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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
Per : Kuldip Singh, Judicial Member:
The assessee by filing the present appeal, sought to set aside the impugned order dated 10.03.2023 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2014-15 on the grounds inter-alia that :- “1. Whether on the facts and in the circumstances and in law, the Ld. CIT(A) erred in allowing deduction u/s.80P(2) (d) of the I.T. Act of Rs.1.62,98,358/- of the IT Act, 1961 without appreciating legislative intent of the inserted provision of 80(p) which specifically provides that section shall not apply in relation to any cooperative bank other than a 2 M/s. Casa Grande Co-op. Housing Society primary agricultural credit society or primary cooperative agricultural and rural developer bank.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing deduction u/s 80P (2) (d) of the I.T. Act, 1961, without appreciating the facts that the assessee has erred interest income from investment of idle funds with cooperative bank.
On the facts and in circumstances of the case and in law, the Ld. CIT(A) erred allowing deduction u/s 80P(2) (d) of the I.T. Act, 1961, without considering the decision of the Hon'ble Supreme Court in the case of Citizen Co-operative Society Vs. ACIT vide its order dated 08/08/2017(2017)84 taxmann.com 114[(SC)] which was further affirmed in its order dated 21/11/2017 in response to review petition [(2017)] 88 Taxmann.com 279 (SC)].
4. The appellant prays that the order of the CIT(Appeals) on the above grounds be aside and that of the AO restored.
5. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee being a co-operative housing society registered under Maharashtra Co-operative Society Act,1960 exclusively engaged in collecting contribution from the members for the day to day maintenance of its building. The assessee society is also required to collect contribution from members towards sinking funds and repair fund as per bylaws of the assessee society and they are required to invest amount in specified securities as prescribed under section 70 of the Maharashtra Co-operative Society Act,1960 and they can maintain account with approved co-operative bank accordingly. During the year under consideration the assessee invested its contribution collected from the members in fixed deposit with Saraswat Co- operative Bank Ltd. and Shamrao Vittal Co-operative Bank Ltd. on which it has earned interest income of Rs.1,89,07,301/- and claimed deduction thereof under section 80P of the Act. The Assessing 3 M/s. Casa Grande Co-op. Housing Society Officer (AO) after declining the contentions raised by the assessee society proceeded to disallow the deduction claimed by the assessee under section 80P and thereby added an amount of Rs.1,89,07,301/- to the total income of the assessee society by framing assessment under section 143(3) of the Act.
3. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has deleted the disallowance made by the AO by accepting the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the Revenue has come up before the Tribunal by way of filing present appeal.
Notice of the present appeal was issued to the assessee on the address given in form No.36 which is on 19.07.2023 but has not received back served/unserved and as such presumed to have been served upon the assessee. But the assessee has not preferred to prosecute the present appeal. So the Bench has decided to dispose of the present appeal on the basis of material available on record with the assistance of the Ld. D.R. for the Revenue.
5. We have heard the Ld. D.R. for the Revenue, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and case law relied upon.
Undisputedly the assessee society is collecting funds from its members for the maintenance of its building. It is also not in dispute that the assessee society has invested the contribution collected from its members in the co-operative bank as per mandate of section 70 of its bylaws. It is also not in dispute that during the 4 M/s. Casa Grande Co-op. Housing Society year under consideration the assessee society has earned interest income on the funds parked with co-operative banks.
In the backdrop of the aforesaid undisputed facts the sole question arises for determination in all the aforesaid appeals is: “As to whether earning of interest income by the assessee from its funds parked with co-operative banks during the year under consideration is to be construed as the profits and gains of the business, thus eligible for deduction under section 80P(2)(a) of the Act?”
The Ld. D.R. for the Revenue challenging the impugned order passed by the ITO and contended that section 80P does not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank and relied upon the order passed by the AO.
