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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 12.08.2024 of Learned Commissioner of Income Tax (Appeals), Addl./JCIT (A), Mysore [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for Bussa Industrial Premises Co-Operative Society Ltd. the A.Y. 2017-18 wherein the appeal of the assessee against disallowance of interest amount earned by the assessee for depositing in cooperative bank has been dismissed and assessment order has been confirmed.
The brief facts of the case are that, the assessee is a registered Housing Cooperative Society. The assessee collects charges from its members for the maintenance of the society and surplus is invested in fixed deposits and saving bank account with cooperative banks as per the provision of Maharashtra Cooperative Societies Act, 1960 and accordingly take the benefit of deduction available u/s 80P(2)(d) of the Act and in the relevant year, the assessee has earned interest of Rs 17,72,829/- on fixed deposit. The list of cooperative banks from which interest on FD is earned by the assessee is as under:-
1. 1. Mumbai District Central Co-Op Bank 2. The Maharashtra State Co-Op Bank 3. Saraswat Co-Op Bank Ltd.
4. SVC Bank Ltd.
3. The assessee has filed its return of income for the year under consideration declaring total income at s. 12,95,430/- under which he has claimed deduction u/s 80P(2)(d) of the Act which has been intimated u/s Bussa Industrial Premises Co-Operative Society Ltd.
143(1) of the Act and the same was disallowed by the CPC and intimated to the assessee. Assessee has filed the appeal against he said intimation order before the Ld. CIT(A) which was dismissed by the Ld. CIT (A) also on the ground that interest income sought to be deducted from the taxable income is earned from deposit with cooperative banks and not from the deposit with cooperative societies.
Aggrieved with the order of Ld. CIT(A) assessee preferred the present appeal before us by raising the following grounds as under:
Under the fact and in circumstances of the case and in law the learned CIT(A) was not justified in confirming the addition of Rs. 1772829/-by disallowing the claim of deduction u/s. 80P(2)(d) by AO.
2. On facts and circumstances of the case as well as in law, the learned Assessing Officer erred in making the assessment u/s. 143(3), not allowing claim of section 80P(2)(d) not considering the evidence placed on records.
Your appellant craves your leave to amend or alter or add new ground till the final disposal of the appeal.
We have heard Ld. AR and Ld. DR. At the outset, Ld. AR submitted that the claim of deduction of interest income earned from deposits with cooperative banks is wrongly denied by the CPC and has been illegally confirmed by the Ld. CIT (A) in the impugned order notwithstanding that Bussa Industrial Premises Co-Operative Society Ltd. various judgments of the Tribunal and Hon’ble High Courts were cited and submitted before the Ld. CIT (A). He further argued that various benches of ITAT throughout India has already taken view that the interest income earned by the Cooperative Society from Cooperative Banks is eligible to be exempted u/s 80P(2)(d) of the Act. He further relied on the following judgments in support of his arguments, which are as under:-
& 1049/Mum/2024 for AY 2015-16 & 2018-19 dated 23.08.2024 in the case of The St. Sebastian Homes Cooperative Society Ltd. Vs. ITO (Mumbai Tribunal) for AY 2018-19 dated 14.07.2023 in the case of ITO vs. Casa Grande Cooperative Housing Society (Mumbai Tribunal)
& 1079/Mum/2024 for AY 2016-17 & 2017-18 in the case of Su Prabhat Cooperative Housing society Ltd. Vs. ITO (Mumbai Tribunal).
6. On the other hand, Ld. DR supported the order of lower authorities stating that the disallowance has been rightly made because the interest income was not earned from deposits with cooperative societies.
We have considered the rival submissions made by the parties and perused the material placed on record. We find that the issue raised by the assessee is covered by the decision of Coordinate Bench of ITAT in the case of Ramas Tower Co-Operative Housing Society vs. ITO (ITA No. Page | 4 Bussa Industrial Premises Co-Operative Society Ltd. 4770/Mum/2024) dated 06.11.2024 wherein the Coordinate Bench has held as under:-
5. We heard the parties and perused the record. We notice that the CPC appears to have rejected the claim for deduction u/s 80P(2)(d) of the Act for the reason that the return of income was not filed within the time allowed u/s 139(1) of the Act. We also noticed that the Ld CCIT has condoned the delay in filing return of income and hence the claim of the assessee should be allowed. However, the Ld CIT(A) has taken a different stand and rejected the claim for deduction u/s 80P(2)(d) of the Act by applying the provisions of sec.80P(4) of the Act.
