MONALISA CO OPERATIVE HOUSING SOCIETY LIMITED ,MUMBAI vs. INCOME TAX OFFICER WARD 19(2)(2), MUMBAI

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 13,53,098/- on fixed deposit. The list of cooperative banks from which interest on FD is earned by the assessee is as under:- 1. Maharashtra State Co-Op Bank Rs. 1,72,773/- 2. North Kanara GSB Co-Op Bank Rs. 1,95,704/- 3. Saraswat Co-Op Bank Rs. 4,24,553/- 4. Shamrao Vithal Co-Op Bank Rs. 5,60,068/- Rs. 13,53,098/- 3. The assessee has filed its return of income for the year under consideration under which he has claimed deduction of Rs. 13,53,058/- u/s Page | 2 80P(2)(d) of the Act which has been intimated u/s 143(1) of the Act and the same was disallowed by the CPC Bengaluru 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:

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 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:-

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. 4770/Mum/2024) dated 06.11.2024 wherein the Coordinate Bench has held as under:-

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

The facts and circumstances of the appeal are perfectly covered by the above decision of Coordinate Bench, however we notice that 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:-

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 Page | 8 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, “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.”

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.