LAXMI CO-OPERATIVE HOUSING SOCIETY LTD ,MUMBAI vs. INCOME TAX OFFICER- 22(2)(3), MUMBAI

Fact in brief is that the assessee is a co-operative society consisting various members on the concept of mutuality. The assessee has filed return of income for the assessment year 2012-13 on 27.09.2012 declaring income of ₹ Nil. The case of the assessee was reopened by issuing of notice u/s 148 of the Act on 03.01.2018 on the ground that the assessee has earned income from interest on FDR and interest on SB account totaling to ₹66,36,310/- received from the co-operative bank and after claiming various expenses the assessee had claimed deduction u/s 80P(2)(d) of the Act at ₹32,54,869/-.

AO was of the view that since the assessee had earned interest from co-operative banks and not from co-operative society, therefore, it was not eligible for deduction u/s 80P(2)(d) of the Act. On query assessee explained that co-operative banks are registered co-operative society, therefore, the interest received from the co-operative bank is eligible for deduction u/s 80P(2)(d) of the Act. However, the AO has not agreed with the submission P a g e | 4 1748,1747, 1743,1744,1749/Mum/2023 A.Y. 2012-13, 13-14, 17-18, 18-19, 21-22 Laxmi Co-operative Housing society Ltd. Mumbai of the assessee. The AO referred Finance Act 2006 vide which deduction u/s 80P(4) of the Act available to the co-operative bank was withdrawn w.e.f. available from 1.04.2007. The AO was of the view that as per the provisions of section 80P (4) of the Act w.e.f. 01.04.2007 deduction u/s 80P(4) was not available to the co-operative banks. He also observed that co-operative Bank is a commercial bank and does not fall under the purview of a co- operative society. Therefore, the AO held that deduction u/s 80P(2)(d) of the Act claimed by the assessee on interest earned from the deposit maintained with co-operative banks is not allowable. Therefore, the same was added to the total income of the assessee.

Aggrieved, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) has dismissed the appeal of the assessee.

During the course of appellate proceedings before us the Ld. Counsel contended that section 80P(4) exclude only the corporative bank for claiming deduction u/s 80P(4) of the Act, however, interest income derived by the co-operative society from its investment maintained with the co-operative bank would be entitled for deduction u/s 80P(2)(d) of the Act. The Ld. Counsel filed paper book and referred various decisions of the ITAT on the issue that interest income earned from the deposit kept with P a g e | 5 1748,1747, 1743,1744,1749/Mum/2023 A.Y. 2012-13, 13-14, 17-18, 18-19, 21-22 Laxmi Co-operative Housing society Ltd. Mumbai the co-operative bank is entitled for deduction u/s 80P(2)(d) of the Act.

On the other hand the Ld. DR supporting the order of the Lower authority.

Heard both the side and perused the material on record. During the year under consideration assessee society has received of ₹66,36,310/- from the deposit maintained with the co-operative banks and claimed deduction u/s 80P(2)(d) of ₹33,81,441/- after excluding expenses incurred for its members. The AO has disallowed the claimed of deduction stating that co-operative banks are not co-operative society. The AO stated that deduction u/s 80P(2)(d) of the Act cannot be allowed when there is investment in co-operative bank and such income from investment made with Co-operative Banks after insertion of sub section 4 of section 80P is not eligible for deduction u/s 80P(2)(d) of the Act. However, we consider though the co-operative bank pursuant to the insertion of sub section 4 of section 80P is no more entitled for claim of deduction u/s 80P of the act, but a co- operative bank continue to be a co-operative society registered under the co-operative society Act. Therefore, interest income derived by a co-operative society from its investment held with the co-operative bank would be entitled for claim of deduction P a g e | 6 1748,1747, 1743,1744,1749/Mum/2023 A.Y. 2012-13, 13-14, 17-18, 18-19, 21-22 Laxmi Co-operative Housing society Ltd. Mumbai u/s 80P(2)(d) of the Act as held in the various decision of benches of ITAT Mumbai.

In this regard the Ld. Counsel has referred the decision of the ITAT Mumbai in the case of Kaliandas Udyog Bhavan Premises Coop Society Ltd. V/s ITO 21(2)(1) Mumbai (2018) 94 taxmann.com 15 (Mumbai Tribunal) where in held that- Para 7- "We are of the considered view, that though the co- operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, 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 enforced 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."