The question as to whether a co-operative society is entitled for deduction u/s 80P(2)(d) of the Act in respect of interest earned on deposits kept with co- operative bank is no more res integra. We notice that an identical issue has been decided by the Hon’ble Madras High Court in the case of Thorapadi Urban Co-op Credit Society Ltd (2023) (156 taxmann.com 419)(Mad) in favour of the assessee. The relevant observations made by Hon’ble Madras High Court are extracted below:
“8. The main issue is to decide in the present case is as to whether the petitioner Co-operative Society is entitled for a deduction for the interest income received from the Co-operative Bank? 9. It would be appropriate to extract hereunder the relevant portion of Section80P(2)(d). “80 P. Deduction in respect of income of cooperative societies:
(1) ……… ………. ………
(2) The sums referred to in sub-section (1) shall be the following, namely :— (a) to (c) ……. ……. …… Bussa Industrial Premises Co-Operative Society Ltd.
(d) “in respect of any income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society, the whole of such income”
9.1 A reading of the above said provision makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Co-operative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Cooperative Bank would fall within the purview of the term „Co- operative Society‟. In the present case, the petitioner produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20.5.2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Co-operative Bank registered under the Co-operative Societies Act. The Income Tax Act, 1961 has also defined „Co-operative Society‟ under Section 2(19) as follows:
“2(19). “Co-operative society” means 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.”
A reading of the above definition would make it clear that „Co- operative Society‟ means a Co-operative Society registered under Co- operative Societies Act,1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co- operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.”
Bussa Industrial Premises Co-Operative Society Ltd.
7. Following the above said decision of the Hon’ble Madras High Court, this Bench of Tribunal has held in the case of Back bay Premises Co-op. Society Ltd (ITA Nos. 4144 & 4146/Mum/2023 dated 14.06.2024) that the interest income earned by a co-operative society from co-operative banks are eligible for deduction u/s 80P(2)(d) of the Act.
In view of the above discussions, we are of the view that the Ld CIT(A) was not justified in denying deduction u/s 80P(2)(d) of the Act in respect of interest income earned by the assessee from deposits kept cooperative banks. The delay in filing return of income has already been condoned by Ld CCIT. Hence, the assessee is entitled for deduction u/s 80P(2)(d) of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow deduction u/s 80P(2)(d) to the assessee on the interest income earned from deposits kept with co-operative banks.
In the result, the appeal filed by the assessee is allowed
8. The facts and circumstances of the appeal are perfectly covered by the above decision of Coordinate Bench, however we notice the anomaly in the order of Ld. CIT (A) which is evident from the observation of Ld. CIT(A) at page 21 and relevant part of order is extracted below:-
“The submission of the Appellant has been carefully perused. The Appellant has relied on a number of decisions of the Hon'ble ITAT in different cases. No decision of any Hon'ble High Court or the Hon'ble Supreme Court could be furnished. The Appellant has relied on the Intimation u/s 143(1) and Rectification u/s 154 of its own case for the AY 2018-19 and AY 2019-20. I find that in AY 2018-19, there was a disallowance of claim of deduction u/s 80P(2)(d) of Rs. 18,000/- and in AY 2019-20, there was an addition of Rs.
Bussa Industrial Premises Co-Operative Society Ltd.
22,010/- after restricting the claim of deduction under Chapter VIA. I find that in none of the AYs as referred by the Appellant, has been scrutinized and assessed u/s 143(3). So, it is apparent that whatever information was available in the ITR, disallowances have been made in both the AYs as above. That for want of information or for not being apparent from record, any claim which is not allowable, but allowed u/s 143(1), can't be precedence for allowing the same when it is apparent from record. It is not that after Scrutiny Assessment the claim of deduction u/s 80P(2)(d) has been allowed on Interest Income from Investment in Banks including Co-Operative Banks when it is proved that the Interest is subject to TDS and computed under the head Other Sources. Hence, it is apparent that the appellant's claim is not correct for AY 2018-19 and AY 2019-20. Also Res-Judicata is not applicable in Income Tax Proceedings.
Therefore, it is clear that a co-operative society neither can use word 'bank' in its name, nor it can involve in business of banking with non-members. If a society is using word 'bank' in its name without getting licence or no objection certificate' from the RBI, it is violating law passed by the Parliament or Central Government and such cooperative societies are indulging in illegitimate activities.”
9. From the above discussion and observations of Ld. CIT(A), it is noticed that Ld. CIT(A) has not rightly decided the issue and h as ignored the fact that Ld. CIT (A) and AO are bound to follow the decision of ITAT and Hon’ble High Courts as held in the decision of the Hon'ble Allahabad High Court in the case of K. N. Agarwal Vs. Commissioner of Income Tax, order dated 11.01.1991, [1991] 189 ITR 769B (ALL) which says, Bussa Industrial Premises Co-Operative Society Ltd. “Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal's order is the subject-matter of revision in the High Court or that the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases.”
10. Thus in view of the above discussions and observations, we are of the considered opinion that the assessee is eligible for deduction u/s 80P(2)(d) of the Act in respect of interest income earned from Cooperative Banks, therefore the order of Ld. CIT(A) is hereby set aside and the grounds in appeal are allowed.
In the result, appeal filed by the assessee is allowed in above terms.
Order pronounced in the open court on 03.01.2025