GOLDEN SQUARE CHS LTD.,MUMBAI vs. ITO-22 (1)(5), MUMBAI

O R D E R PER PAVAN KUMAR GADALE JM: These are the two appeals filed the assessee against the different orders of the National Faceless Appeal Centre (NFAC)/CIT(A), Delhi passed u/s 250 of the Act.

3. The brief facts of the case are that the assessee is a Cooperative Housing Society registered under Maharashtra State Co-operative Act and providing & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. credit facilities to its members. The assessee has filed the return of income for the A.Y 2012-13 disclosing a total income of Rs.4,34,850/-after claiming deduction u/s 80P(2)(d) of the Act of Rs.1,79,511/-. Whereas the return of income was processed u/s 143(1) of the Act disallowing the claim u/s 80P(2)(d) of the Act. The assessee found that the refunds of subsequent years are adjusted against the demand raised u/s 143(1) of the Act, therefore the assessee has obtained the copy and filed petition u/s 154 of the Act. Whereas the AO has not allowed deduction of claim u/s 80P(2)(d) of the Act as the cooperative bank is an urban commercial bank and does not fall under the purview of cooperative society referred in the Sec. 80P(2)(d) of the Act and has rejected the claim of deduction U/sec80P(2)(d) of the Act of Rs.1,79,510/- and passed order U/sec154 of the Act dated 3-03-2020.

4. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). Whereas the CIT(A) considered the grounds of appeal

, submissions of the assessee and findings of the AO but the CIT(A) has dismissed the assessee appeal as not maintainable. & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai.

5. Aggrieved by the CIT (A)order, the assessee has filed an appeal before the Honble Tribunal. At the time of hearing,the Ld. AR of the assessee submitted that the CIT(A) has erred in observing that the assessee appeal is not maintainable overlooking the facts that the assessee filed a rectification petition u/s 154 of the Act and the A.O. has rejected the claim of deduction U/sec80P(2)(d) of the Act of Rs.1,79,510/-.On merits, the Ld.AR emphasized that the claim has to be allowed, as the cooperative bank is treated as a cooperative society for eligibility of deduction u/s 80P(2)(d) of the Act and supported the submissions with factual paper book and judicial decisions Contra, the Ld. DR relied on the order of the CIT(A).

6. Heard the rival submissions and perused the material on record. The Ld.AR submitted that the CIT(A) has erred in dismissing the appeal as not maintainable. though the assessee has filed a rectification petition u/s 154 of the Act and the A.O. has rejected the claim of deduction U/sec80P(2)(d) of the Act of Rs.1,79,510/- and hence considering the facts, submissions and the ratio of judicial decisions & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. relied, the findings of the CIT(A) are not tenable. On merits of the case,the Ld.AR emphasized on granting of deduction u/s 80P(2)(d) of the Act to the Cooperative Society. The Ld. AR submitted that the interest income derived by a co-operative society from its deposits with the co-operative banks would be entitled for deduction U/sec 80P(2)(d) of the Act. The co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act. The Ld.AR demonstrated the copy of the CIT(A) order placed at Page 61 to 66 of the paper book in the assesses own case for the A.Y 2014-15 were the CIT(A) has granted relief by directing the Assessing Officer to delete the disallowance made U/sec80P2(D) of the Act at Page2 Para 3 to 6 of the order read as under:

statement o facts and written submissions filed by the appellant, the appeal is adjudicated in the subsequent paragraphs of this order.

1. The Appellant is a registered cooperative housing society During the year, the appellant society earned interest on deposits made with different co operative bank a amounting to Rs.11,95,223/- on which deduction u/s 80 2(d) was claimed by the appellant during scrutiny proceedings. The Assessing & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. officer while finalising assessment u/s 143(3) for the year under consideration disallowed deduction u/s 80 2(d) by invoking provisions of section 80. P(4) of IT Act. Against order u/s 143(3 appellant is in appeal. Relevant extract of assessment order is reproduced as under "Addition on account of interest received On verification of the details filed during course of scrutiny proceedings, it is seen that during the year under consideration, assessee has received interest on various Fixed deposits and savings accounts as under: Sl. Description Amount of interest No. received

1. Corporation Bank 4456 Savings account 2. SVC Bank savings 17229 3. Bharat Coop Bank 103 savings Ac 4. MSC Co Bank 73153 Savings Ac 5. Sarswat Co Op Bank 12603 A/c 6. Corp Classic Income 281658 7. FD of Saraswat 419825 Bank 8. FD Shamrao Co 359673 Bank 9. FD Bharat Co op 265582 Bank

10. FD of MSC Bank 37767 It is further seen that assessee has offered interest of Rs. 2,76,826/- only under head income from other sources. In this regard, the AR submitted vide order sheet noting dt. 24.11.2016 that interest of Rs14,72,049/- was not offered to tax for the reasons that interest income is received from co- operative bank and the same is exempt to tax, therefore, interest income to that extent was not offered to tax in return of & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. income. He further stated that entire income of Co operative Housing Society is exempt to tax under 'Concept of Mutuality', hence, the same was not incorporated in retur of income. He further stated that income earned by one co-operative society from another co-operative society is exempt u/s 80P and therefore, the same is revenue neutral and out of the tax purview, therefore, no need to offer the same in return of income. Submission of the AR was considered, but found to be not acceptable for the following reasons: Interest income received during the year has no connection with the 'Concept of Mutuality' and the same was required to be offered as income under head Income from Other Sources. Even loss incurred during the year, if any, in Income & Expenditure Account is not eligible for set off from Other Income. 'Concept of Mutuality' is limited to Member's Contribution of Fund and its utilisation. As regards, claims of deduction u/s 80P if the Act, it is pertinent to mention here that the provisions with regard to allowing deduction in respect of interest income earned by a co- operative society are content in section 80P(2)(d) of the Income Tax Act, 1961, which read as under: "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 As quoted above, the provisions of I.T. Act, 1961, is limited to interest received from one "Co-operative Society" from "Other Co-operative Society" and does not extent the deduction further i.e. interest received from the investment made with co-operative banks, in view of provisions of section 80P(4) of the I.T. Act, 1960. In view of above, deduction u/s 80P(2)(d) is not available to the assessee. Further, no such claim i.e. claim of "concept of mutuality" or "deduction u/s 80P" has been made in return of income.

In view of above, an amount of Rs. 11,95,223/i.e. Rs. 14,72,049 Rs.2,76,826/is added to the total income of the & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. assessee under head Income from Other Sources. Penalty proceedings u/s 271(1)(c) of the Act are being initiated separately for furnishing of inaccurate particulars of income and concealment of income. Further, since the assessee has failed to furnish return of income before the end of the relevant assessment year i.e. AY2014-15thereforepenalty proceedings u/s 271F of the Act are also initiated separately."

with respect to disallowance of claim of deduction u/s 80 P 2 (d). This Sieground is taken up for discussion and adjudication in the subsequent paragraphs of this order. Further, as explained elsewhere in this order, during the course of the Cappellate proceedings, the appellant filed detailed written submissions in support of Bas the grounds of appeal and placed reliance on following jurisdictional ITAT decisions. a. Mumbai ITAT decision in cases of Lands End Co-operative Housing society d blow reported in 46 CCH 0052, Sea Green co-op housing society, Merwanjee Cama Park coop housing society b. Ahmedabad ITAT decision in the case of Shri Ambalal Somabhai CES (Kumbhar) Prajapati ITA 1880/AHD/2017 c Bombay HC decision in CIT v/s Gopal Purohit (2011) 336 ITR 0287, d Supreme Court in the case of Radhasoami Salsa case of Radhasoami Satsang vCIT (SC) [(1992) ENT 193 ITR 321].

