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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
ORDER PER VIKAS AWASTHY, J.M: This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-18, Mumbai [hereinafter referred to as ‘the CIT(A)’] dated 14.03.2019 for the Assessment Year (AY) 2015-16. The solitary ground raised by the assessee in appeal is against rejection of assessee’s claim of deduction under section 80P(2)(d) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’].
आअसं. 3510/मुं/2019 (िन.व.2015-16) (A.Y.2015-16)
The brief facts of the case as emanating from records are: The assessee is a Co-operative Housing Society. During the period relevant to AY under appeal, the assessee earned interest income of Rs. 10,77,000/- from deposits (Fixed Deposits & Saving Banks deposits) with Co-operative Bank. The assessee claimed deduction of interest income from Co-operative Bank under section 80P(2)(d) of the Act. The AO disallowed assessee’s claim of deduction and made addition of the entire interest income on the premises that by virtue of insertion of section 80P(4) by the Finance Act, 2006 w.e.f. 01.04.2007, the assessee is not eligible for the benefit under section 80P of the Act. Against the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of assessee and upheld the assessment order. Hence, the present appeal by the assessee.
Shri Sanjay J. Sethi representing the Department vehemently defended the impugned order and prayed for dismissing the appeal by assessee. The ld. Departmental Representative (DR) in support of his contentions placed reliance on the decision of Hon’ble Karnataka High Court in the case of Totagar Co-operative Sale Society reported as 395 ITR 611, the ld. DR reiterated the reasons recorded by the authorities below for rejecting assessee’s claim of deduction under section 80P(2)(d) of the Act. 4. We have heard the submissions made by ld. Departmental Representative and have examined the orders of authorities below. The assessee is a Co-operative Housing Society registered under Co-operative Housing Societies Act. Undisputedly, the assessee earned interest income of Rs. 10,77,000/- from investments/deposits with Co-operative Bank. The आअसं. 3510/मुं/2019 (िन.व.2015-16) (A.Y.2015-16) assessee claimed deduction under section 80P(2)(d) on interest income earned from Co-operative Bank. The authorities below rejected assessee’s claim on the ground that after insertion of sub-section (4) to section 80P, the benefit of deduction under section 80P is no more available to the assessee.
The issue whether interest income derived from deposits with cooperative banks is eligible for deduction under section 80P(2)(d) of the Act or not has not crystallised so far. The coordinate Bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO, 94 taxmann.com 15 (Mumbai) after considering various decisions by Hon’ble High Courts and the Tribunal and the provisions of the Act, has held that interest income derived by a co-operative society from investments with co-operative bank, would be entitled for deduction under section 80P(2)(d) of the Act. The relevant extract of the order reads 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: (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) to (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 cooperative 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 co-operative 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
आअसं. 3510/मुं/2019 (िन.व.2015-16) (A.Y.2015-16) 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 cooperative 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 cooperative 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 '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 cooperative bank pursuant to the insertion of Subsection (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 cooperative 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 cooperative 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.” [Emphasised by us] 6. The Pune Bench of Tribunal in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. vs. ACIT [2019] 105 taxmann.com 100 (Pune - Trib.) has taken a similar view in respect of interest and dividend income derived from investment with cooperative bank. The relevant extract of the findings of the Tribunal are as under: - “24. In some of the appeals the issue of deduction under section 80P of the Act on interest and dividend income is also involved. The assessee claimed deduction u/s.80P(2)(d) of the Act on interest and dividend received from Co-operative Society on Savings Bank accounts. The AO did not allow such deduction. The ld. CIT(A) overturned the assessment order on this point and granted deduction. The Revenue is aggrieved by such allowing of deduction.
We have heard both the sides and gone through the relevant material on record. Relevant part of section 80P reads as under : - 80P. (1) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject
आअसं. 3510/मुं/2019 (िन.व.2015-16) (A.Y.2015-16) 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) to (c) (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income; 26. A cursory look of the above provision deciphers that any amount of interest or dividend derived by a Co-operative Society from its investments with any other Cooperative Society, is deductible under clause (d) of section 80P(2) of the Act. The ld. CIT(A) has given a categorical finding that assessee is a Co-operative Society and the Co- operative Bank from which the above-mentioned income was earned, is also a Cooperative Society duly registered under Maharashtra Cooperative Societies Act. This contention has not been controverted by the ld. DR with any cogent material or evidence. Thus, it is seen that the case of the assessee is fully covered u/s.80P(2)(d) of the Act. Reliance of the AO on the provisions of sub-section (4) of section 80P is misplaced. Such provision states that: 'The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank.' As the assessee under consideration is not a Co-operative Bank, the mandate of sub-section (4) does not extend to it. We, therefore, approve the view taken by the ld. CIT(A) in granting deduction u/s.80P(2)(d) of the Act in respect of interest and dividend income earned by the assessee on such facts.” [Emphasised by us.] 7. The Hon'ble Karnataka High court in the case of PCIT vs. Totagars, Cooperative Sale Society 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.
However, on the same issue Hon'ble Karnataka High court 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 आअसं. 3510/मुं/2019 (िन.व.2015-16) (A.Y.2015-16) 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 Jurisdictional High Court on this issue was brought to the notice of Bench. The Hon'ble Bombay High Court in the case of K. Subramanian vs. Siemens India Ltd. 156 ITR 11 has held that when two conflicting decisions of non-jurisdictional High Courts are available, the view that favours the assessee is to be preferred. Accordingly, following the decision of Hon'ble Karnataka High Court in the earlier 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), the deduction claimed by the assessee under section 80P(2)(d) of the Act in respect interest derived from investments with the cooperative bank is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on Friday, the 20th day of August, 2021.