PREMIUM TOWER COOPERATIVE HOUSING SOCIETY LTD,MUMBAI vs. THE COMMISSIONER (APPEALS)OF INCOME TAX, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C‘ BENCH MUMBAI BEFORE: SHRI B R BASKARAN, ACCOUNTANT MEMBER & SHRI, AMIT SHUKLA, JUDICIAL MEMBER ITA No.1583/Mum/2023 (Assessment Year :2015-16) M/s. Premium Tower Co- Vs. The Commissioner operative Housing Society (Appeals) of Ltd. Office of the Society, Income Tax Ground Floor, Premium Mumbai Tower, CHSL, Lion Sole Marg, Oshiwara, Andheri (West) Mumbai – 400 053 PAN/GIR No.AABAP6171B (Appellant) .. (Respondent) Assessee by Shri Subrata Sen Revenue by Ms. Mahita Nair Date of Hearing 12/05/2023 Date of 17/05/2023 Pronouncement आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the order dated 06/03/2023 passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) for the A.Y.2015-16. 2. In the grounds of appeal, assessee has challenged the disallowance made u/s. 80 P(2)(d) of the Act of Rs.13,85,628/-

2 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. 3. The facts in brief are that that assessee is a co-operative housing society registered under Maharashtra Co-operative Housing Society Ltd. The society collects contribution from its members for payment of property taxes, water charges and other revenue expenses such as electricity, water, security etc. to maintain society situated at Oshiwara, Andheri (W), Mumbai. It has made fixed deposit with various co-operative banks and has earned interest income on fixed deposits and recurring deposits held with many cooperative banks which was claimed as deduction u/s. 80P (2)(d) of the Act. Assessee has claimed deduction of Rs.13,85,628/- u/s. 80P(2)(d) of the Act in respect of bank interest and interest on FDs and RDs received from cooperative banks. The ld. AO held that by insertion of Sub- Section (4) in section 80P, cooperative banks are commercial banks and does not fall under the purview of “cooperative society” referred to in Section 80 P(2)(d) of the Act. The assessee has earned bank interest and interest on FDs & RDs from its investment made with cooperative banks and not with cooperative society. Accordingly, he denied the deduction of claim u/s. 80 P(2)(d)(4) of the Act. 3. Ld. CIT (A) confirmed the action of the ld. AO. While coming to a conclusion he had referred the various case laws which have been referred from pages 5-10 of his appellate order. 4. After hearing both the parties and on perusal of the impugned order, we find that the only issue is with respect of allowability of deduction of Rs.13,85,628/- claimed u/s. 80

3 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. P(2)(d) on account of interest received by the assessee from various cooperative banks. The ld. CIT(A) has held that the provision of Section 80 P(2)(d) and Section 80 P(2)(a)(i) only extend the benefit of deduction towards income earned by cooperative society engaged in the business of providing banking facility to its members and does not extend to the interest received from the investments made in the cooperative banks. The ld. AO has invoked Section 80P (4) holding that since investments have been made in the cooperative banks and therefore, deduction is to be denied. Here, we are not dealing with, whether assessee can be treated as cooperative bank or not. Here the issue is, assessee had made investment in the cooperative banks, whether interest earned from such investment falls in the category of interest earned from cooperative society or not so as to get benefit u/s 80 P(2)(d)? 5. Section 80P provides that in case of assessee being a cooperative society, the gross total income which includes any income referred to sub-section 2 shall be deducted in accordance with subject to provision of this section. Sub-section 2 of section 80P Clause (a) states that, “in the case of cooperative society engaged in cooperative business of banking and providing credit facilities to its members or ………, the whole of amount of profit and gains of the business attributable to anyone or more or such activity.” Clause (d) of Sub-section 2 of Section 80P reads as under:-

4 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. (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; 6. Sub section 4 of section 80P carves out of exception that the provision of this section will not apply in relation to any cooperative bank. Further explanation provides that the definition of cooperative bank and primary cooperative bank. The said provision reads as under:- (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation. For the purposes of this sub-section- (a) co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949) (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.] 7. Thus, assessee being a cooperative society cannot be reckoned as cooperative bank carrying out banking business. The Hon’ble Jurisdictional High court in the case of Quepem Urban Co-operative Credit Society Ltd. vs. ACIT reported in (2015) 377 ITR 272 (Bom), after analyzing the relevant provision

5 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. of Section 80P including Sub-section (4) had categorically held that cooperative banks are to be treated as cooperative society. In so far as deduction of interest earned on investment made in cooperative bank, Clause (d) of section 80P(2) provides that any income by way of interest on dividend derived from cooperative societies from its investment with any other cooperative societies, the whole of such income is deductable u/s 80P. The cooperative bank has been defined in part 5 of the Banking Regulation Act 1949. Section 56(ccv) provides that primary cooperative bank means cooperative societies other than a primary agriculture society. This view had come up for the Hon’ble Karnataka High Court in the case of PCIT vs. Totagars Co-operative Sale Society (2017) 392 ITR 74 (Kar.) dated 5th Jan. 2017, wherein the Hon’ble High Court had observed as under:-

6 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. 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. 7. 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 Co- operative 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 Co- operative 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 "Co- operative 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 Co- operative 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 Co- operative 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 Co- Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co- operative Society'. 10. 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 Co- operative 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.

7 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. 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 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. 8. This view has further been reiterated by the judgment of Hon’ble Kerala High Court in the case of PCIT vs. Percoorkada Service Co. Bank Ltd. (2022) 442 ITR 141 (Kerala) dated 01.11.2021, wherein one of the question before the Hon’ble High Court was, whether the interest income earned from deposits with the banks is eligible for deduction u/s 80P(2). The Hon’ble Kerala High Court has also considered the judgment of Hon’ble Supreme Court in the case of Totagars Cooperative Societies Ltd. 322 ITR 323, wherein the Hon’ble High Court has held that interest income earned from district cooperative bank or state cooperative bank, come within the ambit of section 80P (2)(d), therefore the income constitutes income from other sources and it is eligible for deduction covered u/s 80P(2)(d). Otherwise section 80P(2)(d) specifies any income by way of interest or dividend which is otherwise taxable under the head income from

8 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. other sources, deduction is allowable if the same is derived from investment made with any other cooperative societies.

9 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. that income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or cooperative bank. Therefore, section 80P(2)(d) would not apply on the facts of that case. However, as noted above in one of the judgment, the Hon’ble Karnataka High Court has held the same issue in favour of the assessee.

Order pronounced on 17th May, 2023.

Sd/- Sd/- (B R BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 17/05/2023

10 ITA No. 1583/Mum/2023 M/s. Premium Tower Co-operative Housing Society Ltd. KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER,

(Asstt. Registrar) ITAT, Mumbai