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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH, JM & SHRI N. K . PRADHAN, AM
सुनवाई की तारीख / Date of Hearing: 15.01.2019 घोषणा की तारीख /Date of Pronouncement: 30.01.2019 आदेश / O R D E R
PER AMARJIT SINGH, JM:
1. The assessee has filed the above mentioned appeals against the different orders passed by the Commissioner of Income Tax (Appeals)-33, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11, 2012-13 & 2013-14.
to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14
The assessee has filed the present appeal against the order dated 03.07.2017 passed by the CIT(A)-33, Mumbai relevant to the A.Y.2010-11. The assessee has raised the following grounds: -
“1. The Ld. CIT(Appeals) - 33, Mumbai has erred in not considering the income earned on investment made in other co-operative credit societies, banks as income of the society from business activities and hence eligible for deduction u/s.80P(2)(a)(i). 2. The Ld. CIT(Appeals), 33 and Ld. AO has erred in not considering deduction u/s.80P(2)(c) amounting to Rs.50,000/- allowable to a co-operative society for income from other sources.
The brief facts of the case are that the assessee filed its return of income on 13.10.2010 declaring total income of Rs.Nil. The case was selected for scrutiny assessment under CASS and thereafter the assessment was completed on 31.10.2012, accepting the return of income. Thereafter, the assessment was reopened u/s.147 of the Income Tax Act, 1961 ( in short “the Act”) and notice u/s.148 dated 13.03.2015 was issued to the assessee. The reasons were served upon the assessee but the assessee did not file any reply. Thereafter, the notice u/s.143(2) and 142(1) of the Act were issued to the assessee. The assessee is a co-operative credit society carrying on the business of providing credit facilities to its members i.e. financial / banking business with members only. On perusal of the income and to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 expenditure account and balance sheet as on 31.03.2010, it was noticed that the major receipt of Rs.1,47,81,277/- was by way of interest on loan and amount of Rs.37,87,234/- was received as interest on fixed deposits with bank. On the expenditure side, the major item of expenditure incurred on interest on bank deposits amounting to Rs.1,11,79,499/-. Other receipt on the income side was pass book sale and service charges of Rs.4,519/-, form fees Rs.9,930, dividend of Rs.8,06,058. Accordingly, total receipt of the income side was Rs.1,93,89,018/-. The assessee shown the income to the tune of Rs.32,60,973/- and claimed deduction u/s.80P(2)(a) of the Act. Since the claim was not justifiable, therefore, the notice was given and after the reply of the assessee, the claim of exemption in sum of Rs.32,60,973/- was not found eligible for deduction u/s.80P(2)(a)(i) and section 2(24)(viia) read with section 80P(4) of the Act inserted by Finance Act w.e.f.01.04.2007, therefore, the claim of the assessee was declined and an amount of Rs.32,60,973/- was added to the income of the assessee.
Feeling aggrieved the assessee filed an appeal before the CIT(A) who dismissed the appeal of the assessee, therefore, the assessee has filed the present appeal before us.
5. All the issues are interconnected, therefore are being taken up together for adjudication. In-fact in all the issues the claim of the assessee is that the assessee nowhere fall within the purview of to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 cooperative credit bank and even interest income with the deposit with the cooperative bank nowhere vitiated the claim of the assessee but the CIT(A) has wrongly declined the claim of the assessee, therefore the claim of the assessee is liable to be allowable. It is specifically argued that there are difference of opinion on the different High Court decisions but on seeing the facts and circumstances, the Hon’ble ITAT has also allowed the claim of the assessee in similar circumstances in case titled as M/s. Sai Prerna Co-operative Society Limited Vs. ITO Ward 17(3)(2) in ITAT No.5741/Mum/2018 for A.Y.2014-15 dated 03.12.2018, therefore, the claim of the assessee is liable to be allowable in the interest of justice. However, on the other hand the learned DR has refuted the said contention. We noticed that the assessee was providing loan to the members and earned interest income to the tune of Rs.1,47,81,277/-. The assessee also received the interest income by way of deposits with FD in the bank in sum of Rs.37,87,234/-. The major expenditure of the assessee was paying the interest on deposit amounting to Rs.1,11,79,499/-. The CIT(A) has considered the said transaction as activity of cooperative credit bank which falls within the purview of sub clause 56(c)(ccv) of part V of the Banking and Regulation Act, 1949 and accordingly held the assessee was not eligible u/s.80P(4) of the Act. It is not in dispute that there is different law in connection with the issue but latest decision of the Hon’ble ITAT in titled as M/s. Sai Prerna Co-operative Society Limited dated 03.12.2018. allowed the to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 claim of the assessee in similar circumstances. Before going further we deemed it necessary to advert the finding of the Hon’ble ITAT in above mentioned case. The relevant finding is hereby reproduced below:-
“2. The solitary issue raised in this appeal is whether the learned CIT(A) was justified in confirming the rejection of claim for deduction u/s.80P(2)(d) of the Income Tax Act in respect of interest received on deposits kept with Co-operative Banks.
3. The assessee is a registered Co-operative Housing Society. It earned Interest income of Rs.1,82,77,027 out of deposits kept with Co-operative Banks. The assessee claimed the same as deduction u/s.80P(2)(d) of the Act. The said section reads as under:- “80P(2)(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; 4. The Assessing Officer took the view that the Co-operative Banks cannot be considered as Co-operative Societies within the meaning of section 80P(2)(d) of the Act and accordingly denied the deduction claimed by the assessee. The learned CIT(A) also confirmed the same and hence the assessee has filed the appeal before us.
We have heard the parties and perused the material on record. The learned AR submitted that an identical issue was considered by the SMC Bench in the case of ITA Vs. M/s. Citiscape Co-op. Housing Society Ltd. [ITA No.5435- 5436/Mum/2017 dated 08.12.2017]. The learned AR submitted that the SMC bench has noted that the Hon’ble Karnataka High Court has considered an identical issue and has taken the view against the assessee in the case of Pr.CIT Vs. Togars Co-operative Sale Society [ITA No.100066 of 2016 & Ors. Dated 16.06.2017]. It was also noticed that the Hon’ble High Court of Himachal Pradesh has also considered an identical issue and has taken its view in favour of the assessee in the case of CIT Vs. Kangra Co-operative Bank Ltd. (309 ITR 106). Accordingly, the Tribunal by following the decision rendered in the case of Kangra Co-operative Bank Ltd. (supra) has held that the interest income earned on deposits kept with Co-operative Banks would be eligible for deduction u/s.80P(2)(d) of the Act by following the principles laid down by the Hon’ble Supreme Court in the case of Vegetable Products Ltd. (88 ITR 192). The learned AR also submitted that an identical issue was considered by the Co-ordinate to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 Bench in the case of M/s Sea Grean Co-operative Housing Society Ltd. v. ITO [ITA No.1343/Mum/2017 dated 31.03.2017] wherein the Tribunal, by following the decision rendered by the co-ordinate Bench in the case of Land End Cooperative Housing Society Ltd. v. ITO [ITA No.2379/Mum/2015 dated 15.01.2016] has held that the interest income earned by a Co-operative Society from deposits kept with Co-operative Banks is eligible for deduction u/s 80P(2)(d) of the Act.
6. On the contrary, the learned Departmental Representative supported the order passed by the learned CIT(A).
Having heard the rival contentions, we noticed that there is merit in the contentions of the assessee as it is supported by the order passed by the SMC Bench in the case of Citiscape Co-operative Housing Society Ltd. (supra) and also the decision rendered by the Division Bench in the case of Sea Grean Co-operative Housing Society Ltd. (supra). For the sake of convenience, we extract below the operative portion of the order passed by the Division Bench in the case of Sea Green Co-operative Housing Society Ltd .(supra): "5. We have carefully considered the rival submissions. The facts lie in a narrow compass, inasmuch as, the appellant is a Cooperative society, whose income.? , inter- alia, included interest earned on deposits with another Cooperative bank. Accordingly, such income was claimed as exempt under section 80P(2)(d) of the Act. The claim has been denied primarily on account of the fact thin section 80P(2)(d) of the Act relates to the income earned from a Co-operative society. In this conte.vt, the decision of the Mumbai Tribunal in the case of Lands End Co-opeative Housing Society Ltd. (supra) is rendered under identical circumstances and the following discussion is relevant. 8.3 We have heard the rival submission and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u/s.80P(2)(d) of the Act of Rs.14,88,107/- being interest on investment with other Co-operative Banks by following the decision in the case of Bandra Samruddihi Co- operative Housing Society Ltd. (Supra) which was passed on the basis of the decision passed by the Hon’ble Supreme Court in the case of Totagar’s Co-operative Sale Society Ltd. Vs. ITAT (supra) the Hon’ble Supreme Court while interpreting the section 80P(2)(a)(i) of the Act held that surplus funds not immediately required in the business and invested in the short term deposits would be assessable under the head “income from other sources” where the Co-operative to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 society is engaged in carrying on business of banking or providing credit facilities to its members and consequently no deduction is allowable u/s.80P(2)(d) of the Act. Whereas in the case before us the issue is whether a co-operative banks is entitled to deduction u/s.80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on investments made with other Co-operative society. For the purposes of better proper understanding of these two provisions the relevant extract of the section are reproduced below: 80P Deduction in respect of income of co-operative Societies.
