The Totgars Co-operative Sale Society Ltd. Vs. Income Tax Officer, (supra). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the Page No. 11 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.”
10. Following the above said decision, similar view has been taken by the Coordinate Bench in the cases of ITO v. Abhylaxhmi Co-op Credit Society Ltd in ITA.No. 1525/Mum/2017 dated 31.07.2017 and Kalindas Udyog Bhavan Premises Co-op Society Ltd., v. ITO in ITA.No. 6547/Mum/2017 dated 25.04.2018.”
In the case of Kaliandas Udyog Bhavan Premises Co-op Hsg Society v. ITO in ITA.No. 6547/Mum/2017 dated 25.04.2018 the Coordinate Bench held 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. (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 Page No. 12 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., 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: - “(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.
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 52 (Mum) (ii) M/s C. 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. ITO Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017.
Page No. 13 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., 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 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 society would not be entitled to claim of deduction under Sec. 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
Page No. 14 (A.Y: 2011-12 Silver Sand Coop Housing Society Ltd., 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 cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.”
Facts being identical, respectfully following the above said decisions, we hold that the assessee a cooperative society is eligible for deduction u/s.80P(2)(d) of the Act in respect of the interest income earned by the assessee from either any other cooperative society or from a cooperative bank. Grounds raised by the assessee are allowed.
In the result, appeal filed by the assessee is allowed.