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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH & S RIFAUR RAHMAN
HAFFKINE CO-OP ITO 20 (1)(5), CREDIT SOC LTD. Mumbai, Maharashtra. Haffkine Institute, Vs. Compound, Acharya Donde, Marg, Parel, Mumbai-400012 PAN- AAAAT8907A (Appellant) (Respondent) Present for: Assessee by : Shri. Mandar Vaidya Revenue by : Shri. Ashish Kumar Dehria Date of Hearing : 03 . 01 . 2023 Date of Pronouncement : 17 . 01 . 2023 O R D E R Per : Kuldip Singh, Judicial Member:
Aforesaid inter-connected Appeal bearing common question of law and facts are being disposed of by way of composite order to avoid repetition of discussion.
Appellant, HAFFKINE CO-OP CREDIT SOCIEY LTD. (‘here in after, referred to as the Assessee’) by filing aforesaid Appeal sought to set aside the impugned order dated 12.09.2022 passed by National Faceless Appeal Centre(NFAC), for short CIT(A) on the identically verdict grounds accept the difference in amount of deduction/disallowance inter alia that:-
1. 1. The Ld. CIT(A) erred in not considering that the the reopening of assessment beyond four years, was without jurisdiction since there was no failure on part of the assessee to disclose material facts.
2. The Ld. CIT(A) fell in error of law in declining the deduction of Rs.8,68,703/- u/s 80P(2)(a)(i) by invoking the provisions of sec.80P(4) of the Act.
2. The Ld. CIT(A) misdirected himself in declining the deduction of Rs.8,68,703/-, by treating the Appellant at par with a Cooperative Bank, for the purpose of sec.80P(2)(a)(i), which runs contrary to the position laid down by the Hon'ble Bombay High Court in Quepem Urban Credit Coop. Society 377 ITR 272 (Bom.).
3. The Ld. CIT(A) fell in error of law in declining the deduction of Rs.3,09,732/- u/s 80P(2)(d) by invoking the provisions of sec.80P(4) of the Act.
4. It is submitted that the disallowances made u/s.40(a)(ia) of Rs.1,72,784/- and expenses of Rs.1,40,698/-, would be includible in the quantum of deduction u/s. 80P(2)(a)(i).
The Ld. CIT(A) failed to appreciate that sec.80P(4) applies only in the hands of a Cooperative Bank and has no application in the hands of a Cooperative society which is not a bank.
The Ld. CIT(A) erred in not appreciating that section 80P(4) is meant to operate as a proviso to the main section 80P and does not override section 80P(2)(a)(i) of the Act and/or sec.80P(2)(d).
7. The appellant craves leave to add, alter, amend, modify any grounds of appeal. (Ground of AY 2010-11 are taken)
3. Briefly stated facts necessary for consideration an adjudication of the issue at hand are :- assessee is a Co-operative Credit Society. Society in its return of income declared total income at Rs.(NIL) claiming deduction u/s 80P. Assessing Officer declining the raised by the Assessee made disallowance of deduction claimed by the Assessee as well as disallowance of provision for expanses assets the total income at Rs. 14,91,917/- & 23,87,781/- for the AY 2010-2011 & 2014-15 respectively.
4. Assessee carried the matter before the Ld.CIT(A), by way of filing Appeals who has confirmed the addition by dismissing the Appeal. Filing aggrieved, the Assessee has come up before the tribunal by way of filing present Appeals. 5. I have heard the Ld. Authorized Representative of the parties to the Appeal. 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 has claimed deduction u/s, 80P(2)(d) to the tune of Rs. 3,09,732/- & 3,72,548/- in AY 2010-11 & AY 2014-15 respectively, which has been disallowed by the Assessing Officer and confirmed by the Ld.CIT (A). This issue is no longer Res-Integra as the same has already been decided by the Tribunal in number of cases in favor of the Assessee. 7. The co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co-operative Society Ltd. in order dated 09.09.2022 decided 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. (supra) 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, 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 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 co- operative 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 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 co- operative 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 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 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 co- operative societies;" We are of the considered view, that though the co- operative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 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 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.
