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Facts
The assessee, a cooperative housing society, claimed deduction under Section 80P(2)(d) for interest income earned from deposits with a cooperative bank. The Assessing Officer disallowed this deduction, stating that the bank was not a cooperative society. The CIT(A) upheld this disallowance.
Held
The Tribunal held that a cooperative bank is a species of cooperative society. Therefore, interest income earned by a cooperative society from deposits with a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Act.
Key Issues
Whether interest income earned by a cooperative society from deposits with a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income-tax Act.
Sections Cited
80P(2)(d)
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Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI GIRISH AGRAWAL & SHRI SUNIL KUMAR SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER
ITA No.4328 & 4329/MUM/2023 Assessment Year: 2020-21& 2021-22
Rajat Apartments Co-op Housing Assistant Commissioner of Society, Income Tax, Circle 19(3), 20, Rajat Apt., Mount Pleasant Vs. Mumbai Road, Malabar Hill, Mumbai – 400 006 (PAN:AAABR0118C) (Appellant) (Respondent)
Present for: Assessee : Shri Jayesh Dadia, C.A Revenue : Smt. Mahita Nair, Sr. DR
Date of Hearing : 09.05.2024 Date of Pronouncement : 27.05.2024
O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: Both the appeals filed by the assesseeare against the orders of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi,vide order no. ITBA/NFAC/S/250/2023-24/1057567223(1) and order no. ITBA/NFAC/S/250/2023-24/1057567455(1), dated 31.10.2023, passed against the assessment orders by Mum-C-(169)(1), dated 25.02.2022 and by Central Processing Centre, dated 26.06.2023, u/s.154 of the Income-tax Act (hereinafter referred to as the “Act”), for AY 2020-21& 2021-22.
The sole issue involved in both the appeals relate 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-
2 ITA No.4328 & 4329/MUM/2023 Rajat Apartments Co-op Hsg. Soc., AY 2020-21 & 2021-22 operative bank.Since, common issue is involved in both the appeals, we draw the facts from the appeal in ITA No.4328/Mum/2023 to arrive at our finding which will apply mutatis mutandis on the other appeal also. 3. Brief facts of the case as culled out from records are thatassessee is a cooperative housing society deriving income from house property and income from other sources. Return of income was filed on 15.02.2021 reporting total income at Rs.40,53,940/-. Return was processed by Central Processing Centre (CPC), Bengaluru vide intimation dated 25.11.2021 u/s. 143(1) of the Act. In the said processing of the return, deduction claimed u/s. 80P(2)(d) of Rs.18,23,302/- towards interest earned on deposits kept with cooperative bank was disallowed. An online rectification application was moved by the assessee on 13.12.2021 to rectify this mistake apparent from record. However, it did not yield the desired result. Yet another application was moved u/s. 154 on 22.02.2022 which also went in the failure mode. Aggrieved, assessee went in appeal before the ld.CIT(A) who also confirmed the disallowance. Aggrieved, assessee is in appeal before the Tribunal. 4. The moot point before us is in respect of eligibility of deduction claimed u/s.80P(2)(d) in respect of interest income earned by the assessee from Shamrao Vithal Cooperative Bank which according to the authorities below is not a cooperative society. 5. In this respect, we note that ld. CIT(A) has observed that Shamrao Vithal Cooperative Bank is not a cooperative society but a multistate scheduled cooperative bank having RBI license. Therefore, interest income earned from a cooperative bank is not eligible for deduction u/s. 80P(2)(d) which allows deduction only in respect of receipts from cooperative society. It is worth noting that assessee has derived interest income from various sources and has suo motto not
3 ITA No.4328 & 4329/MUM/2023 Rajat Apartments Co-op Hsg. Soc., AY 2020-21 & 2021-22 claimed deduction in respect of interest income earned by it from banks other than cooperative banks.
On the above stated facts, the issue before us is no longer res integra as extensively dealt by 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). Relevant findings given in para 7 to 12 are as under:
"7. However, the contention being taken by the learned counsel is untenable. For the issue that was before ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to Co-operative Society, then any interest earned by the Co-operative Society from a Co-operative Bank wo necessarily be deductable under Section SOP(I) of the Act.
