STELLA MARIS CO-OPERATIVE HOUSING SOCIETY LTD,MUMBAI vs. INCOME TAX OFFICER WARD 22(3)(6)(, MUMBAI

We have perused the material on record and heard learned representatives for both the parties.

8. The limited issue for determination under appeal is as to whether the appellant Stella Maris Co-operative Housing Society Ltd. is entitled to its claim of deduction of Rs. 1,12,030/- u/s. 80P(2)(d) of the Act on the interest received from investment in the said co-operative bank?

Stella Maris Co-operative Housing Society Ltd. 9. Learned AR has submitted that the assessee is a co-operative society registered under the Maharashtra Co-operative Society, Act 1960. The interest income earned by a co- operative society on its investments held with a co-operative bank would be eligible for the deduction u/s. 80P(2)(d) of the Act. Learned AR has referred order dated 29.11.2019 passed by the co–ordinate bench of ITAT Mumbai in for A.Y. 2014–15, M/s. Solitaire CHS Ltd. V. Principal Comm. Income-Tax in support of his submissions.

The term “co-operative society” is defined under the Income Tax Act 1961, as under: “section 2(19) of the Income Tax Act 1961 “ ‘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.” The term “Co-operative Bank” is defined under the Maharashtra co-operative society Act 1960, as under: Maharashtra Co-operative Society Act 1960 “(10) "Co-operative Bank means a society which is doing the business of banking as defined in clause (b) of sub section (1) of section 5 of the Banking Companies Act 1949, and includes any society which in functioning are is to function as (a co-operative agricultural and rural multipurpose developers bank) under chapter XI”

In Mavilayi Service Co-operative Bank Limited V Commissioner of Income Tax, Calicut, (2021) 7SCC 90, it has been held by the Apex Court that Section 80P of the Act is a beneficial provision which was Stella Maris Co-operative Housing Society Ltd. enacted in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and therefore, has to be read liberally in favour of the assessee. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub- section (2) of Section 80P must be given by way of deduction vide Citizen Co-operative Society Limited V Commissioner of Income Tax, (2017) 9SCC 364. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in sub- sections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. Hon’ble Supreme Court in Kerala State Co– operative Agricultural and Rural Development Bank Ltd. (KSCARDB) V The Assessing Officer Trivendrum and Ors, in Civil Appeal no. 10069 of 2016, vide judgment dated 14.09.2023 has also reiterated the same.

Hon’ble Karnataka High Court in Principal Commissioner of Income Tax and another V Totgars Co- operative Sale Society, [2017] 392 ITR 74 (Karn.), held in para 7,8,9,10 as under: “7. However, the contention being taken by the learned counsel is unten- able. For the issue that was before the Income-tax Appellate Tribunal, was a limited one, namely whether for the purpose of section 80P(2)(d) of the Act, a co-operative bank should be considered as a co-operative society or not? For, if a co-operative bank is considered to be a co-operative society, then any interest earned by the co-operative society from a co-operative bank would necessarily be deductible under section 80P(1) of the Act.

The issue whether a co-operative bank is considered to be a co-oper- ative society is no longer res integra. For the said issue has been decided by the Income-tax Appellate Tribunal itself in different cases. Moreover the word "co-operative society" are the words of a large extent, and denotes a genus, whereas the word "co-operative bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus co-operative societies. Co-operative society can be of different nature, and can be involved in different activities; the co-operative bank is merely a variety of the co-operative societies. Thus the co-operative bank which is a species of the genus would necessarily be covered by the word "co-operative society".

Admittedly, the interest which the assessee-respondent had earned was from a co- operative bank. Therefore, according to section 80P(2)(d) of the Income-tax Act, the said amount of interest earned from a co-operative bank would be deductible from the gross income of the co-operative soci- ety in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee- respondent. The learned counsel has relied on the case of Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under section 80P(2)(a) (i) of the Income-tax Act. For, in the present case the interpretation that is required is of section 80P(2)(d) of the Income-tax Act and not section 80P(2)(a)(i) of the Income-tax Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two sub- stantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.”

The coordinate Mumbai bench of the Tribunal in M/s. Solitaire CHS Ltd (Supra), vide paras 8 & 9, held as under:

Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set aside his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016.”

We note that the various co-ordinate benches of this Tribunal have time and again, considered the identical issue and have consistently held that the income earned by way of interest or dividend from investments made with any other co- operative bank is allowable as deduction u/s. 80P(2)(d). The assessee is thus entitled for the benefit u/s. 80P(2)(d) of the Act. The aforesaid limited issue is accordingly determined in favor of the assessee and against the revenue. The impugned order passed by learned CIT(A), thus cannot be sustained. Hence, the appeal is liable to be allowed.