THE MOTTA MAHAL CO.OP. HSG SOC.LTD,MUMBAI vs. ITO,WARD 19(3)(1), MUMBAI

This is an appeal preferred by the appellant/assessee Motta Mahal Co-operative Housing Society Ltd. against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 30.11.2022 for the assessment Year 2020-21.

Brief facts are that the assessee Motta Mahal Co-op Housing Society Ltd. is a Cooperative Housing Society, Registered under the Maharashtra Co-op Society Act. The assessee had invested its Surplus fund with Co-operative Banks as per the requirement of the Maharashtra State Co-operative Act. The assessee’s claim of deduction of interest income from Maharashtra State Co-operative Bank to the tune of Rs. 99,807/- u/s 80P(2)(d) of the Act was rejected by CPC u/s 143(1) of the Act dated 25.11.2021. Aggrieved, the assessee preferred a rectification application u/s 154 of the Act on 03.12.2021, which was rejected on 16.02.20022. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of the CPC by relying on the decision of the Hon’ble Karnataka High Court decision in the case of PCIT Vs. Totgars Co-operative Sales Society (2017) 83 taxmann.com 140 (Karn) wherein the Hon’ble High Court held in favour of the revenue. Aggrieved, the assessee is before this Tribunal.

Heard both the parties and perused the records. It is undisputed that the assessee is a Cooperative Society which has earned interest income on its fixed deposit to the tune of Rs. 99,807/- from Maharashtra State Cooperative Bank. The assessee’s claim of deduction in respect of interest income from the Maharashtra State Co- operative Bank u/s 80P(2)(d) of the Act was rejected by CPC u/s 143(1) of the Act and the rectification application was also rejected, which action of CPC has been confirmed by the Ld. CIT(A) by relying 3 A.Y. 2020-21 The Motta Mahal Co-op HSG Soc. Ltd. on the Hon’ble Karnataka High Court decision in the case of Totgars Co-operative Sales Society (supra). The correctness of the action of Ld. CIT(A) on this issue need to be examined. For that let me have a look at the relevant provision, viz. Section 80P(2)(d) of the Act which falls under Chapter VIA (Deduction in respect of certain income). Deduction in respect of income of Co-operative Society. “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 cooperative society from its investments with any other co-operative society, the whole of such income;”

From a bare reading of Sec. 80P(2)(d), it can be discerned that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. So, 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 4 A.Y. 2020-21 The Motta Mahal Co-op HSG Soc. Ltd. society with any other co-operative society. So if the interest income is derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under Sec. 80P(2)(d) of the Act is a valid claim. Further 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 co-operative societies;”

Further, it is noted that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative 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 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. As far as the reliance placed made by the assessee before the Ld. CIT(A)/NFAC in support of the claim of deduction u/s 80P(2)(d) of the Act as well as the reliance placed by the Ld. DR before me for supporting the order of the Ld. CIT(A)/NFAC, it is noted that the case laws cited by both the parties have been taken note by this Tribunal in the case of M/s. Rema Sahakari Karkhana Ltd. Pune Bench (ITA. No. 1249/Pun/2018 dated 07.01.2022) wherein the Tribunal has held as under: - 5 A.Y. 2020-21 The Motta Mahal Co-op HSG Soc. Ltd. “9. In so far the judicial pronouncements that have been relied upon by the ld. A.R are concerned; 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 co-operative bank is covered in favour of the assessee in the following cases: (i). M/s Solitaire CHS Ltd. vs. Pr. CIT, dated 29.11.2019 ( ITAT “G” Bench, Mumbai); (ii). Majalgaon Sahakari SAkhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune) M/s Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr. CIT-2, Aurangabad ITA No. 1249/Pun/2018 – A.Y 2013-14 7 (iiii). 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 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. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs.