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Facts
The assessee, a credit cooperative society, claimed a deduction under Section 80P(2)(d) for interest income earned from deposits with a cooperative bank. The Assessing Officer disallowed this claim, and the CIT(A) upheld the disallowance. The assessee appealed to the Tribunal.
Held
The Tribunal held that a cooperative bank is a type of cooperative society, and interest earned by a cooperative society from investments in another cooperative society (or cooperative bank) is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961. Therefore, the disallowance made by the lower authorities was incorrect.
Key Issues
Whether interest income earned by a cooperative society from its investment in a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.
Sections Cited
80P(2)(d), 143(1), 234B, 234C, 2(19), 2(10), 5, 36(1)(viia), 80P(4), 80P(2)(a)(i)
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Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI SATBEER SINGH GODARA & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER
ITA No.1470/MUM/2024 Assessment Year: 2021-22
RWITC Ltd. Permanent Employees Addl/Joint Commissioner of Co-op Credit Society Ltd., Income Tax, Appeals – 4, Personal Department Royal Kolkatta Western India Turf Club Ltd., Vs. Keshavrao Khade Marg, Race Course, Mahalaxmi, Mumbai – 400034
(PAN : AADAR3470M) (Appellant) (Respondent)
Present for: Assessee : Shri Rakesh Kumar Sirsalewala, CA Revenue : Smt. Mahita Nair, Sr. DR
Date of Hearing : 04.07.2024 Date of Pronouncement : 09.07.2024
O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A),4, Kolkata vide order no. ITBA/APL/S/250/2023- 24/1060655839(1), dated 08.02.2024 against the Intimation u/s. 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) by Central Processing Centre (CPC), Bengaluru, dated 19.10.2022 for Assessment Year 2021-22.
Grounds taken by the assessee are reproduced as under:
2 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22
“1. On the facts and in the circumstances of the case, and in law, the Hon'ble CIT(A) has erred in upholding the disallowance under section 80P(2)(d) of Rs. 8,68,670/-. The Appellant prays that the deduction under section 80P(2)(d) of Rs. 8,68,670/- be allowed. 2. The Appellant prays that the levy of interest under section 234B & 234C of Rs. 48,774/- be deleted.”
The issue involved in the appeal relates to disallowance of claim of deduction u/s. 80P(2)(d) of the Act in respect of interest income earned by the assessee from deposits made by it with Co-operative bank.
Brief facts of the case as culled out from records are that assessee is a credit cooperative society engaged in providing various credit facilities to its members who are permanent employees of Royal Western India Turf Club Ltd. (RWITC Ltd.). Assessee is registered under the Maharashtra Co-operative Society Act, 1960 as the salary earners co- operative credit society, having its registration as No. PNA/BNA/116 dated 16.04.1964. Assessee filed its return of income on 12.03.2022 with total income reported at Rs.6928/- after claiming deduction u/s. 80P(2)(d) of Rs.8,68,669/- towards interest from investment in other co- operative society. Return of the assessee was processed u/s. 143(1)(a) on 19.10.2022 whereby deduction claimed u/s. 80P(2)(d) was disallowed. Aggrieved, assessee went in appeal before the ld. CIT(A).
4.1. Ld. CIT(A) noted that assessee had admitted the interest from Savings Bank account as taxable and interest on investment with Co- operative bank was claimed as deduction u/s.80P(2)(d). However, ld. CIT(A) sustained the disallowance made in the processing of the return. It is noted that assessee had earned interest on investment with Mumbai District Central Co-operative Bank Ltd. of Rs.8,68,669/- which
3 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22 was claimed as a deductions u/s.80P(2)(d). Assessee’s contentions is that Mumbai District Central Co-operative Bank Ltd. is first a Co- operative Society and then a Co-operative Bank by holding a banking license.
According to the provisions of Section 80P, in case of a Co- operative Society, the gross total income if it includes income referred to in sub-section 2, then same shall be granted as a deduction, subject to the conditions and to the extent amounts specified. In sub-section 2, clause (d) provides that in respect of income by way of interest earned by the Co-operative Society from its investments with other Co-operative Society, the whole of such income is eligible for deduction. The contention of the Revenue in this respect is that the amount invested in a Co-operative Bank is different from Co-operative Societies and that these are not Co-operative Society and therefore assessee is not entitled to deduction u/s. 80P(2)(d).
5.1. Section 2(19) of the Act defines cooperative society according to which it means a cooperative society registered under the Cooperative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of cooperative societies. Thus, if the cooperative banks are falling into the definition of 'cooperative societies', naturally the deduction would be eligible to the assessee under section 80P(2)(d) of the Act. Therefore, it needs to be examined that whether the cooperative banks are coperative societies u/s. 2 sub-section (19) of the Act are not.
