Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order
dated 16/06/2014 of the Ld. First Appellate Authority,
Mumbai, with respect to determine the interest earned by the assessee amounting to Rs.10,14,162/- on the investment in the bank FDRs with scheduled/cooperative banks as income from other sources without considering the provisions of section 80P of the Income Tax Act, 1961
(hereinafter the Act).
2. During hearing, none was present for the assessee, in spite of receipt of registered AD notice.
However, the assessee has filed written submissions by contending that the appeal of the assessee may be decided on the basis of written submissions. The assessee has filed a copy of the order of the Tribunal in the case of Sea Grean Cooperative Housing vs Income
Tax Officer (ITA No.1343/Mum/2017), order dated
31/03/2017 by claiming that the impugned issue is covered by this order of the Tribunal. On the other hand,
3 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd. the Ld. DR, Shri Rajat Mittal, defended the impugned order by inviting our attention to the finding of the Ld.
Commissioner of Income Tax (Appeal). The crux of the argument is in support of the addition.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 31/03/2017 for ready reference and analysis:-
“The captioned appeal filed by the assessee pertaining to assessment year 2013-14 is directed against an order passed by CIT(A)-33,Mumbai dated 10/02/2017, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961(in short ‘the Act’), dated 18/01/2016.
2. The Ground of appeal raised by the assessee read as under:-
1. "On the facts and in the circumstances of case and in law, the Hon. CIT(A) has erred in upholding that the appellant is not eligible for deduction u/s. SOP(2)(d) of the I.T.Act,1961 at Rs.27,41,747/- relying on the decisions of the Hon. ITAT, Ahmedabad in the case of SBI Employees Cooperative Credit Society Ltd. (2015) 57 taxman.com 367 and the Hon. ITAT, Mumbai Bench in the case of Shri Saidatta Cooperative Credit Society Ltd. Vs. ITO in ITA
4 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
No.2379/Mum/2015 without appreciating that the Hon. ITAT, A- Bench, Mumbai in the case of Lands End Cooperative Housing Society Ltd. In wherein on an identical issue i.e. claim of deduction u/s.SOP(2)(d) of the Act in respect of interest on fixed deposit with cooperative banks was involved, has held that the assesse is entitled to the deduction for interest derived by it on deposits with cooperative banks."
2.1 Briefly put, the relevant facts are that the appellant is a Co-operative housing society, which had, inter-alia, earned an interest income of Rs.27,41,747/-,on which deduction under section80P of the Act was denied. The claim of the assessee was that the said interest is earned on deposits with a Co-operative bank and, therefore, it was eligible for the benefits of section 80P(2)(d) of the Act. The Assessing Officer as well as CIT(A) however, denied the exemption on the ground that the provisions of section 80P(2)(d) of the Act restrict the exemption to the interest earned from “ any other Co-operative society”, whereas the impugned interest income was earned from a Co-operative bank.
Before us, the Ld. Representative for the assessee pointed out that the claim of exemption has been denied by the lower authorities on a wrong basis inasmuch as even interest earned from a Co-operative bank is covered within the scope of section 80P(2)(d)of the Act, because even a Co- operative bank is essentially a Co-operative society. In this context, he has relied upon the decision of the Mumbai Tribunal in the case of Lands End Co-operative Housing Society Ltd. Vs. ITO in dated 15/01/2016, wherein interest earned by a Co-operative housing society on investment with a Co-operative bank has been held to be eligible for exemption under section80P(2)(d) of the Act . By referring to the discussion made by the Tribunal, the Ld. Representative for the 5 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
assessee pointed out that even the judgment of the Hon'ble Supreme Court in the case of Totagar’s Cooperative Sales Society Ltd. vs. ITO,322ITR 283(SC) has been considered.
On the other hand, Ld. Departmental Representative pointed out that the decision of the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. Vs.ITO in 15/1/2016(supra)is to the contrary and, therefore, the CIT(A) was justified in denying the claim for exemption under section 80P(2)(d) of the Act.
We have carefully considered the rival submissions. The facts lie in a narrow compass, inasmuch as, the appellant is a Co-operative 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 that section 80P(2)(d) of the Act relates to the income earned from a Co-operative society. In this context, the decision of the Mumbai Tribunal in the case of Lands End Co-operative Housing Society Ltd. (supra) is rendered under identical circumstances and the following discussion is relevant:-
“8.3 We have heard the rival submissions 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 Coop. 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 Cooperative Sale Society Ltd. In the case of Totagar’s Co-operative Sale Society Ltd v/s ITAT (supra) the Hon’ble Supreme Court while interpreting the section 6 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
80P(2)(a)(i) of the Act held that surplus funds not immediately required in the business and invested in the short term deposit would be assessable under the head “income from other sources” where the Cooperative 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)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative 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 Cooperative 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 assesssee 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:-
(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 attributes.
7 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
(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 80P(2)(a)(i) and 80P(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 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. Now will evaluate the assessee’s case in the light of the decision of the Hon’ble Supreme court. The Hon'ble 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 said 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)(i) is available only in respect of income which is assessable as business income
8 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd. 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 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 CIT(A). The AO is directed accordingly.
5.1 It is clear that the Tribunal in the case of Lands End Co-operative 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 Cooperative 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, inasmuch 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) is also of no avail, inasmuch as, the Bench merely set-aside the matter to the file of the 9 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
Assessing Officer for examination afresh, whereas in the case of Lands End Co-operative Housing Society Ltd(supra), the claim of exemption under section 80P(2)(d) of the Act with respect to the 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.
