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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-33, Mumbai [in short CIT(A)], in appeal No. CIT(A)-33/Rg.21/621/2015-16 dated 06.04.2017. The assessment was framed by the Asst. Commissioner of Income Tax, Circle-21(2), Mumbai (in short ‘ACIT’/ ‘AO’) for the A.Y. 2013-14 vide
09.02.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing the claim of deduction under section 80P(2)(d) of the Act on interest earned from co- operative Banks. For this assessee has raised the following ground No.
2. (a) to (d): - “2. a. The Ld. CIT (A) has erred in disallowing the claim of Deduction u/s. 80P(2)(d) of Rs. 73,23,824/- on the ground that co-operative bank does not fan under the purview of a Co-operative Society referred in section 80P(2)(d) by ignoring the explanation offered b. The Ld. CIT A) ought to have considered that Co- operative Banks in which the appellant has invested are in-fact Co-operative Societies registered under the Maharashtra State Co-operative Societies Act, 1960.
C. The Ld. CIT (A) ought to have considered that, so Long the entity in which the assessee Co-operative Society has made investment is a registered Co- operative Society, the requirements of Sec. 80P(2)(d) are complied with and therefore, the nature of business of such co-operative society whether banking or otherwise has no relevance. d. The Ld. CIT(A) has erred in not appreciating that the provisions of Sec 80P(4) is applicable only where the assessee is a co-operative bank;
Ld. CIT(A) ought to have considered that the provisions of Sec. 80P(4) has no relevance to the allowability of deduction of Interest income to a Co-operative Society u/s 80P(2)(d).”
Briefly stated facts are that the assessee is a co-operative housing society and during the year, assessee has earned interest income of ₹ 73,23,824/- from its investment in FDRS from the following co-operative banks:-
a) Saraswat Bank. b) Shamrao Vithal Co-operative Bank. c) The NKGSB Bank. d) Janakalyan Bank. e) Mumbai District Co-operative Bank.
The assessee claim deduction of this interest income under section 80P(2)(d) of the Act, but according to AO the deduction cannot be allowed as income from co-operative bank is not allowable under section 80P(2)(d) of the Act in view of insertion of section 80P(4) in the Act with effect from 01.04.2007 differentiating a co-operative bank in comparison to co-operative society. Accordingly, the AO disallowed the claim of the assessee. The CIT(A) also confirmed the action of the AO by observing as under: - “……………………….
Hence, it is clear that where the assessee is a Co- operative Credit Society whose business is to provide credit facilities to its members and if the funds created by such activities are not required
Hon'ble Apex Court that the interest earned by the assessee oil such deposits would come in the category of Income from other sources' taxable under section 56 of the IT Act. Applying the ratio to the facts of the instant case, it emerges that interest income earned from investments in Co- operative Banks or any other banks are not eligible for deduction u/s 8OP(2)(d) of the Act.”
Aggrieved, now assessee is in appeal before us.
Before us, the learned Counsel for the assessee stated that the issue is squarely covered by Tribunal’s decision in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs. ITO [2018] 94 taxmann.com 15 (Mumbai - Trib.), wherein Tribunal has considered the issue in great detail vide Para 6 to 9 as under: - “6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. 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 banks is in order or not. We find that the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P, as had been made available on the statute by the legislature vide the Finance Act 2006, with effect from 01.04.2007. We find that the lower authorities
(4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) of the interest income earned on the amounts parked as investments with co-operative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. We find that the lower authorities had observed that as the co-operative bank with which the surplus funds of the assessee were parked as investments, were neither Primary Agricultural Credit Society nor a Primary Co- operative Agricultural and Rural Development Bank, therefore, the interest income earned on such investments would not be entitled for claim of deduction under Sec. 80P(2)(d) of the Act.
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.
"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-
(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 co-operative 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 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
Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative 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 co- operative 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 'co-operative society' had been defined under Sec. 2(19) of the 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;' We are of the considered view, that though the 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 Act, but however, as a co-operative bank 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 enforced 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 claim of deduction under Sec.80P(2)(d) of the Act.
We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases:
(i) Land and Cooperative Housing Society Ltd. (supra) (ii) Sea Green Cooperative Housing and Society Ltd. (supra) (iii) Marwanjee Cama Park Cooperative Housing Society Ltd. (supra).
We further find that the Hon'ble High Court of Karnataka in the case of Totagars Cooperative Sale Society (supra) and Hon'ble High Court of Gujarat in the case of State Bank Of India (supra), had also held that the interest income earned by the assessee on its investments held with a co- operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, 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 Act. We are of the considered view that the reliance placed by the CIT (A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) being distinguishable on facts, thus, had wrongly been relied upon by him. 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 society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co- operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT "F" bench, Mumbai in the case of Vaibhav Cooperative Credit Society (supra) is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee co-operative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec. 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT 'SMC' Bench, Mumbai in the case of Shri Sai Datta Co-operative Credit Society Ltd. (supra), would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Totagars co-operative Sale Society (supra), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian v. Siemens India Ltd. [1983] 15 Taxman 594/[1985] 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Totagars Cooperative Sale Society (supra) and Hon'ble High Court of Gujarat in the case of State Bank Of India (supra), wherein it was observed 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) of the Act.
We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside the order of the lower authorities and conclude that Rs. 27,48,553/-earned by the assessee on the investments held with the co- operative bank would be entitled for claim of deduction under Sec. 80P(2)(d).” When this was confronted to the learned Sr. Departmental Representative, he heavily relied on the assessment order.
After hearing both the sides and going through the facts and circumstances of the case, we find that the issue is squarely covered by Tribunals decision in the case of Kaliandas Udyog Bhavan Premises Co- op Society (supra). Respectfully following the same, we delete the disallowance and allow the assessee’s claim of deduction under section 80P(2)(d) of the Act. Accordingly, the appeal of the assessee is allowed.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 23-08-2018.