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Facts
The appellant, a cooperative housing society, claimed deduction under section 80P(2)(d) for interest income earned from cooperative banks, sinking fund deposits, and members. The Assessing Officer disallowed the deduction, and the CIT(Appeals) confirmed the addition.
Held
The Tribunal held that the appellant society is entitled to deduction under section 80P(2)(d) on interest income earned from cooperative banks, following coordinate bench decisions that distinguished the Supreme Court ruling in Totgar's Cooperative Sale Society. However, issues related to interest from sinking fund deposits and members, and miscellaneous charges, were remitted to the CIT(Appeals).
Key Issues
Whether interest income earned by a cooperative society from cooperative banks is eligible for deduction under section 80P(2)(d)? Whether interest on sinking fund deposits and from members are taxable, and whether miscellaneous charges received from members are taxable on the principle of mutuality?
Sections Cited
80P(2)(d), 234A, 234B
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Income Tax Appellate Tribunal, Mumbai “SMC” Bench, Mumbai.
Before: Shri Pawan Singh (JM) & Shri Omkareshwar Chidara (AM)
The following grounds of appeal are raised before the ITAT by the appellant :- 1) For that the Ld. Assessing Officer (hereinafter referred to as "Ld. AO") erred in disallowing deduction u/s 80P(2)(d) of the Act of Rs. 14,10,932/-. 2) For that the Ld. AO erred in holding that interest received from other co-operative societies which are also co-operative banks are not eligible for deduction u/s 80P(2)(d). 3) For that the Ld. AO erred in taxing the interest received / credited of Rs. 1,82,887/- on sinking fund deposits, despite the fact that the same were never credited to the income and expenditure account and the same was required to be created as per the statutory provisions of the co- operative law. 4) For that the Ld. AO erred in adding interest received from members of Rs. 2,96,101/-ignoring the fact that the same were exempt based on mutuality. 5) For that the Ld. CIT (Appeals) erred in confirming the addition made by Ld. AO due to non-response without considering the submission in support of the assessee already available on record. Hence order so passed
2 Safal Twins Cooperative Housing Society Ltd. dismissing the appeal of the Appellant is bad in law hence such order be set aside. 6) For that the learned CIT (Appeals) erred in confirming the interest u/s 234A and 234B of the Act, the same was unjustified and hence the same be deleted. 7) The appellant craves leave to produce additional evidences in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. v_ 8) That the appellant company craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal.
From the assessment order and the order of Ld. CIT(A), it is observed that they held the appellant society is not entitled for deduction under section 90P(2)(d) of the I.T. Act, on the interest income earned from the cooperative banks. Reliance was placed by them on the decision of Hon'ble Supreme Court in the case of Totgar’s Cooperative Sale Society 322 ITR 283 (SC), where it was held that income from utilisation of surplus funds was taxable under the head ‘income from other sources’ and hence not eligible for deduction under section 80P(2)(d) of the Act.
During the appellate proceedings before the Bench, the Ld. AR of the appellant filed a paper book containing the several decisions rendered by various Tribunals on this issue, viz., Kaliandas Udyog Bhavan Premises Society Ltd. (94 taxmann.com 15)(Mum), Palm Court Premises Cooperative Society Ltd. (145 taxmann.com 415)(Mum) and decisions of Pune, Chennai and Bangalore Tribunals on this issue where the Tribunals have held that interest income received from the Cooperative Banks are exempt from 80P(2)(d) of the Act.
The Ld. DR relied on the orders of Ld. AO and Ld. CIT(A).
After hearing both parties, it is decided that the appellant society is entitled for deduction under section 80P(2)(d) of the Act on the interest income earned from the cooperative banks in view of the decisions rendered by the Coordinate Benches (supra). In these decisions, the coordinate
3 Safal Twins Cooperative Housing Society Ltd. Benches have considered and distinguished the decision of Hon'ble Supreme Court in the case of Totgar’s Cooperative Sale Society (supra) and held that the cooperative societies are entitled for deduction as above. Respectfully following the decisions, it is held that the appellant society is entitled for deduction under section 80P(2)(d) of the Act on the interest income earned from the cooperative banks.
As far as the grounds of appeal raised by the appellant in serial No. 2 and 3 are concerned, viz., interest received from sinking fund deposits of Rs. 1,82,887/- and interest received from members of Rs. 2,96,101/- the same are not borne out of the order of Ld. AO and Ld. CIT(A) has not adjudicated these issues despite the same were raised before Ld. CIT(A). In fact, the Ld. AO made an addition of Rs. 76,881/- towards miscellaneous charges received by the appellant as there was no explanation from them. (para 4.1 of assessment order). The Ld. CIT(A) has confirmed this addition of Rs. 76,881/- as there is no nexus with the business activity of appellant society and hence not entitled for deduction u/s. 80P(2)(d) of the Act. (para 5.3 of the order of Ld. CIT(A).
The appellant has raised an additional ground of appeal stating that on the basis of principle of mutuality, the contribution received from members towards “miscellaneous charges” are not taxable.
8. Since the facts are not clear from the orders of lower authorities/not adjudicated by Ld. CIT(A), on these grounds raised by the appellant in serial No. 3&4, the same are remitted to the file of Ld. CIT(A) for adjudication after giving an effective opportunity to the appellant.
9. Thus, as far as the interest received from the cooperative banks, the appellant is entitled for deduction under section 80P(2)(d) of the Act and other issues are remitted to the file of Ld. CIT(A).
4 Safal Twins Cooperative Housing Society Ltd.
Appeal of the appellant is partly allowed as above.
Order pronounced in the open Court on 18/03/2025.