INCOME TAX OFFICER -30(1)(1), MUMBAI, MUMBAI vs. TIFR EMP CO-OP CR SOC LIMITED, MUMBAI

3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction u/s.80P(2)(d) of the Income Tax Act in respect of interest earned from deposits in cooperative bank ignoring that whether the deposits and investment of surplus funds of assessee not immediately required for its purposes, is made with Scheduled Bank or Nationalized Banks or with cooperative Banks does not make a difference as far as the character of the Income earned by assessee is concerned and it does not partake the character of its operational income from its activity as cooperative housing society, the same would continue to be fully taxable and will not be eligible for deduction under section 80P(2)(d) of the Act."

4. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in allowing deduction u/s.80P(2)(d) of the Income Tax Act, 1961 in respect of interest earned from deposits, though Hon'ble Karnataka High Court in a detailed judgment discussing the law and Tifr EMP Co-Op CR Soc. Limited various related issues in the case of PCIT vs. Totagar's Co- operative Sales Society ( 395 ITR 611) has specifically decided the Question of Law about the allowability of interest earned from deposits with co-operative bank u/s. 80P(2)(d) of the Income tax Act in favours of Revenue."

5. The appellant craves leave to amend or alter or add a new ground which may be necessary.”

Tifr EMP Co-Op CR Soc. Limited “5.2. The issue of denial of deduction u/s.80P (2) (d) has also been considered by the Hon'ble Mumbai ITAT in several cases. The gists of the decisions in a few cases are as under: i. ITAT Mumbai in the case of New Ideal Co-op Housing. vs. ITO dt. 03.02.2021 has held that the adjustment has been done by the CPC Bengaluru under section 143(1)(a) of the Act and no such adjustments in clause (a)(i) to (v) of 143(1) shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: and further para 9 of the decisions reads as under: “9) In my considered opinion the adjustment done by denial of deduction u/s. 80P (2) (d) and 80P (2) (c) (ii) in this case does not fall in any of the above. That a cooperative society will not get exemption on the interest earned on deposits in cooperative bank is not something which is a subject matter of adjustment under section 143(1)(a) of the Act. I find that despite noting that there are tribunal decisions in favour of assessee, the learned CIT (A) has chosen not to follow the same by referring to some other decisions." ii. In a recent decision Hon'ble ITAT "D" Bench Mumbai in the case of Mittal Court Premises Co. Op. Society Ltd in to 1537/Mum/2022 dt. 31.10.22 for A.Y. 14-15 to 16-17 noted that the issue is no longer res-integra; and dismissed the revenues appeal against CIT's order allowing the claim of deduction u/s. 80P(2)(d). Reliance was placed on the Tribunal decision in the case of Palm Tifr EMP Co-Op CR Soc. Limited Court M. Premises Cooperative Society Itd. Vs PCIT for A.Y. 15- 16 where in the order of the Ld. PCIT holding the Assessment Order passed by AO allowing the claim of deduction u/s. 80P(2)(d) was erroneous has been set aside. The Tribunal while arriving at the decision in favour of assessee in the case of Palm Court M. Premises Cooperative Society Ltd. placed reliance on the following cases.

Tifr EMP Co-Op CR Soc. Limited "In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co- operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term co- operative society" had been defined under Sec. 2(19) of the Act, as under:- "(19) "Co-operative society" means a cooperative society registered under the Cooperative 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;" We are of the considered view, that though the co-operative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as 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 in force in any State for the registration of co- operative societies, therefore, the interest income derived by a co-operative 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." 5.3 In the aforementioned decisions it has been held that the disallowance of deduction u/s. 80P (2)(d) does not fall within the scope of adjustment u/s. 143(1) and that the interest income derived by a co-operative society by way of investment made with a co-operative bank would be entitled to claim of deduction under section 80P(2)(d) of the Act.”

Tifr EMP Co-Op CR Soc. Limited was correct in allowing deduction u/s 80 P (2) (d) of the Act to the assessee on the interest income earned by it on the fixed deposits kept with Cooperative Banks? 7. We have considered the facts of the case and the various decisions of the Coordinate Benches of the Tribunals which allowed the Cooperative Societies the deduction u/s 80 P (2) (d) of the Act on the interest received on fixed deposits kept in Cooperative Banks. Thus, respectfully following the considered view taken by the Hon’ble Coordinate Benches of the Income Tax Appellate Tribunal, Mumbai (supra.), we also hold that the appellant is entitled to get deduction u/s. 80P (2) (d) of the Act on the interest income earned from deposits made in the Cooperative Banks.