The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover, the word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co- Operative Society can be of different nature, and can be involved in different activities; the Cooperative Society Bank is merely a variety of the Co-operative Societies. Thus the Co- operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society".
Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Ban. would be included in the words 'Co- operative Society'.
Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank Therefore, according to Sec. 80P(2)(d) of the IT. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess it: total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assesse respondent.
11.The learned counsel has relied on the case of Totgars Co- operative Sale Society Ltd. v. IΠΟ (2010) 322 ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section SOP(2)(d) of the L.T. Act and not Section S * 0P(2)(a)(i) of the IT. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of la canvassed by the learned counsel for the Revenue even arise it is the present case.
4 ITA No.4328 & 4329/MUM/2023 Rajat Apartments Co-op Hsg. Soc., AY 2020-21 & 2021-22 12. For the reasons stated above, this Court does not find any merit in the present appeal. Hence, the appeal is dismissed.”
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. 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
5 ITA No.4328 & 4329/MUM/2023 Rajat Apartments Co-op Hsg. Soc., AY 2020-21 & 2021-22 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.
8.1. In a recent decision by the coordinate bench of ITAT Mumbai in the case of Ashok Tower “D” Co. Op. Housing Society Ltd. vs. ITO [2024] 161 taxmann.com 518 (Mumbai - Trib.), this has been dealt with extensively. Relevant extracts are as under:
“We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. v. Totagars Cooperative Sale Society [2017] 78 taxmann.com 169/392 ITR 74 (Karnataka) and Hon'ble High Court of Gujarat in the case of State Bank of India v. CIT [2016] 72 taxmann.com 64/290 CTR 129/389 ITR 578/241 Taxman 163 (Gujarat), had also held that the interest income earned by the assessee on its investments held with a co- operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the cooperative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT(A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. v. ITO (2010) 322 ITR 283 (S.C) being distinguishable on facts, thus, had wrongly been relied upon by
6 ITA No.4328 & 4329/MUM/2023 Rajat Apartments Co-op Hsg. Soc., AY 2020-21 & 2021-22 him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a cooperative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT "F" bench, Mumbai in the case of M/s Vaibhav Cooperative Credit Society v. ITO -15(3)(4)(ITA No. 5819/Mum/2014, dated 17.03.2017 is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee cooperative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec. 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT "SMC" Bench, Mumbai in the case of Shri Sai Datta Cooperative Credit Society Ltd. v. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT v. Totagars co-operative Sale Society [2017] 83 taxmann.com 140/297 CTR 158/395 ITR 611 (Karnataka), the High Court had concluded that a co- operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. v. Siemens India Ltd. and Anr [1983] 36 CTR 197/[1985] 156 ITR 11/[1983] 15 Taxman 594 (Bombay), where there is a conflict between the decisions of non-jurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. v. Totagars Cooperative Sale Society [2017] 78 taxmann.com 169/392 ITR 74 (Karnataka) and Hon'ble High Court of Gujarat in the case of State Bank Of India v. CIT [2016] 72 taxmann.com 64/290 CTR 129/389 ITR 578/241 Taxman 163 (Gujarat), wherein it was observed that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act." 9. Considering the factual matrix in the present case which are akin to the judicial precedents dealt above, we hold that assessee is entitled to claim of deduction u/s. 80P(2)(d) towards interest earned on deposits with cooperative banks. Accordingly, the disallowance made is deleted. This appeal of the assessee is allowed.
7 ITA No.4328 & 4329/MUM/2023 Rajat Apartments Co-op Hsg. Soc., AY 2020-21 & 2021-22 10. Since the facts in the other appeal of the assessee in ITA No.4329/Mum/2023 are the same, our aforesaid observations and findings apply mutatis mutandis on this appeal also. Accordingly, this appeal is also allowed. 11. In the result, both the appeals of the assessee are allowed. Order is pronounced in the open court on 27 May, 2024
Sd/- Sd/- (Sunil Kumar Singh) (Girish Agrawal) Judicial Member Accountant Member
Dated: 27 May, 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