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Facts
The appellant, Chitrakoot Cooperative Housing Society Ltd., claimed a deduction of ₹3,076,363/- under Section 80P(2)(d) for interest income received from cooperative banks for Assessment Year 2016-17. The Assessing Officer and CIT(A) denied this deduction, contending that cooperative banks are not "cooperative societies" for the purpose of this section.
Held
The Tribunal held that cooperative banks are indeed cooperative societies, clarifying that their banking business does not alter this status. Consequently, the interest income earned by the assessee from investments in such cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961. The deduction claimed by the assessee was allowed.
Key Issues
Whether interest income earned by a cooperative society from deposits with cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, and if cooperative banks qualify as "other cooperative societies" under this section.
Sections Cited
Section 80P(2)(d) of the Income Tax Act, 1961, Section 144 of the Income Tax Act, 1961, Section 143(2) of the Income Tax Act, 1961, Section 2(19) of the Income Tax Act, 1961, Section 80P(4) of the Income Tax Act, 1961
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Income Tax Appellate Tribunal, Mumbai “SMC” Bench, Mumbai.
Before: Shri Prashant Maharishi (AM)
IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “SMC” Bench, Mumbai. Before Shri Prashant Maharishi (AM) (A.Y. 2016-17) Chitrakoot Cooperative Vs. ITO, Ward-19(1)(3) Housing Society Ltd. Matru Mandir Altamount Road Tardeo Road Near Jaslok Hospital Mumbai-400 007. Maharashtra-400026. PAN : AAAC0342C (Appellant) (Respondent) Assessee by Shri Meet Saurin Dangarwala Department by Shri R.R. Makwana Date of Hearing 10.06.2024 Date of Pronouncement 27.06.2024 O R D E R Per Prashant Maharishi Accountant Member
This appeal is filed by Chitrakoot cooperative housing society Ltd for assessment year 2016 – 17 against the order of the National faceless appeal Centre (NFAC) Delhi (the learned CIT – A) dated 5/1/2024 wherein the appeal filed by the assessee against the assessment order dated 24/12/2018 passed under section 144 of the income tax act 1961 by the income tax officer Ward 19 (1) (3), Mumbai (the learned AO) was dismissed.
The only issue involved in this appeal is that assessee is disallowed the deduction of ₹ 3,076,363/– under section 80 P (2) (d) of the act on account of interest income received by the assessee from other cooperative banks. 3. The fact shows that the assessee filed its return of income on 19/12/2016 declaring a total income of ₹ 27,170/–. The return of income was picked up for limited scrutiny and notice under section 2 ITA number 1009/Mumbai/2024 Assessment year 2016 – 17 Chitrakoot cooperative housing society Ltd Versus The income tax officer Ward 19 (1) (3), Mumbai 143 (2) of the act was issued and served. It was found that assessee has earned gross total income of ₹ 3,103,535/– and has claimed deduction under section 80 P (2) (D) of the act on account of bank interest received from cooperative banks amounting to ₹ 3,076,363/–. The learned assessing officer asked the assessee that why the above deduction claimed by the assessee should not be disallowed. The learned authorized representative of the assessee made several claims before the learned AO but same were denied holding that assessee cannot be allowed deduction under that section with respect to the interest income on from cooperative banks as those are not cooperative societies.
Consequently the assessment order was passed under section 144 of the act determining total income of the assessee at ₹ 3,103,540/– as per assessment order dated 24/12/2018.
Assessee preferred an appeal before the National faceless appeal Centre, the appeal of the assessee was disposed on 5/1/2024 wherein the assessee reiterated its claim of deduction. The learned CIT – A dismissed the claim relying upon the several judicial precedents.
The assessee in appeal before us filed a paper book containing 92 pages wherein several judicial precedents were relied upon. The learned authorized representative reiterated the facts stated before the AO.
The learned departmental representative supported the order of the lower authorities.
We have carefully considered the rival contention and perused the orders of the lower authorities. The only controversy involved in this appeal is whether in case of cooperative society, which has made an investment in another cooperative societies which are cooperative banks, on interest thereon, whether such interest can be considered as income eligible for deduction under section 80 P (2) (d) of the act. The Page 2 of 4 3 ITA number 1009/Mumbai/2024 Assessment year 2016 – 17 Chitrakoot cooperative housing society Ltd Versus The income tax officer Ward 19 (1) (3), Mumbai claim of the revenue is that cooperative banks are not cooperative societies and therefore deduction is not eligible.
On the merits of the case, provisions of section 2 (19) define a co- operative society as under:- 19) "co-operative society"97 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 ;
Thus, for the definition of the cooperative society whether covers the cooperative banks are not one has to look at the respective cooperative societies act is applicable.
THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960, Defines cooperative banks as per section 2 (10) of that Act as under :”- “Co-operative bank” means a Co-operative society which is doing the business of banking as defined in clause (b) of sub-sections (1) of section 5 of the Banking Companies Act, 1949 and includes any society which is functioning or is to function as an Agricultural and Rural Development Bank under Chapter X. 12. Thus it is apparent that cooperative banks are also a co-operative society. Only difference is that those cooperative societies are doing the business of banking as per the banking companies' act 1949. Therefore, merely because these cooperative societies cooperative bank they do not lose their status as a co-operative society. 13. According to the provisions of section 80 P (2) (d) of the income tax act (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;
Thus, the assessee’s investment of earning interest income from such cooperative banks which are also cooperative societies whole of such income is deductible under this section.
It is not in dispute that assessee is not a cooperative bank and therefore provisions of section 80 P (4) of the act does not apply to it. Page 3 of 4
4 ITA number 1009/Mumbai/2024 Assessment year 2016 – 17 Chitrakoot cooperative housing society Ltd Versus The income tax officer Ward 19 (1) (3), Mumbai 16. Thus the assessee is eligible for deduction under section 80 P (2) (d) of the act on its income received from all the above cooperative banks. Hence assessee is eligible for that deduction amounting to Rs. 30,76,363/- . Several judicial precedents relied upon by the learned lower authorities are not applicable to the facts of the case as the claim of the assessee is deduction of interest income on from investment in fixed deposit receipt with the cooperative banks which are also a co- operative society. This is the second ground of appeal of the assessee which is allowed.
17. Ground number 1 of the appeal is not pressed and is dismissed.