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 an 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) In the case of a co-operative society engaged in- (i) Carrying on the business of banking or providing credit facilities to its members. The whole of the amount of profits and gains of business attributable to any one or more of much at tributes. (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." From the close perusal of the provisions of u/s 801"(2)(a)(1) and 8OP(2)(d) it is clear that the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect of its income assessable as business income and not as income from other sources if it carries on business of the banking or providing credit facilities to its members and has income assessable under the head business whereas for claiming u/s 801"(2)(d) it must have income of interest and dividend on investments with other Co-operative society may or may not be engaged in the banking for providing credit facilities to its to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 members and the head under which the income is assessable is not material for the claim o deduction under this section. Now will evaluate the asscssccs case in the light of the decision of the Hon'hlc Supreme court. The Ilonhie Supreme Court in the case of Totagar's Co-operative Sale Society Ltd.(Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the s aid income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(1) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop society if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the asscssee is entitled to the deduction ol Rs. 14,88,107/- in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of' the CIT(A). The AO is directed accordingly. 5.1 It is clear that the Tribunal in the case of Lands End Co-opeative Housing Society Ltd. (supra) has considered a similar situation and allowed the claim of the assessee. We find that the CIT(A) has placed reliance on the decision of the Ahmedabad Bench of the Tribunal in the case of State Bank of India Employees Co-operative Credit Society Ltd. 57 taxman.com 367. It is further noted by the CIT(A) that the said decision of the Ahmedabad Bench of the Tribunal has been referred to by the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Co-operative Credit Society Ltd. (supra). In our view, the reliance placed by the CIT(A) on the judgment of the Ahmedabad Bench of the Tribunal is quite untenable, in as much as, in the said case the interest income in question was earned from deposits kept with State Bank of India. Obviously, State Bank of India is not a Co-operative Society so as to justify the claim that such interest earnings fall within the scope of section 80P(2)(d) of the Act. Further, the reliance placed by the CIT(A) on the decision of the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. (supra), the claim of exemption under section 80P(2)(d) of the Act with respect to the to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14 interest earned from a Co-operative bank has been upheld. Therefore, in view of the said precedent, the claim of the assessee deserves to be allowed. We hold so.”
On appraisal of the above mentioned finding, we find that the facts of the present case are quite similar to the facts of the case mentioned above. By honouring the decision of the Hon’ble ITAT in titled as M/s. Sai Prerna Co-operative Society Limited dated 03.12.2018, we are of the view that the claim of the assessee is liable to allowable u/s.80P(4) of the Act. We ordered accordingly and set aside the finding of the CIT(A) on these issues and allowed the claim of the assessee.
7. In result the appeal filed by the assessee is hereby allowed. ITA No.6169 & 6170/Mum/2017:- 8. The facts of the present case are quite similar to the facts of the case mentioned above while deciding the ITA No.6168/M/2017, therefore, there is no need to discuss the case. However, the matter of controversy is also same. The finding given above while deciding the on the issues raised in the said appeal is quite applicable as mutatis mutandis. Therefore, in the said circumstances, we set aside the finding of the CIT(A) and allow the claim of the assessee. In the result the appeals of the assessee are hereby allowed. to 6170/Mum/2007 A.Y. 2010-11, 2012-13 & 2013-14