ITO-21(1)(3), MUMBAI, MUMBAI vs. M/S. CASA GRANDE CO-OP HSG. SOC. LTD., MUMBAI

This appeal in A.Y.2016-17 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-33, Mumbai in appeal No.CIT(A)-33/Rg.21/85/2018-19 dated 24/07/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 20/11/2018 by the ld. ITO-WARD 21(1)(3), Mumbai (hereinafter referred to as ld. AO).

Though the revenue has raised several grounds of appeal, we find that the effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in allowing deduction u/s.80P(2)(d) of the Act in the facts and circumstances of the case.

We have heard rival submissions and perused the materials available on record. At the outset, both the parties before us fairly agreed that this issue is already covered in favour of the assessee by the order of this Tribunal for the A.Y.2015-16 in dated 29/10/2020. We find that assessee is a co-operative housing society. During the period relevant to year under appeal, the assessee received interest income of Rs.1,86,42,143/- being interest on savings account, term deposits and fixed deposits with Co-operative banks, sale of scrap, miscellaneous income, dividend and interest free tax free bonds. We find that assessee filed its return of income for the A.Y.2016-17 on 21/10/2016 declaring total income of Rs.1,44,130/-. The assessee had claimed deduction u/s.80P(2)(d) of the Act while filing the return of income for Rs 1,86,42,143/-. The total deduction u/s.80P(2)(d) claimed by the assessee was Rs.1,86,42,143/- was restricted to Rs.1709/- by the ld. AO while completing the assessment. In effect, in the scrutiny assessment proceedings, the ld. AO held that interest income received by the assessee from Co-operative bank does not fall in the exempt category as provided u/s.80P(2)(d) of the Act along with other income. The ld. CIT(A) apart from placing reliance on various decisions also placed reliance on the decision of the Hon’ble Jurisdictional High Court in the case of K. Subramanian vs. Siemens India Ltd., reported in 156 ITR 11 accepted the assessee’s claim of deduction u/s.80P(2)(d) of the Act in respect of interest derived from investment with co-operative banks and M/s. Casa Grande Co-op Housing Society Ltd., directed the ld. AO to allow deduction of Rs.1,86,42,143/- as claimed by the assessee u/s.80P(2)(d) of the Act.

We have heard the submissions made by learned Departmental Representative and have examined the orders of lower authorities. The only issue in present appeal by the Department is against allowing deduction under section 80P(2)(d) of the Act. The issue gives rise to the question: Whether a Cooperative Bank should be considered as cooperative society for the purpose of section 80P(2)(d) of the Act? The Hon'ble Karnataka High court in the case of PCIT vs. Totagars Co- operative Sale Society 392 ITR 74 (Karnataka) has held that for the purpose of section 80P(2)(d) of the Act a cooperative 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 [2020] 421 ITR 134 (Gujarat). 4.1 On the same issue the 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 Act. It would be relevant to mention here that the Hon'ble High Court while rendering later judgement has not considered the earlier decision rendered in the case of Totagars Co-operative Sale Society reported as 392 ITR 74.

No judgement from Hon'ble Jurisdictional High court on the issue of eligibility of deduction under section 80P(2)(d) of the Act on interest income from cooperative bank has been brought to our notice. 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 which is in favour of the assessee, is to be preferred. In the light of decisions discussed above and the facts of the case, we find no infirmity in the order of CIT(A). Hence, the same is upheld and the appeal of Revenue is dismissed.

In the result, appeal of the Revenue is dismissed.