5.2. Section 2(10) of the Maharashtra Cooperative Societies Act defines "Co-operative bank" which means a Co-operative society which is doing the business of banking as defined in clause (b) of sub-sections (1) of
4 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22 section 5 of the Banking Regulation Act, 1949 and includes any society which is functioning or is to function as an Agricultural and Rural Development Bank under Chapter XI; Therefore, according to the above definition, the cooperative banks are also cooperative society.
Identical issue came up before the coordinate bench in the case of Vaibhav Co-operative Credit Society in ITA No.44, 46 & 298/Mum/2024 for Assessment Years 2014-15, 2018-19 and 2021-22, order dated 28.05.2024 (undersigned author is also the author of this order), wherein it was held that assessee is a credit cooperative society and not a cooperative bank within the meaning of Banking Regulation Act, 1949, allowing the claim of deduction u/s. 80P(2)(d). Ground taken by the assessee in the present appeal is squarely covered by the said order, there being no material change in the relevant facts and applicable law. The observations and findings by the coordinate bench in the said order is reproduced for ease of reference: “5. We have heard the rival contentions and perused the material on record. We have given our thoughtful considerations to the submissions made before us and various judicial precedents relied upon as discussed above including those in the case of assessee itself dealing with the issue before us. Admittedly, it is a fact on record that assessee does not hold banking license issued by Reserve Bank of India which is a necessary requirement for doing banking business. Assessee is a credit cooperative society providing credit facilities to its members from the deposits collected by it from its members. The credit activities undertaken by the assessee carry attributes of banking but for this sole reason assessee cannot be held to be doing banking business within the meaning of Banking Regulation Act, 1949 as applicable to cooperative banks. In this respect, it is worthwhile to take note of the difference in cooperative societies and cooperative banks explained elaborately by the Co-ordinate bench of ITAT, Mumbai in the case of ITO vs. Kulswami Cooperative Society in ITA No.6790/Mum/2012. The same is reproduced as under:
Sl.No. Co-operative societies Co-operative Banks 1. The Co-operative Credit Co-operative Banks are Societies are registered under registered under Maharashtra Maharashtra State Cooperative Co-operative Societies Act, 1960 Societies Act, 1960 and and administered by Registrar of governed, regulated, Cooperative Societies, Govt. Of
5 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22 administered and supervised Maharashtra. Cooperative Banks by the Registrar of the are regulated and supervised by Cooperative Societies, the Reserve Bank of India. Government of Maharashtra. Provisions of Banking Regulation Act, 1949 with modifications specified in section 56 of the Banking Regulation Act, 1949 are applicable to Co-operative Banks. Schedule 1 to Schedule V are applicable to Cooperative Bank. 2. Co-operative Societies are Co-operative Banks are classified as Cooperative Bank. classified as resource/thrifts Societies in the certificate of registration issued by Registrar of Cooperative Society. 3. Co-operative Credit Societies Co-operative Banks can accept can accept deposits and deposits from public. However, advance loans only to the unlike Co-operative credit members. Hence the business societies they can advance loans to the members only. activities are restricted to members and hence it can be termed as a mutual association/self-help group. 4. Co-operative Credit Societies Co-operative can accept deposits from public. can6not accept deposits from public. 5. The provisions of Banking The provisions of Banking Regulation Act 1949 are not Regulation Act 1949 are applicable to the Cooperative applicable to the Cooperative Credit Societies. Bank. 6. The Co-operative credit The Co-operative banks are societies do not required required to obtain license from license from Reserve Bank of Reserve Bank of India to carry on India to carry on its business. its business. 7. The Co-operative credit The Co-operative have cheque societies do not have cheque facilities, clearing facilities and facilities, clearing facilities and they issue demand drafts, they cannot issue demand Assessment Year order, bank drafts, pay orders etc. guarantees etc. 8. Co-operative Credit Societies Co-operative Banks are cannot use word mandatorily required to use word Bank/Bankers in their name. Bank/Bankers in their name. 9. Reserve Bank of India has no Reserve Bank of India has vested statutory power of control and with statutory powers of control
6 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22 supervision of Cooperative and supervision of Cooperative Societies. Banks.
Furthermore, in assessee’s own case (supra), the coordinate bench has held that assessee is a cooperative credit society eligible for benefit of deduction u/s. 80P(2)(a)(i) and that Section 80P(4) restricting the benefit of deduction does not apply to the assessee since it is neither a cooperative bank nor a cooperative society holding license from RBI for banking business. Also, with detailed exposition on the issue in hand by the Hon’ble Supreme Court in the case of The Mavilayi Service Cooperative Bank (Supra) and Kerala State Cooperative Agricultural and Rural Development Bank (Supra) we do not find any reason to interfere with the well analysed and elaborate finding arrived at by the ld. CIT(A) in allowing the grounds raised by the assessee on this issue. Accordingly, ground no.1 and 3 of the Revenue are dismissed. 7. Having held that assessee is a credit cooperative society and not a cooperative bank within the meaning of Banking Regulation Act, 1949, provisions of Section 36(1)(viia) of the Act do not apply in the case of assessee, which has been rightly held by the ld. CIT(A). Accordingly, ground no.2 of the Revenue is dismissed. 8. In the result, appeal of the Revenue is dismissed. 9. In ITA No. 298/Mum/2024, the issue involved is in respect of disallowance of Rs.2,57,88,069/- u/s. 80P(2)(a)(i) which is identical to the issue dealt above in ITA No.46/Mum/2024 except for variation in the amount. Accordingly, our observations and findings stated above apply mutatis mutandis on this appeal also. In the result, appeal of the Revenue is dismissed. 10. In ITA No.44/Mum/2024, the ground raised by the Revenue refers to deduction u/s. 80P(2)(d) of Rs.1,89,79,925/- on interest income earned from cooperative bank. This issue has also been dealt with by us while dealing with ground no.3 in ITA No.46/Mum/2024 above by referring to findings of ld. CIT(A) in allowing the said claim. 10.1. To further elaborate on this issue, we refer to a recent decision of the Co- ordinate Bench of ITAT, Mumbai in the case of Rajat Apartments Co-op Housing Society in ITA No. 4328 & 4329/Mum/2023, dated 27.05.2024 (undersigned author is also the author of this decision). While arriving at this decisions, reliance was placed on the decision of Hon'ble High Court of Karnataka in case of the PCIT vs. Totagar Cooperative Sales Society Limited [2017] 392 ITR 74 / 78 taxmann.com 169 (SC). The findings so arrived at by the co-ordinate bench is as under: “6.1. From the above, we understand that the provisions of section 80P(2)(d) of the Act are very clear and assessee is entitled for deduction u/s.80P(2)(d) of the Act in respect of interest or dividends received from investments made with any other cooperative societies. The decision on which the Ld.CIT(A) placed reliance i.e. The Totagar Cooperative Sales Society Limited v. ITO 322 ITR 283 (SC), is not on the issue of whether the assessee is entitled for exemption u/s. 80P(2)(d) of the Act vis-a-vis the interest income earned by the cooperative society from investments in other cooperative societies.
7 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22 Hence the decision of Hon'ble Supreme Court in the case of The Totagar Cooperative Sales Society Limited v. ITO has no application to the facts of the present case. 6.2. From the above extraction, we also note that the Hon'ble High Court held that the word ‘cooperative society’ are the words of the large extent and denotes a genus, whereas the word ‘cooperative bank’ is a word of limited extent, which merely de-markets and identifies a particular species of the genus ‘cooperative societies’. Thus, a cooperative bank is merely a variety of the cooperative societies which can be of a different nature and can be involved in different activities. 7. We are of the considered view, that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, since a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a cooperative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We also find that the issue before us of whether a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank or not is covered in favour of the assessee not only by the decision of Hon’ble High Court of Karnataka referred above but also in plethora of cases including few of the following cases:
(i) Land and Cooperative Housing Society Ltd. v. ITO (2017) 46 CCH 52 (Mum) (ii) C. Green Cooperative Housing and Society Ltd. v. ITO 21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. v. ITO Range- 20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017.”
10.2. In the present case, ld. Assessing Officer has identified interest earned by the assessee from various cooperative banks against the investments made by it which has been disallowed towards deduction claimed under section 80P. Considering the facts on record and the judicial precedents referred above, as well as our observations and discussions made supra, we are of the considered view that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, since a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a cooperative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. We thus, hold that assessee is eligible for claiming deduction u/s. 80P(2)(d) disallowed by the ld. Assessing
8 ITA No.1470/MUM/2024 RWITC Ltd., AY 2021-22 Officer. Accordingly, ground taken by the Revenue in this respect is dismissed. In the result, appeal of the Revenue is dismissed.”
Considering the facts on record, applicable law & judicial precedent referred above, we hold that assessee is eligible for claim of deduction u/s. 80P(2)(d) of the Act. We thus, allow the deduction claimed by the assessee of Rs. 8,68,669/-. Accordingly, ground taken by the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 09 July, 2024
Sd/- Sd/- (Satbeer Singh Godara) (Girish Agrawal) Judicial Member Accountant Member
Dated: 09 July, 2024 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,
(Dy./Asstt.Registrar) ITAT, Mumbai