M/S. THE AJANTA IDEAL CO-OPERATIVE HOUSING SOCIETY LIMITED,MUMBAI vs. ASST. DIRECTOR OF INCOMETAX, CPC , BENGALURU

The Learned CIT(A) / NFAC erred in law and facts in confirming the disallowance of claim of deduction of interest on deposits with co- operative banks (co-operative society) of Rs. 4,74,119/- (Rounded 4,74,120) u/s 80P(2)(d) of the Act. The reasons given by him for doing M/s The Ajanta Ideal co-operative Housing Society., Mumbai. so are, contrary to provisions of law and Judicial pronouncements. 2. The Learned CIT(A)/NFAC/AO erred in law and facts in holding that co-operative banks are not co- operative society as defined u/s 2(19) of the Act. 3. The Learned CIT(A)/NFAC / AO ought to have appreciated that co-operative bank registered under Maharashtra / Bombay co-operative societies Act is a co- operative society as defined u/s 2(19) of the Act hence interest received by assessee from cooperative bank is eligible for deduction u/s 80P (2) (d) of the Act 4 The Learned CIT(A)/NFAC erred in law and facts in confirming the disallowance of claim of deduction of interest on deposits with co- operative banks (co-operative society) of Rs. 4,74,119/- (Rounded 4,74,120) u/s 80P(2)(d) of the Act completely in derogation of the spirit of the order of the jurisdictional Mumbai appellate tribunal. 5. The Learned CIT(A)/NFAC erred in in confirming the disallowance of deduction of Rs. 4,74,119/- (Rounded 4,74,120) 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 laws

The brief facts of the case are that the assessee is a Cooperative Housing Society registered under Maharashtra Co-operative Societies Act 1960. The assessee derives income from house property and interest on fixed deposits with the Cooperative Banks. M/s The Ajanta Ideal co-operative Housing Society., Mumbai. The assesee has filed the return of income for the A.Y 2020-2021 on 08.01.2021 disclosing a total income of Rs.31,950/- after claiming deduction u/s 80P(2)(d) of the Act of Rs.4,74,119/-.Subsequently the return of income was processed u/s 143(1) of the Act. Whereas the AO/CPC 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 therefore the interest income from cooperative banks has to be taxed under income from other sources and assessed the total income of Rs.5,06,070/-and passed the order u/s 143(1) of the Act dated 23.12.2021. 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee and findings of the A.O but sustained the addition and dismissed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal with the Hon’ble Tribunal. M/s The Ajanta Ideal co-operative Housing Society., Mumbai. 4. At the time of hearing, none appeared on behalf of the assessee. Whereas CIT(A) has confirmed the action of the A.O in treating the interest income from cooperative bank is ineligible for deduction u/s 80P(2)(d) of the Act. The assessee has supported the claim with the judicial decisions in the paper book that the cooperative bank has to be treated as a cooperative society for eligibility of deduction u/s 80P(2)(d) of the Act. The Ld. DR relied on the order of the CIT(A).

Heard the Ld.DR submissions and perused the material on record. The sole matrix of the disputed issue is in respect of granting of deduction u/s 80P(2)(d) of the Act to the Cooperative Society. The assessee has submitted before the CIT(A) 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. M/s The Ajanta Ideal co-operative Housing Society., Mumbai. 6. The Coordinate Bench of the Honble Tribunal in the case of Amore Commercial Premises Co-op Society Ltd vs. CPC Karnataka in ITA No. 2873 & 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:

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. 5. We have heard the Ld. Authorized Representative of the parties to the Appeals, perused the order passed by the Lower Revenue Authorities and documents available on record in the light of the law applicable thereto. 6. Undisputedly Assessee Society has invested is surplus funds with Co-Operative banks and earned the interest income to the tune of Rs. 6,96,725/- and claimed it is deduction u/s. 80P (2)(d) of the Act, which has been M/s The Ajanta Ideal co-operative Housing Society., Mumbai. disallowed by Assessing Officer & confirmed by the Ld.CIT(A) by relying upon decision rendered by Hon’ble Karnataka High Court in case of principle Ld.CIT Vs. Totgar’s Co-Operative Sales Society Ltd. 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 ITA No.561/M/2021 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 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. M/s The Ajanta Ideal co-operative Housing Society., Mumbai. 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 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 M/s The Ajanta Ideal co-operative Housing Society., Mumbai. 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. 7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid 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 subsection (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;" On a perusal M/s The Ajanta Ideal co-operative Housing Society., Mumbai. of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other cooperative society shall be deducted in computing its total income. 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 co- operative society. We are in agreement with the view taken by the Pr. CIT, 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. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income investments/deposits parked with a co- operative bank. In our considered view, as long as it is proved that the interest income is being derived by a cooperative 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 find that the term cooperative society" had been defined under Sec. 2(19) of the Act, as under:- "(19) "Co-operative society" means a cooperative society registered under the Cooperative 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 cooperative banks pursuant to the insertion of subsection

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 M/s The Ajanta Ideal co-operative Housing Society., Mumbai. interest on deposits with the co-operative bank is eligible for claim of deduction under section 80(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.

In the result, the appeal filed by the appeal is allowed.