5. I have carefully considered the grounds of appeal raised by the appellant and the written submission made in support of the same, and examined the issued under dispute in the light of the facts and circumstances of the case and relevant provisions of the statute and applicable judicial precedence. It can be seen from assessment order that one of the reasons for disallowance of deduction claim made by the appellant was that appellant failed to make claim for deduction in the return of Income filed for the year. The issue that whether claims not made in return but during assessment proceedings can be ITA No. 572 & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. entertained or not has been discussed by Hon'ble Mumbai ITAT in ITO VS Sanjay Gurudasmal Chawla ITA No 2931/MUM/2017 dated 30/11/2018. Hon'ble Mumbai ITAT relied on Mumbai High court decision in case of CIT Vs Pruthvi Brokers and shareholders (p) Ltd ITA No 3908 of 2010 dated 21-06- 2012 where it is held that even if a claim is not made before the assessing officer, it : can be made before the appellate authority and appellate authorities can entertain such claim. Hence claim not made in return but during assessment proceedings can be entertained by the appellate authority. Further notwithstanding the fact that claim was not made in the return of Income, assessing officer in order reproduced above has discussed about merits of the deduction claim of the appellant. It is the contention of the appellant that issue under consideration is covered by several decisions of Mumbai ITAT where it is consistently held that co operative societies are eligible for deduction u/s 80P 2(d) wrt interest earned from co operative banks. This question is recently adjudicated by Hon'ble Mumbai ITAT in Palm court M. Premises Co operative Society Limted Vs PCIT ITA No 561/Mum/2021. The Hon'ble ITAT relied on two decisions of High courts

1. Pr CIT Vs Totagars Co operative sale society (2017) 392 ITR 74 (Karnataka HC)

2. Gujarat High court in State bank of India Vs CIT (2016) 389 ITR 578 (Guj) where it is held that the interest income earned by a cooperative society on its investments with co operative bank would be eligible for claim of deduction u/s 80P 2(d) and based on these two decisions, the Mumbai ITAT held in favour of assesse that it is eligible for deduction w.r.t interest received from co-operative bank. Respectfully following decision of jurisdictional ITAT it is held that appellant society is entitled to deduction u/s 80P2 (d) w.r.t interest earned from co-operative banks during the year to the extent of Rs.11,95,223/-, the Assessing officer is directed to delete the disallowance made for the year. Thus, Ground No 1 raised by the appellant is allowed. As the main ground against the disallowance is allowed, other grounds which are general and consequential need no adjudication. In the result, the appeal of the appellant is allowed.

ITA No. 572 & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. 7. Further the Coordinate Bench of the Honble Tribunal in the case of Amore Commercial Premises Co-op Society Ltd vs. CPC Karnataka in & 2874/Mum/2022 dated 17-01-2023 has dealt on the taxability of interest earned on the deposits with the Co-operative Banks at page 2 Para 3 of the order, which is read as under:

3. Briefly stated facts necessary for consideration an adjudication of the issues at hand are :- Assessee being a Co-Operative Society has claimed disallowance/deduction u/s. 80P (2)(d) in respect of the interest of Rs. 6,96,725/- for parking its funds with Saraswat Co-Operative Bank, Sham Vithal Rao Co- Operative Bank and district central CoOperative Bank. However, centralized processing centre (CPC)/ Assessing Officer has disallowed the deduction Claimed by the Assessee u/s 143(1).

4. Assessee carried the matter before the Ld.CIT(A) by way of filing Appeals who has confirmed the addition by dismissing Appeals. Filling aggrieved Assessee has come up before the Tribunal by way of filing present Appeal.

7. Issue as to the allow-ability of the deduction claimed by the Assessee u/s. 80P (2)(d) of the Act, is no longer Res-Integra having being decided by the co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd. in order dated 09.09.2022 by settling the issue in favour of the assessee by distinguishing the judgment rendered by Hon'ble Supreme Court in case of Totgar's Co-operative Sale Society Ltd. Vs. Income Tax Officer, 188 Taxman 282(SC) and by discussing the decision rendered by Hon'ble Bombay High and Hon'ble Gujarat High Court wherein it is held that interest income earned by the Co- operative Society on its investment made with co- operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act by returning following findings:

8. We have given a thoughtful consideration to the contentions advanced by the Id. Authorized representatives for both the parties in context of the aforesaid issue under consideration. As stated by the ld. A.R, and rightly so, the issue that interest received by a & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. co-operative society on its deposits with co-operative banks would be eligible for deduction w/s 80P(2)(d) of the Act is covered in assessee's favour by orders of the various coordinate benches of the Tribunal in the following cases: (i). M/s Solitaire CHS Ltd. Vs. Pr.CIT-26, Mumbai, ITA No.3155/Mum/2019, dated 29.11.2019 (ii). Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum.) (iii). M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017. (iv). Marvwanjee Cama Park Cooperative Housing Society Ltd. V's. ITO- Range 20(2)(2), Mumbai (ITA NO. 6139/Mum/2014, dated 27.09.2017. (v). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. In the aforesaid orders, it has been held by the Tribunal that though the cooperative banks pursuant to the insertion of sub-section (4) to Sec. 80P of the Act would no more be entitled for claim of deduction u/s 80P of the Act, but 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 in force in any State for the registration of co-operative societies, therefore, the interest income derived by a cooperative society from its investments held with a co-operative bank would be entitled for claim of deduction w/s 80P(2)(d) of the Act. We find that the aforesaid issue had exhaustively been looked into by the ITAT, G" bench, Mumbai in the case of M/s Solitaire CHS Ltd, Vs. Pr.CIT-26, Mumbai ITA No.3155/Mum/2019, dated 29.11.2019, wherein the Tribunal had observed as under: "6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as ITA No. 572 & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. to whether the claim of the assessee for deduction under section. 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr.CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2) (d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with cooperative banks, other than a Primary Agricultural Credit Society or a Primary Co- operative Agricultural and Rural Development Bank. Observing, that the co- operative banks from where the assessee was in receipt of interest income were not co- operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act.

8. We shall now advert to the judicial pronouncements that have been relied upon by the Id. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on 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 $2 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(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. (iv). Kaliandas Udyog Bhavan Pemises Co- op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. 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 ITA No. 572 & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments 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, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the being distinguishable on facts 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 cooperative society towards deduction under Sec. 80P(2) (d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars cooperative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co- operative society would not be entitled to claim of deduction under Sec. 80P(2) (d). At the same time, we 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 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. We find that as held by the Hon'ble High Court of & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. 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 nonjurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial 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 cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.

9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2) (d) on the interest income earned on its investments/deposits with cooperative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we "set aside" his order and restore the order passed by the A.O under Sec. 143(3), date & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. 14.09.2016." As the facts and the issue involved in the present case before us remains the same as were there before the Tribunal in the case of M/s Solitaire CHS Ltd. (supra), wherein the order passed by the Pr. CIT u/s 263 of the Act was quashed, we, thus, respectfully follow the same. Backed by our aforesaid deliberations, we are unable to uphold the view taken by the Pr. CIT that the failure on the part of the A.O to be disallow the assessee's claim for deduction u/s 80P(2)(d) had rendered the assessment order passed by him u/s 143(3) of the Act, dated 31.08.2017 as erroneous in so far it was prejudicial to the interest of the revenue.

9. So following the decision rendered by Hon'ble Karnataka High Court (supra) and Hon'ble Gujarat High Court (supra), we are of the considered view that & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. assessee society who has earned an amount of Rs. Rs. 6,96,725/- from its investment of surplus fund with cooperative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. 8. Considering the facts, circumstances and the ratio of the judicial decisions. The Honble Tribunal has passed the order and relied on catena of judicial decisions were the co-operative society receives/earns interest on deposits with the co-operative bank is eligible for claim of deduction under section 80P (2)(d) of the Act. Accordingly, fallow the judicial precedence, and set aside the order of the CIT(A) and direct the Assessing officer to allow the claim of deduction u/sec 80P(2)(d) of the Act on the interest income received /earned from the co-operative banks. And the grounds of appeal

filed by the assessee are allowed.

9. As the facts and circumstances in this appeal is identical to ITA No 572/Mum/2020 on the disputed issues (except variance in figures) and the decision rendered in the above paragraphs will apply mutatis mutandis to this appeal also. Accordingly, the ITA No. 572 & 573/Mum/2023 Golden Square Co Op HSG Society, Mumbai. grounds of appeal are allowed in favour of the assessee.