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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya & Shri Ravish Sood
O R D E R
PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-46, Mumbai, dated 23.03.2018, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short „I-T Act‟), dated 28.12.2016. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal: “The Appellant is a Co-operative Housing Society, primarily engaged in providing various services to its members for upkeep and maintenance of the society and collecting charges from members for the same. During the relevant previous year, appellant received Rs.40,720/- as Interest from Shamrao Vithal Co-operative Bank. The Learned Commissioner of Income Tax (Appeals)-46 has erred in holding that appellant was not entitled to benefit of exemption uls 80P (2) (d).The order passed, disallowing claim of the appellant P a g e | Ekta Milan Co-Op. Hsg. Society Ltd. Vs. CIT(A)-46 u/s.80P(2)(d) of the Income Tax Act. 1961 of Rs. 40,720/-is ab-initio void, same having been passed in clear contradiction of the binding provisions of the Income Tax Act and instructions of Central Board of Direct Taxes. In view of the above the assessee craves to allow deduction of Rs. 40,720/- u/s 80P(2)(d).”
Briefly stated, the assessee is a co-operative society which accepts contributions from its members for providing common amenities and services to them. The assessee had e-filed its return of income for A.Y. 2014- 15 on 20.03.2016, declaring total income at Rs.26,870/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the I-T Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2).
During the course of the assessment proceedings it was observed by the A.O that the assessee society had earned interest income of Rs.2,16,190/- on its FDR‟s held with two banks viz. (i) Shamrao Vithal Co- op Bank Ltd. (Rs.41,792/-) ; and (ii) Corporation Bank Ltd. (Rs.2,16,190/-). The A.O held a conviction that as the interest income earned by the assessee on its aforesaid investments was not from its activities of a co-operative credit society for which it was formed, thus the same was liable to be brought to tax under the head “Income from other sources”. On the basis of his aforesaid deliberations the A.O relying on the judgment of the Hon‟ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (S.C) concluded that the aforesaid interest income accruing the assessee society did not qualify for deduction under Sec.80P. As a result, the A.O declined the assesses claim of deduction under Sec.80P on the interest on FDRs and brought the same to tax under the head “Income from other sources”.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) not being persuaded to subscribe to the contentions advanced by the assessee dismissed the appeal.
The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short P a g e | Ekta Milan Co-Op. Hsg. Society Ltd. Vs. CIT(A)-46 „A.R‟) for the assessee submitted that the lower authorities had erred in declining the assesses claim of deduction under Sec.80P(2)(d) insofar the interest income of Rs. 41,792/- on the fixed deposit with the co-operative bank viz. Shamrao Vithal Co-op Bank Ltd. was concerned. In support of his aforesaid contention the ld. A.R relied on the following orders of the coordinate benches of the Tribunal viz. (i) Lands End Co-operative Housing Society Limited Vs. ITO (ITA No.3566/Mum/2014 dated 15.05.2016; (ii) Sea Green Co-operative Housing society Ltd. Vs. ITO (ITA No. 1343/Mum/2017 dated 31.03.2017); (iii) ITO Vs. Citiscape CHS Limited ( 7 5436/Mum/2017 dated 08.12.2017); and (iv) Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO (ITA No. 6547/Mum/2017, dated 25.04.2018).
Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities.
We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record and judicial pronouncements relied upon by them. We find that our indulgence in the present appeal has been sought to adjudicate as to whether the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments made with the co- operative bank is in order, or not. 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 Sec. 80P(2)(d), which reads as under :
“80P(2)(d) (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 :-
P a g e | Ekta Milan Co-Op. Hsg. Society Ltd. Vs. CIT(A)-46 (a)............................................................................................ (b)............................................................................................ (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 co-operative society, the whole of such income;” On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by a co-operative society from its investments held with any other co-operative society shall be eligible for deduction from 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 co-operative society. We are of the considered view that though with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act 2006, w.e.f 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, however, the same would in no way jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) insofar its interest income on investments made with a co-operative bank is concerned. 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 co-operative society, the claim of deduction under the Sec. 80P(2)(d) would be duly available. We may herein observe that the term „Co-operative society‟ had been defined under Sec. 2(19) of the I-T Act, as under:- “(19) “Co-operative society” means a cooperative society registered under the Co-operative 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;” As observed hereinabove, though a co-operative bank pursuant to the insertion of sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the I-T Act, however, as a co-operative bank P a g e | Ekta Milan Co-Op. Hsg. Society Ltd. Vs. CIT(A)-46 continues to be a co-operative society registered under the Co-operative 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, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for deduction under Sec.80P(2)(d). In fact, we find that the issue that the interest income derived by a co-operative society from its investments held with a co-operative bank is eligible for deduction under Sec. 80P(2)(d) is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum) (ii) M/s Sea Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO- Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. Apart there from, we find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj), had also held that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d). Still further, we find that the CBDT Circular No. 14, dated 28.12.2006 also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the co-operative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the I-T Act. We are of the considered view that the reliance placed by the lower authorities on the judgment of the Hon‟ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C) being distinguishable on facts, had thus wrongly been relied upon by them. In fact, the adjudication by the Hon‟ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i) and not on the entitlement of a co-operative