We have perused the order passed by the Ld. CIT(A) who has thrashed the facts and after relying upon the order passed by the co-ordinate Bench of the Tribunal in case of The Juhu Ville Parle Development Cooperative Housing Association Ltd. vs. ACIT, Circle-25(3), Mumbai in & 1835/M/2022 order dated 29.09.2022 decided the issue in favour of the assessee by returning following findings: “9.4.7 It is also noted that the issue of deduction u/s 80P(2)(d) w.r.t to interest income derived from investments with Co-Operative Banks has also been decided in favour of appellant's own case for A.Y 2015-16 by Ld.CIT(A)-33, Mumbai vide its order dated 01.01.2019 in Appeal No. CIT(A)-33/Rg.23/108/2017-18 wherein Ld. CIT(A)- 33, Mumbai has held that the interest income derived from investments with Co- Operative Banks is eligible for deduction u/s 80P(2)(d) of the Income Tax Act, 1961. Further, on revenue's appeal before the Tribunal, Hon'ble ITAT "C" Bench, Mumbai vide its order dated 29.10.2020 in ITA No. 1880/Mum/2019, in case of appellant for AY 2015-16, has upheld the 5 M/s. Casa Grande Co-op. Housing Society
order of Ld. CIT(A)-33, Mumbai dated 01.01.2019 and has held as under:
"We have heard the submissions made by learned Departmental Representative and have examined the orders of the lower authorities. The only issue in the present appeal is against allowing deduction under section 80P(2)(d) of the Act. The issue gives rise to the question: Whether a Cooperative Bank should be considered as cooperative society for the purpose of section 80P(2)(d) of the Act? The Hon'ble Karnataka High Court in the case of PCIT vs Totgars Co-operative Sale Society 392 ITR 74 (Karnataka) has held that for the purpose of section 80P(2)(d) of the Act a cooperative 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 [2020] 421 ITR 134 (Gujarat).
4.1 On the same issue the Hon'ble Karnataka High court in the case of PCIT vs Totgars Co-operative Sale Society 395 ITR 611 (Karnataka) has taken 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 Hon'ble High Court while rendering later judgement has not considered the earlier decision rendered in the case of Totgars Co- operative Sale Society reported as 392 ITR 74.
No judgement from Hon'ble Jurisdictional High court on the issue of eligibility of deduction under section 80P(2)(d) of the Act on interest income from cooperative bank has been brought 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 on non-jurisdictional High courts are available, the view which is in favour of the assessee, is to be preferred. In the light of decisions discussed above and the facts of the case, we find no infirmity In the order of CIT(A). Hence, the same is upheld and the appeal of the revenue is dismissed."
9.4.8 Following its decision in dated 29.10.2020 for A.Y 2015-16, Hon'ble ITAT Mumbai G Bench, Mumbai has also decided the issue in favour of appellant in appellant's own case for AY 2016-17 in ITA No. 6009/Mum/2019, vide its order dated 31.03.2021.
9.5 In view of the above judicial pronouncements, I am of the view that the Assessing Officer is not justified in disallowing deduction u/s 80P(2)(d) and therefore, appellant is eligible for deduction u/s 80P(2)(d) w.r.t interest income of Rs. 1,89,07.300/- derived from investments with Co-Operative Banks. Accordingly, the Assessing Officer is directed to delete the disallowance of Rs. 1,89,07,300/- u/s 80P(2)(d). Also, since the issue of levy of interest in demand notice u/s 6 M/s. Casa Grande Co-op. Housing Society
156 is consequential, therefore this issue will also go in favour of the appellant. Hence, grounds of appeal nos. 1 to 7 are allowed.”
10. We are of the considered view that deposit of funds by the assessee society with the co-operative banks are as per mandate of the section 70 of the Maharashtra Co-operative Society Act,1960. Moreover, the assessee society is wholly and exclusively catering to its members and in view of the order passed by the co-ordinate Bench of the Tribunal in case of The Juhu Ville Parle Development Cooperative Housing Association Ltd. vs. ACIT (supra), the Ld. CIT(A) has passed a valid order and as such we find no illegality or perversity in the impugned order passed by the Ld. CIT(A), hence appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 27.07.2023.