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 co- operative 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 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 co- operative 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 co- operative 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 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. 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 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. Accordingly, on the basis of our aforesaid observations, we herein not finding favor with the view taken by the Pr. CIT that the order passed by the A.O u/s 143(3), dated 31.08.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act set-aside the same and restore the order passed by the A.O u/s 143(3) of the Act, dated 31.08.2017." 8.Hon'ble High Court of Karnataka in case of Pr. CIT & Anr.Vs. Totgar's Co-operative Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and Hon'ble Gujarat High Court in case of State Bank of India vs. CIT (2016) 389 ITR 578 (Guj.) had held that interest income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. 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 assessee society who has earned an amount of Rs. Rs. 13,85,532/- from its investment of surplus fund 19,20,726/- deposited with co-operative 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.
7. Assessee claimed further deduction of Rs. 8,68,703/- & 10,52,263/- u/s. 80P (2)(a)(i) of the Act, AY 2010-11 & 2014-15 respectively which has also been disallowed by the Assessing Officer as well as Ld.CIT(A) on the ground that since the Assessee is not undertaken banking business activities it’s not entitle for the deduction and also on the ground that section 80P(4) is applicable only to Co-Operative Banks and not to the credit Co-Operative Societies.
8. This issue is also no longer Res-Integra having been decided by the Co-Ordinate Bench of Tribunal in case of The KEM Hospital & Sheth GSM College Employees Co- Operative Credit Society Ltd. date 07.04.2021 by returning following findings,
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 considered the judicial pronouncements that have been relied upon by the lower authorities. After deliberating at length on the orders of the lower authorities, we are persuaded to subscribe to the observations of the CIT(A) that as the assessee which is a co-operative credit society is not a primary co-operative bank, hence, it would not be hit by the provisions of Sec.80P(4) as had been made available on the statute vide the Finance Act, 2006 w.e.f 01.04.2007. Our said view is fortified by the fact that it is absolutely mandatory for a co-operative society to seek a licence from the Reserve Bank of India to form and operate as a co-operative bank. Further, a perusal of Circular No. 312 of the Reserve Bank of India reveals the process involved for conversion of a co-operative society into a primary co-operative bank. Admittedly, in the case before us as the assessee being a co-operative credit society is neither authorized nor had undertaken any of the banking business activities as are carried out by a primary co-operative bank, but had only provided financial assistance/credit to its members, therefore, it can safely be concluded that it cannot be held to be a co- operative bank. Apart from that, we find that as stated by the Id. A.R, and rightly so, the issue involved in the present appeal in squarely covered by the orders of the Tribunal in the assessee's own case for the preceding years, viz. A.Y 2012-13, dated 15.03.2018; AY 2013- 14, ITA No. 864/Mum/2017, dated 20.06.2018, and A.Y 2014-15, ITA No. 4552/Mum/2019, dated 07.01.2021. On the basis of our aforesaid deliberations, we are persuaded to be in agreement with the observations of the CIT(A) that the assessee would not be hit by the provisions of Sec. 80P(4) of the Act. We, thus, being in agreement with the view taken by the CIT(A) that the claim of the assessee under Sec. 80P(2)(a)(i) was in order, uphold the same.
Following the order passed by the Tribunal in case of KEM Hospital & Sheth GSM College Employees Co-Operative Credit Society Ltd.(Supra), I am of the considered view that the Assessee Co-Operative Credit Society being not a primary Co-operative Bank is not hit by the provision of section 80P(4), made available on the statute vide Finance Act at 2006 with effect from 01.04.2007. More over it is also Mandatory for a Co-Operative Society to seek license from the Reserve Bank of India to form and operate as Co-Operative Bank. Since the Assessee Society has only provided Financial Assistance/Credit to its Member it cannot be treated as a Co-Operative Bank, hence entitled for deduction u/s. 80P (2)(a)(i). My view is also fortified by the decision rendered by Hon’ble Bombay High Court in case of [ [2015]377 ITR 272 (Bom) ] QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY LTD. ASSISTANT COMMISSIONER OF INCOME–TAX, F.M.REIS & M.S.SANKLECHA JJ. April 17, 2015.
In view of but has been discussed above, both the Appeals filed by the Assessee are allowed.
Order pronounced in the open court on 17.01.2023.