CCI CHAMBERS CO OP HSG SOC. LTD,MUMBAI vs. ITO 17(1)(3), MUMBAI

Per Shamim Yahya (AM) :- This appeal by the assessee is directed against order of learned CIT-A dated 12.6.2018 pertains to assessment year 2012-13.

read as under :- On the facts arid in the circumstances of the case and in law :-

2. The learned C1T(A) failed to take into consideration that the provisions of section 80P(d) does not emphasis on principal of mutuality as long as income is received from the investments made, with a co-operative society. The learned CIT(A) failed to consider the provisions of section SOP clause (d) which reads as under:- "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." ...........

2 CCI Chambers Cooperative Housing Society Limited 3. The learned CIT(A) erred in not granting the exemption of interest earned from FD in Cooperative Bank on the ground that contribution collected was from a non-member.

“Firstly, the assessee received Rs.54,89,600 from Mrs.Sanjukta Ghosh, who was never a member of the society. .As admitted by the assessee itself, Mrs.Sanjukta Ghosh intended to purchase a flat in their society but when the deal did not materialize the amount received from Mrs.Sanjukta Ghosh in September 2011 was refunded in May 2013. Hence, the principle of 3 CCI Chambers Cooperative Housing Society Limited mutuality is missing in this transaction. Secondly, the assessee made short- term FDRs of the amount received from a non-member hence the interest earned thereon also cannot be said to be covered by the principle of mutuality. Further, where assessee deposits the money in bank for earning interest, their relations are not based on mutuality but they are of customer and the banker. In such transaction also, the principle of mutuality is missing.

“I have gone through the Assessing Officer’s observation and appellant’s submission. The only issue to be adjudicated here is whether the sum received by the society from a non member kept in bank and interest received out of it can be allowed deduction u/s. 80P(d). The appellant has concluded that the provisions of section 80P(d) does not emphasise on principal of mutuality as long as income is received from the investment made with a cooperative society. But I do not agree with the contention of the assessee as the whole scheme of cooperative societies non taxability rests on the principal of mutuality. Concept of mutuality is based on the fact that one cannot trade with oneself and cannot make profit out of oneself in the case of cooperative societies contributions collected from non-members are income chargeable to tax. In the instant case the contribution collected was from non-member and so the interest earned from that amount of money which was kept as FD cannot be claimed as exempt from tax. Hence, in absence of mutuality the Assessing Officer is right in concluding that interest income cannot avail benefit of section 80P(d). Moreover, I find that case laws referred by appellant are on different facts and not applicable to the present case. Hence, appellants ground of appeal is dismissed.”

“Moresoever, it is pertinent to note that although Mr. Azim Ghosh cancelled the transaction pertaining to Flat No. 24 he purchased Flat No. 32 and therefore eventually acquired membership in the Appellant Society and till date is the member of the Society and enjoys all the benefits and privileges as a member of the assessee-Society. Thus the principles of mutuality are applicable in the facts and circumstances of this case. The assessee-Society has satisfied all the conditions stated in section 80P(2)(d) and there is no reason for denying the deduction. However, the AO denied such deduction u/s 80P of the Act on a ground of non-applicability of principal of mutuality and has added the same under the head "Income from Other Sources.

4 CCI Chambers Cooperative Housing Society Limited 8. We find that in of the orders of the authorities below the above fact are absent. If the above submissions are correct and the said person from whom the advanced was received has been admitted as a member subsequently the submission of the assessee will have to be accepted that this fund cannot be said to have been contributed by nonmember. In such circumstances the denial of benefit of principle of mutuality will not survive. Accordingly in the interest of justice we remit this aspect of the assessee’s submission to the file of assessing officer. Assessing officer shall examine the veracity of assessee’s submission as above and thereafter decide as per our observations as above. Needless, to add the assessee shall be granted adequate opportunity of being heard.