MTNL MUMBAI EMPLOYEES CO OPERATIVE CREDIT SOCIETY LTD,MUMBAI vs. ITO 21(2)(2), MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 24/10/2016 of the Ld. First Appellate Authority, Mumbai, in confirming the disallowance of Rs.61,75,706/- made u/s 80P(2)(d) of the Income Tax Act, 1961 (hereinafter the Act) in respect of interest earned by the assessee society from co- operative banks.

2.1. We have considered the rival submissions and perused the material available on record. In view of the above,

3 MTNL Mumbai Employees Cooperative Credit Society. we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 06/03/2018 for ready reference and analysis:-

“This is an appeal filed by Revenue against the order of CIT(A)-37, Mumbai dated 15/03/2017 for A.Y.2012-13 in the matter of order passed u/s.143(3) of the IT Act.

conclusion and held that the assesses could not be considered to be a Co- operative Bank for the purpose of sections 80P(4) of the Act. Further, Hon'ble Income tax Appellate Tribunal "A" Bench, Mumbai in the case of Lands End Co-operative Housing Society Ltd. vs ITO, in has “…the provisos of section 80P(2)(d) of the act provides for deduction in respect of income of a co-operative society by way of invest for dividend from its investments with other co-op society if such income is included in the gross total income of the such co-op society. In view of these facts and circumstances we are of the considered view that the assessee is entitled to the deductions of Rs.14,88,107 in respect of interest received/ derived by it on deposit "with co-op banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directed accordingly." 5.9 In the case of the advocates mutually aided Co-operative Society Vs ACIT(2015), in ITA No. 546,547 & 1331/Hyd/2103, it was held by the Hon'ble ITAT, Hyderabad Bench that provisions of sections 80P(4) does not apply as the assessee society is not in the business of Banking and that sections 80P(2)(d) is applicable to the assessee society in respect of interest received from other Co-operative Society including Co-operative Banks. In Sabarkantha District Co-operative Milk producers Union Limited Vs CIT in ITA No. 2613/Ahd/@012 it was held by Hon'ble Ahmedabad Tribunal that the only requirement for claiming deduction under sections 80P(2)(d) was that the income should be received from the investments made in Co- operative Society and Co-operative Banks. 5.10 Hon'ble ITAT B Bench Mumbai's in the case of The NutanLaxmi Chs Ltd, Mumbai vs Assessee decided on 24 August, 2016 is held that. "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 80P(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 members and the head under which the income is assessable is not material for the claim of deduction under this section. The provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a co-op society by way of interest or dividend from its investments [Q\ "with other co-op society if such income is included in the gross total income of the such Co-op society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/- in respect of interest received/derived by it on deposits with co-op, banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT (A). The AO is directed accordingly," 5.11 Further Hon'ble ITAT Mumbai has decided the issue in the case of Lands' End Co-operative Housing Society Ltd vs. I.T.O. I.T.A. No. 3566/Mum/2014 (ITAT) dated 15-01-20l6.The operative part of the above decision reads as under:-

5 MTNL Mumbai Employees Cooperative Credit Society.

" 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 assessee is entitled to the deduction of 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 CTT(A). The AO is directed accordingly ". 5.12 In the ACIT vs. M/s. Jawala Cooperative Urban Thrift & Credit Society Ltd., - it was held that "We have heard rival parties and have gone through the material placed on record. We find that total income earned by the assessee included income on fixed deposits placed with Bombay Mercantile Bank, interest income from a scheduled bank and dividend income from Delhi Cooperative Bank. From the certificate as placed at paper book page 30, we find that Bombay Mercantile Cooperative Bank is a cooperative society registered under Maharashtra Cooperative Societies Act and we further find that the said society has been assessed u/s 143(3) as a cooperative society and its income was allowed to be exempt u/s SOP(2) (i) as held by Mumbai Tribunal in I. T.A. No. 4128 and 4129 vide its order dated 30.11.2005, for Assessment Year 1990-91 and 1991-92 and further by Mumbai Tribunal vide order dated 07.09.2011 in for Assessment Year 1997-98. Therefore it is held that fixed deposits placed with Bombay Mercantile Bank falls within the exemption granted by Section 80P(2)(d) of the Act. The assessee was also eligible under the provisions of Section 80P(2)a(i) as the funds placed by assessee in the form of fixed deposits can be said to be kept for the purpose of business of the assessee as the assessee had availed credit facilities also against such fixed deposits which were again used for the purpose of business of assessee. Moreover, under similar circumstances, Chandigarh Bench in I.T.A. No. 996/2009 as noted by Ld. CIT(A) has decided in favour of assessee. The dividend income is exempt for all persons including assessee. The interest income from bank amounting to Rs.18,190/- is though not exempt u/s 80(p)(2)(d) but is exempt u/s 80P(2)(i) of the Act. The case law of Totgar's Cooperative Society was rightly distinguished by Ld. CIT(A). Therefore, keeping in view all facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A).

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Society Ltd. A Cooperative Bank is always registered under the relevant Co- operative Societies Act of the relevant State. However, during the appellate proceedings, appellant has submitted that the claim of deduction u/s.80P has been accepted in the subsequent year and no addition on the above ground has been made in the AY 2013-14 and AY 2014-15 In view of above, the appellant is entitled to claim of deduction u/s 80P of the Act, therefore, AO is directed to allow Rs.42,57,348/- as deduction u/s.80P of the Act. This ground of appeal is allowed.

6. I have gone through the orders of the authorities below. It is clear from the order of CIT(A) that after applying judicial pronouncements, as laid down by Hon’ble Bombay High Court and the various benches of Tribunal held that assessee-Co-operative society is eligible for deduction u/s. 80P. The finding recorded by CIT(A) has not been controverted by learned DR by bringing any positive material on record. Accordingly, I do not find any reason to interfere in the order of CIT(A).

7. In the result, appeal of the Revenue is dismissed.

2.2. The facts in brief, in the present appeal, are that the assessee is a employees co-operative credit society catering to its members. The main activity carried out by the society was mainly borrowing from banks and lending of funds/providing credit facilities to its own members under various schemes formulated by it. During assessment proceedings, the Ld. Assessing Officer observed that the assessee showed total receipt of Rs.22,21,52,042/- by way of interest including interest from deposits in MDC Co-operative bank amounting to Rs.57,22,046/-. The Ld. Assessing Officer further observed that the assessee claimed deduction of Rs.4,45,67,962/- u/s 7 MTNL Mumbai Employees Cooperative Credit Society.

80P(2)(a)(i) and Rs.61,75,706/- u/s 80P(2)(d) of the Act. As such the assessee claimed total deduction of Rs.5,07,43,668/- u/s 80P of the Act, which was denied by the Ld. Assessing

Officer. On appeal, before the Ld. Commissioner of Income Tax

(Appeal), the view taken in the assessment order was affirmed by Ld. Commissioner of Income Tax (Appeal) so far as deduction u/s 80P(2)(d) to the tune of Rs.61,75,706/-, which is under challenge before this Tribunal. However, we find that on identical issue in the case of Income Tax Officer vs M/s

Presidency Co-operative Housing Society Ltd. (ITA

No.4058/Mum/2017) order dated 06/03/2018 ((supra)), another decision in Income Tax Officer vs M/s The Central

Telegraph Office Co-operative Credit Society Ltd. (ITA

No.4553/Mum/2016), Lands End Co-operative Housing Society

Ltd. (2016) 46 CCH 52 (Mum. Trib.) following the decision in CIT vs Darbhanga Mansion CHS Ltd. (ITA

No.1474/Mum/2012) decided identical issue in favour of the assessee by holding that the deduction in respect of income co- operative society by way of interest from its investment with other co-operative society, the assessee is entitle to deduction in respect of interest received/derived by it on deposit with 8 MTNL Mumbai Employees Cooperative Credit Society. cooperative bank. It is further noted that in the aforesaid decision, the Bench duly considered the decision in Totagar Co- operative Sale Society Ltd. 322 ITR 283 (Supreme Court), Mittal Court Premises Cooperative Society Ltd. vs Income Tax Officer 320 ITR 414 and CIT vs Kangra Cooperative Bank Ltd. 309 ITR

Finally, the appeal of the assessee is allowed.

This Order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of the hearing on 17/04/2018.