In view of the above, the order of the CIT(A) is set-aside and the Assessing Officer is directed to allow deduction under section 80P(2)(d) of the Act with respect to the interest income earned from a Co-operative bank.
In the result, appeal of the assessee is allowed, as above.”
2.2. In the aforesaid order, the Tribunal has considered the provisions of section 80P (2)(a)(i) and 80P(2)(d) of the Act with respect to profit and gains of business in case of cooperative society carrying on the business of banking or providing credit facilities to its members and concluded that the interest and dividend on investment with other cooperative 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 Tribunal has already considered the 10 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd. decision from Hon'ble Apex Court in the case of Totagar’s Cooperative Sale Society Ltd. (322 ITR 283)(Supreme Court), Lands End Cooperating Housing Society Ltd. vs Income Tax Officer (ITA No.2379/Mum/2015) order dated 15/01/2016 and finally the Assessing Officer was directed to allow deduction u/s 80P(2)(d) of the Act with respect to interest income earned from a cooperative bank.
2.3. However, we find that in the case of Pr. CIT vs Ekta Co-op. Credit Society Ltd. (2018) 91 taxmann.com 42 (Guj.), the Hon'ble Gujarat High Court held as under:-
“The appellant-revenue in this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") has called in question the order dated 5.5.2017 made by the Income Tax Appellate Tribunal, Ahmedabad "A" Bench, Ahmedabad (hereinafter referred to as "the Tribunal") in by proposing the following question, stated to be a substantial question of law:— "Whether the Appellate Tribunal has erred in law and on facts of the case in allowing deduction u/s. 80P(2)(a)(i) to assessee's society even though same is covered u/s. 80P(4) r.w.s. 2(24)(viia) being income from providing credit facilities carried on by a co-operative society with its members?"
The assessee filed its return of income for assessment year 2010-11 showing 'nil' income after claiming deduction of Rs.16,96,744/- under section 80P(2)(a)(i) of the Act. The Assessing Officer was of the view that the deduction claimed by the assessee under Chapter VI-A was not an allowable deduction for the reason that the society was engaged in the business of providing credit facility to members and banking business. Under section 80P(2)(a) of the Act, in case of cooperative society providing credit facilities to its members, the whole of the amount of profit and gains from such business are deductible. However as per sub-section (4) of section 80P of the Act, which came to be inserted by Finance Act, 2006 with effect from assessment year 2007-
11 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
08, deduction under section 80P will not be available to any co- operative bank or primary cooperative agricultural and rural development bank with the principal object of providing long term credit for agricultural and rural development activities. Being of the view that the assessee was a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank, the Assessing Officer held that the provisions of sub-section (4) of section 80P of the Act would be applicable to the assessee and disallowed the deduction claimed under section 80P of the Act. The assessee carried the matter in appeal before the Commissioner (Appeals), who allowed the said ground of appeal and deleted the disallowance under section 80P of the Act. The revenue carried the matter in appeal before the Tribunal, but did not succeed.
3. Mrs. Mauna Bhatt, learned senior standing counsel for the appellant, assailed the impugned order on the grounds set out in the memorandum of appeal and on the reasons recorded by the Assessing Officer in the assessment order.
4. As can be seen from the order passed by the Commissioner (Appeals), he has recorded that the provisions of sub-section (4) of section 80P of the Act would be attracted in case of a cooperative bank other than primary agricultural credit society or a primary cooperative agricultural and rural bank. In terms of clause (a) of the Explanation to section 80P(4), cooperative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949. The Commissioner (Appeals) has recorded that the assessee society being a cooperative credit society limited is not a bank as contemplated under the Banking Regulation Act and hence, the provisions of sub-section (4) of section 80P of the Act would not be applicable to it.
5. The Tribunal has concurred with the view adopted by the Commissioner (Appeals). The above view of the Tribunal is fortified by a decision of this court in the case of CIT v. Surat Vankar Sahakari Sangh Ltd., [2014] 225 Taxman 162/43 taxmann.com 431 (Guj.), wherein the court has repelled the contention of the revenue that section 80P(4) would exclude not only the cooperative banks other than those fulfilling description contained therein but also credit societies, which are not cooperative banks. In the facts of the said case, the assessee was a credit cooperative society and not a cooperative bank. The court held that the exclusion clause of sub-section (4) of section 80P of the Act would, therefore, not apply. The above decision would be squarely applicable to the facts of the present case.
6. The impugned order passed by the Tribunal being in consonance with the view adopted by this court in the above decision, does not suffer from any legal infirmity so as to give rise to a question of law, much
12 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd. less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, summarily dismissed.” 2.4. It is noted that in the aforesaid order with respect to deduction under section 80P of the Act in respect of income of credit cooperative societies, engaged in providing credit facilities to its members, the Ld. Assessing Officer disallowed the claimed deduction. On appeal, the Ld. Commissioner of Income Tax (Appeal), held was not a bank, hence, section 80P(4) would not be applicable. On further appeal, the Tribunal concurred with the view of the Ld. Commissioner (Appeals). The Hon'ble High Court upheld the order of the Tribunal by holding that the assessee would be entitled to be deduction u/s 80P(2)(a)(i) on its income from providing credit facilities to its members. Identical view was taken by the Tribunal in the case of Akshaya Co-operative Credit Society Ltd. (ITA No.59/PAN/2016), order dated 21/11/2016. Following the aforesaid decisions and more specifically Hon'ble Gujarat High Court, the appeal of the assessee is allowed.
13 Airport Authority of India (IAD) Staff Co-op. Credit Society Ltd.
Finally, the appeal of the assessee is allowed.
This Order was pronounced in the open court in the presence of ld. DR at the conclusion of the hearing on 28/03/2018.