M/S.ABHINAV CO-OPERATIVE HOUSING SOCIETY,MUMBAI vs. ASSESSING OFFICER,CPC, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2564/MUM/2022 (Assessment Year: 2016-17) Abhinav Nagar Co Op Hsg Soc Ltd., Abhinav Nagar, Road 2, Borivali-(E), Near National Park, Mumbai - 400066 [PAN: AAAAA0320Q] ……………… Appellant Assessing Officer, CPC, Mumbai ITO-32-1-1, Kaushalya Bldg. Vs BKC, Bandra, Mumbai - 400050 ……………. Respondent ITA No. 2565/MUM/2022 (Assessment Year: 2019-20) Abhinav Nagar Co Op Hsg Soc Ltd., Abhinav Nagar, Road 2, Borivali-(E), Near National Park, Mumbai - 400066 [PAN: AAAAA0320Q] ……………… Appellant Assessing Officer, CPC, Mumbai Vs Kaushalya Bldg.,BKC, Bandra, Mumbai - 400050 ……………. Respondent Appearances For the Appellant/Assessee : Shri Hiten Dedhia For the Respondent/Department : Shri Manoj Kumar Sinha Date of conclusion of hearing : 13.12.2022 Date of pronouncement of order : 23.01.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. These are two appeals filed by the Appellant against two separate orders, each dated 14.12.2021, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 Appeal Centre (NFAC) Delhi [hereinafter referred to as „the CIT(A)‟] for the Assessment Years 2016-17 and 2019-20. The appeals involved identical grounds arising in identical facts and circumstances, and therefore, the same were heard together and are being disposed by way of common order.

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 CIT(A) did not come to the knowledge of the present office bearers. When the Ld. Authorised Representative for the Appellant check the income-tax portal the Appellant in relation to Assessment Order for the Assessment Year 2020-2021 in the month of September, 2022 he came to know about the orders passed by CIT(A) and informed the Appellant. Thereafter, necessary steps were taken to file the present appeals. In view of the aforesaid facts and circumstances, we hold that the Appellant had sufficient caused for not filing appeal in time and therefore, condone the delay in filing the appeals and proceed to examine/adjudicate the same on merits.

ITA No. 2564/Mum/2022 (Assessment Year 2016-17) 3. We would first take up appeal for the Assessment Year 2016-17 (ITA No. 2564/Mum/2022) wherein the Appellant has raised following grounds of appeal: “Ground: 1: 1.1 CIT(A) erred in disallowing deduction u/s 80P of Rs. 21,94,865/- out of the total deduction claimed of Rs. 50,61,200 as under The appellant earned interest on FDR From Co-Op Bank of Rs. 50,11,200 and Claimed deduction u/s 80P as under:- 80P(2)(d) 50,11,200 80P(2)(c)(ii) 50,000 Total Deduction Claimed u/s 80P 50,61,200 Less : Deduction allowed by CIT(A) 28,66,335 CIT(A) disallowed u/s 80P 21,94,865 1.2 CIT(A) erred in holding that SVC Co-Op Bank and Mumbai district central Co Op bank are not society and hold that the same do not qualify deduction u/s 80P(2)(d). 1.3 CIT(A) erred in holding that adhoc deduction

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 u/s 80P(2)(c) is also not allowable. Ground: 2 CIT(A) erred in holding that deduction was rightly disallowed u/s 80P in intimation u/s 143(1) observing that the same was not claimed in the return while fact remain the same was claimed as shown in intimation u/s 143(1).” 4. The relevant facts, in brief, are that Appellant is a registered Co-operative Housing Society. In the return of income for the Assessment Year 2016-17, the Appellant claim deduction of INR 50,61,200/- consisting of deduction of INR 50,11,200/- under Section 80P(2)(d) of the Act and deduction of INR 50,000/- under Section 80P(2)(c)(ii) of the Act. The return filed by the Appellant was processed under Section 143(1) of the Act and vide intimation/order, dated 24.05.2017, deduction of INR 50,61,202/- was denied to the Appellant. The rectification application filed by the Appellant was also dismissed vide order dated 17.06.2019. Being aggrieved, the Appellant preferred appeal before CIT(A) who granted partial relief to the Appellant and allowed deduction to the extent of INR 28,66,335/- to the Appellant. The CIT(A) did not allow deduction under Section 80P(2)(d) of the Act in respect of interest income of INR 21,17,676/- and INR 27,189/- received from SVC Co-operative Bank Ltd. and the Mumbai District Central Bank Ltd., respectively. CIT(A) also did not allow deduction of INR 50,000/- under Section 80P(2)(c)(ii) of the Act. Therefore, being aggrieved, the Appellant has preferred the present appeal.

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 has been received by the Appellant are co-operative banks and not co-operative societies. We find merit in the contention of the Appellant that the issue stands decided in favour of the Appellant by various decisions of the Tribunal wherein the Tribunal has held that benefit of deduction under Section 80P(2)(d) of the Act would be available in respect of interest received from a co-operative bank after considering the judgments/decisions relied upon by the CIT(A). The Mumbai Bench of the Tribunal in the case of Lands End Co-operative Housing Society Ltd. Vs. ITO : 3566/Mum/2014, vide order dated 15.01.2016 has held that:

“8.3. We have heard…………. xx xx From the close perusal of the provisions of …………………………Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd.(Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this, the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a co-op society by way of interest or dividend from its investments with other coop society if such income is included in the gross total income of such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/- in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directed accordingly.” (Emphasis supplied)

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 6. After examining the judgment of the Hon‟ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 and taking into account the insertion of 80P(4) vide the Finance Act, 2006, the Mumbai Bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises vs. ITO: ITA No. 6547/Mum/2017, dated 24.04.2018, has held that the judgment of Hon‟ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra) was wrongly relied upon by the Revenue as the adjudication by the Hon‟ble Supreme Court in the aforesaid case was in context of Section 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Section 80P(2)(d) of the Act on the interest income received from co-operative bank. The relevant extract of the decision of the Tribunal read as under:

“7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further we may herein reproduce the relevant extract of the said 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 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)……………………………………………………………… 6

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20

(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”

Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. 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 cooperative society. We though are in agreement with the observations of the lower authorities 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, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a co-operative 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 may herein observe that 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 cooperative societies;” 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 7

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 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 cooperative 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. 8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for 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 32 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017

(iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. 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 also held that the interest income earned by the assessee on its investments held 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, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the cooperative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT(A) on the judgment of the Hon‟ble Supreme Court in the case of Totgars 8

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C.) being distinguishable on facts, thus, 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 co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT “F” bench, Mumbai in the case of M/s Vaibhav Cooperative Credit Society Vs. ITO- 15(3)(4) (ITA No. 5819/Mum/2014, dated 17.03.2017 is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee co-operative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec, 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT „SMC‟ Bench, Mumbai in the case of Shri Sai Datta Co-operative Credit Society Ltd. Vs. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination, That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Section 80P(2)(d). We however find that as held by the Hon'ble High Court of 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 non-jurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, 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),

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 wherein it was observed that the interest income earned by a co- operative society on its investments held with a co operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 9. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside the order of the lower authorities and conclude that the interest income of Rs.27,48,553/- earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d).” (Emphasis supplied) Same view has been taken by the Tribunal in the case of Mystique Rose Cooperative Housing Society Ltd.: vs. ITO 22(2)(3) (ITA No. 1290/Mum/2021) dated 30.03.2022 and Sonmarg Co- operative Housing Society Limited vs. CIT(A): (ITA No. 1334/Mum/2021) dated 29.03.2022.

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 9. In view of the above, disallowance of INR 21,94,865/- under Section 80P of the Act sustained by the CIT(A) is deleted and Ground No. 1 and 2 raised by the Appellant are allowed.

ITA No. 2565/Mum/2022 (Assessment Year 2019-2020) 10. We would now take up appeal for the Assessment Year 2019-20 (ITA No. 2565/Mum/2022). We have already condoned delay in filing the appeals for the Assessment Years 2016-17 and 2019-20 in paragraph 2 above. We note that the grounds raised in the present appeal challenging the disallowance of deduction under Section 80P(2)(d) and 80P(c)(ii) of the Act are identical to those raised in appeal for the Assessment Year 2016-17. The above adjudication shall also apply to the present appeal. Accordingly, disallowance of INR 14,78,759/- under Section 80P(2)(d) and INR 50,000/- under Section 80P(2)(c)(ii) of the Act aggregating to INR 15,28,759/- is deleted. Ground No. 1 and 2 raised by the Appellant are allowed.

Order pronounced on 23.01.2023.

Sd/- Sd/- (B.R. Baskaran) (Rahul Chaudhary) Accountant Member Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 23.01.2023 Alindra, PS

ITA. No. 2564 & 2565//Mum/2022 Assessment Year: 2016-17 & 2019-20 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.

आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai