MHADA KARMACHARI SAHAKARI PATPEDHI MARYADIT,MUMBAI vs. ASSESSMENT UNIT, INCOME TAX DEPARTMENT, MUMBAI

Natural Justice

1 The The Additional / Joint / Deputy / Assistant Commissioner of Income Tax / Income tax Officer, OF Assessment Unit, Income Tax Department ["the A.O."], erred in not granting proper, sufficient and adequate opportunity of being heard to the Appellant while framing the assessment / making the impugned additions.

2 It is submitted that in the facts and the circumstances of the case, and in law, the assessment so framed be held as bad and illegal, as the same is framed in breach of the principles of natural justice.

1 On the facts and circumstances of the case, and in law, the learned the A.O. erred in not allowing deduction of Rs. 35,04,451/- u/s. 80P (2) (a) (i) of the Act in respect of the interest income earned by the Appellant on the deposits kept by it with co-operative banks. It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance of the claim was called for.

2. The AO erred in not allowing Deduction of Rs. 35,04,451/- U/s. 80 P (2) (d), as the income from Other Sources of the Appellant.

3. The Commissioner of Income-tax (Appeals), Income Tax Department, National Faceless Appeal Centre ["the CIT(A)"] erred in upholding the Action of AO.

The only ground raised by the assessee in the present appeal is with regard to disallowance of deduction claimed

In this regard Ld. AR appearing on behalf of the assessee, reiterated the same arguments as released by him before revenue authorities. Whereas on the contrary, DR appearing on behalf of the revenue relied upon the orders passed by the revenue authorities

I have heard the counsels for both the parties and have perused the material placed on record, judgements cited before me and also the orders passed by the revenue authorities

From the records, I noticed that the assessee is a cooperative credit Society and earned interest income from Mumbai District Cooperative Bank and Maharashtra State Cooperative Bank and thus claimed deduction u/s 80P(2)(a)(i) of the Act, but the same was denied by the AO by holding that earning of interest from FDR is not an activity for advancement of cooperative movement, while relying upon the decision of Hon’ble Supreme Court in the case of Totagarh’s Co-operative Sales Society Ltd Vs. ITO, 322 ITR 283 and other decisions quoted in the order of Ld. CIT(A).

In the result, appeal filed by the assessee is allowed.

Both sides heard, orders of authorities below examined. Undisputedly the assessee has received interest and dividend income from deposits/investments with Co-operative Bank. The Assessing Officer and CIT(A) has disallowed the assessee's claim of deduction under section 80P(2)(d) of the Act in respect of said income of Rs.10,74,752/-.

The Hon'ble Karnataka High court in the subsequent judgment in the case of PCIT vs. Totagars, Co-operative Sale Society reported as 392 ITR 74 has held that for the purpose of section 80P(2)(d) of the Act, co-operative bank should be considered as cooperative society. Similar view has been taken by the Hon'ble Gujarat High court in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT, 421 ITR 134. 7. However, on the same issue Hon'ble Karnataka High court in the subsequent judgment in the case of PCIT vs. Totagars, Co- operative Sale Society 395 ITR 611 (Karnataka) has taken a contrary view holding that interest income earned from deposit with the cooperative bank does not qualify for deduction under section 80P(2)(d) of the Act. It would be relevant to mention here that the Hon'ble High Court while rendering the later judgement has not considered the earlier decision rendered in the case of Totagars, Co-operative Sale Society (supra).

No judgement by the Hon'ble Juri ictional High Court on this issue was brought to our notice. The Hon'ble Bombay High 156 ITR 11 has held that when two conflicting decisions of non-juri ictional High Courts are available, the view that 6 Mhada Karmachari Sahakari Patpedhi Maryadit, Mumbai favours the assessee is to be preferred. Accordingly, following the first decision of Hon'ble Karnataka High Court in the case of Totagars Co-operative Sale Society (supra) and the decision in the case of Hon'ble Gujarat High Court in the case of Vankar Sahakari Sangh (supra). I hold that the assessee is eligible to claim deduction under section 80P(2)(d) of the Act in respect interest / dividend income from co-operative bank.

The CIT(A) has placed reliance on the decision of Hon'ble Supreme Court of India in the case of Totgars Co-operative Sale Society Ltd. vs. ITO(supra) to disallow assessee's claim of deduction under section 80P(2)(d) of the Act. 1 find that the aforesaid decision is distinguishable on facts. In the said case assessee's claim of deduction under section 80P(2)(d) of the Act was not rejected for the reason that the assessee falls within the ambit of section 80P(4) of the Act. Hence, ratio laid down by Hon'ble Apex Court in the case of Totgars Co-operative Sale 10. In the result, impugned order is set-aside and appeal by assessee is allowed.

Respectfully, following the view taken by the Hon’ble Coordinate Benches of Mumbai ITAT, I hold that AO was not justified in disallowing the claim of deduction. Therefore I set aside the order of CIT(A) and allow the deduction claimed by the assessee u/s 80(P)(2)(d) of the Act. Consequently, this grounds raised by the assessee stands allowed.

In the result, the appeal filed by the assessee stands allowed.

उप/सहायक पंजीकार ( Asst.