Loading judgment…
Facts
The assessee, a co-operative housing society, claimed deduction under Section 80P(2)(d) for interest earned on fixed deposits with co-operative banks. The Assessing Officer disallowed this deduction, viewing the interest as income from sources other than business. The CIT(A) upheld this disallowance. The assessee appealed to the Tribunal.
Held
The Tribunal held that co-operative banks are also co-operative societies. Therefore, interest earned from them by another co-operative society qualifies for deduction under Section 80P(2)(d). The assessee is not a co-operative bank and thus not excluded by Section 80P(4).
Key Issues
Whether interest income earned by a co-operative housing society from fixed deposits with co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961?
Sections Cited
80P(2)(a)(i), 80P(2)(d), 80P(4), 143(3), 143(2), 28(10), 2(27)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “K (SMC
PER PRASHANT MAHARISHI, AM:
ITA No. 2088/Mum/2024 is filed by Pathare Prabhu Co- Operative Housing Society Limited (assessee / appellant), for A.Y. 2014-15, against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 16th March, 2023, wherein the appeal filed by the assessee against the assessment order passed under Section 143(3) of the Income-tax Act, 1961 (the Act) by the Income Tax Officer, Ward 22(2)(5), Mumbai (the learned Assessing Officer) dated 21st November, 2016, was dismissed. The assessee is aggrieved with the
“1. The learned CIT(A) erred in relying on the Supreme Court's decision in Totgar's Co-operative Sales Society Ltd. which judgment is delivered in the context of sec. 80P(2)(a)(i) and wherein it was held that interest on surplus funds deposited with banks bears the character of income from other sources and not business income, whereas the appellant has claimed deduction under sec. 80P(2)(d) which does not confine the deduction to business income only.
The learned CIT(A) failed to appreciate that the mandate of sec. 80P(4) is to deny the benefit of sec. 80P to co-operative banks and not to other co- operative societies investing their funds in co- operative banks.
The learned CIT(A) erred in applying the principle of mutuality to the interest income without appreciating that the appellant never claimed that interest is exempt on the principle of mutuality. This interest was offered as income, however, in view of Sec 80P(2)(d) the deduction was claimed. Hence, the application of principle of mutuality is completely erroneous with respect to interest income.”
Brief facts of the case shows that assessee is a co- operative housing society filed its return of income on 13th March, 2015, at a total income of ₹4,47,892/-. The return was picked up for scrutiny by issue of notice under Section 143(2) of the Act dated 21st September, 2015. The
Aggrieved with the assessment order, assessee preferred the appeal before the learned CIT (A). The assessee relied upon the several judicial precedents of co-ordinate Benches; however, the learned CIT (A) dismissed the appeal of the assessee and confirmed the above disallowance.
We have carefully considered the rival contentions and hearing the parties of the learned lower authorities. We find that the assessee has received interest on fixed deposits with various co-operative banks and claimed deduction under Section 80P(2)(d) of the Act amounting to ₹39,43,686/-. All the above stated co-operative banks are also co-operative societies and therefore, the denial of deduction under Section 80P(2)(d) of the Act is not proper. The assessee has stated several decisions of the co-operative bank, wherein identical deduction is allowed to them. Whether the co-operative bank from whom the assessee has received interest income is co-operative society or not is the only bone of contention. If they are co-operative societies then deduction is allowable to the assessee. It is also undisputed that assessee is not co- operative bank and therefore, not hit by the provisions of section 80P(4) of the Act. It is not denied by the Revenue that all these co-operative banks are also co-operative societies. Looking to the relevant co-operative Societies Act, it is also found that though this co-operative societies are carrying on banking business but in substance those are co-operative societies who are carrying on banking business but does not loses its character of co-operative society. According to Section 28(10) of the Maharashtra Co-operative Societies Act, 1960, Co-operative Bank means society carrying on the banking business. According to Section 2(27), society means co-operative society. Thus, even those co-operative banks are also co-operative
In view of our decision for ground no.3, ground no.1 and 2, are not required to be adjudicated.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 24.07.2024.
Sd/- Sd/- (SUNIL KUMAR SINGH) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 24.07.2024 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, Mumbai 4. 5. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai