JOHNSON & JOHNSON EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LIMITED ,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS) ADD/JCIT (A)-5 INCOME TAX DEPARTMENT , MUMBAI

Before the learned CIT(A), the assessee submitted that the deduction claimed of Rs.4,07,859 has been restricted to Rs.40,115 on account of an inadvertent error in the return of income made by disclosing the items of income. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee, and by placing reliance upon the decision of the Hon’ble Johnson & Johnson Employees Co-operative Credit Society Ltd Supreme Court in Goetze (India) Ltd. v/s CIT, [2006] 284 ITR 323, held that the powers of the first appellate authority are coterminous with that of the assessing officer and the appellate authority cannot do what the Assessing Officers ought to have done. Being aggrieved, the assessee is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. The only dispute raised by the assessee in the present appeal is against the denial of deduction claimed under section 80P(2)(d) of the Act in respect of interest income earned from the investments with Co-operative Banks. From the perusal of the record, we find that vide intimation issued under section 143(1) of the Act, the interest income of Rs.10,11,013 earned by the assessee from grant of loans to the members was allowed under section 80P(2)(a)(i) of the Act. Further, the interest income of Rs.40,115 from savings in Co-operative Bank was allowed under section 80P(2)(d) of the Act. However, the interest income of Rs.3,67,744 from fixed deposits in Co-operative Banks was disallowed under section 80P(2)(d) of the Act. The learned CIT(A) also did not grant any relief to the assessee by placing reliance upon the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. (supra), as the assessee submitted that due to inadvertent error in the return of income by disclosing the items of income the deduction claimed of Rs.4,07,859 has been restricted to Rs.40,115.

At the outset, we find that Hon'ble Supreme Court in Goetze (India) Ltd. (supra) and Hon'ble jurisdictional High Court in CIT v/s Pruthvi Brokers and Shareholders Pvt. Ltd., [2012] 349 ITR 336 (Bom.) has held that the appellate Page | 3 Johnson & Johnson Employees Co-operative Credit Society Ltd authority can entertain a fresh claim made by the assessee, even if such a claim was not made in return of income or by way of revised return of income.

Before proceeding further, it is relevant to note the provisions of section 80P of the Act under which the assessee has claimed the deduction in the present case. As per the provisions of section 80P(1) of the Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an assessee being a co-operative society. Further, section 80P(2)(d) of the Act, reads as under:

In the present case, there is no dispute that the assessee is a Co- operative Society, which is engaged in providing credit facilities to its Page | 4 Johnson & Johnson Employees Co-operative Credit Society Ltd members, and was formed to cater to the financial needs of its members. Thus, if any income as referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as a deduction. It is pertinent to note that since the assessee is registered under the Maharashtra Co-operative Societies Act, 1960, it is required to invest or deposit its funds in one of the modes provided in section 70 of the aforesaid Act, which includes investment or deposit of funds in the District Central Co-operative Bank or the State Co-operative Bank. Accordingly, the assessee kept the deposits in District Central Co-operative Banks and earned interest, which was claimed as a deduction under section 80P(2)(d) of the Act. It is pertinent to note that the Hon’ble Supreme Court in Mavilayi Service Co- operative Bank Ltd. v/s CIT, Calicut, [2021] 431 ITR 1 (SC) while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Co-operative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. The Hon’ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, we are of the considered view that section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction under section 80P of the Act. We also find that in PCIT v/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023] 150 taxmann.com 173 (SC), the Hon’ble Supreme Court held that a taxpayer who is merely giving credit to its members cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act and the banking Page | 5 Johnson & Johnson Employees Co-operative Credit Society Ltd Banking Regulation Act are altogether different. Therefore, the Hon’ble Supreme Court held that the assessee, a co-operative credit society, could not be termed a bank/Co-operative Bank and that being a credit society, it was entitled to exemption under section 80(P)(2) of the Act. Thus, we find no basis in denial of deduction claimed under section 80P(2)(d) of the Act in respect of interest income earned from the investments with Co- operative Banks.

As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) of the Act. We find that the coordinate bench of the Tribunal in Jansevak Co–operative Society Ltd. vs ITO, in & 3230/Mum./2022, vide order dated 23/02/2023 allowed the deduction claimed by the assessee under section 80P(2)(d) of the Act, by observing as under:-

So following the decision rendered by Hon’ble Karnataka High Court (supra) and Hon’ble Gujarat High Court (supra) and order passed by the coordinate Bench of the Tribunal discussed in preceding paras, we are of the considered view that assessee society who has earned an amount of Rs.16,76,460 and Rs.87,93,570/- for A.Y. 2013-14 and A.Y. 2018-19 respectively from its investment of surplus fund parked with co-operative banks is entitled for deduction under section 80P(2)(d) of the Act.

Therefore, in view of the aforesaid findings, we uphold the plea of the assessee and direct the AO to grant deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with Co-operative Banks. Accordingly, we set aside the impugned order passed by the learned CIT(A). As a result, the grounds raised by the assessee are allowed.

In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 19/06/2024