INDIAN OIL EMPLOYEES WELFARE CO OPERATIVE SOCIETY LTD,MUMBAI vs. ACIT 23(1), MUMBAI

These are the two appeals filed by Indian oil employees' welfare cooperative society Ltd, Mumbai (the assessee/appellant) for assessment year 2013 – 14 in ITA number 3519/M/2022 and ITA number 3518/M/2022 for assessment year 2017 – 18 involving identical issue and therefore decided by this common order.

Assessee raised following grounds of appeal: –

Fact shows that assessee is a co-operative society primarily engaged in making suitable arrangements for prompt payment to beneficiaries of diseased employees of Indian oil Corp. It accepts any amount or deposits from

Assessee filed its return of income on 27 September 2013 at a total income of ₹ 10,622,078/– after claiming deduction of ₹ 7,645,872/– showing net taxable income of ₹ 2,976,210. Return was picked up for scrutiny. The assessment was completed on 17 December 2019 assessing the total income of the appellant at ₹ 1,06,22,018 against the returned income of ₹ 2,976,210/- where the deduction of ₹ 7,645,872/– was disallowed.

The disallowance was with respect to the fact that assessee has received income in the form of fixed deposit interest of ₹ 7,595,579 from cooperative bank and savings bank interest of ₹ 293/–. Assessee also claim standard deduction under 80 P (2) (c) of ₹ 50,000/– thus the aggregate deduction was claimed under section 80 P of ₹ 7,645,872/–.

The claim of the assessee is that assessee is a co- operative society registered under the Maharashtra cooperative societies act, 1960 and interest received by the appellant from the cooperative banks which are registered under the cooperative society act is deductible under section 80 P (2) (D).

However, the learned AO did not agree with the assessee and disallowed the above deduction.

On identical facts and circumstances, the disallowance was made for assessment year 2014 – 15 and 2015 – 16. For

However, the learned assessing officer disallowing impugned deduction passed an assessment order on 30 December 2019.

Assessee preferred an appeal before the learned CIT – A. He passed an order on 16/8/2023 holding that honourable Supreme Court in Maviyelli cooperative bank has held that the profits attributable to the nonmember are not eligible for deduction under section 80 P (2) (a) of the act. With respect to the deduction under section 80 P (2) (d), the learned CIT – A held that in the Totagars cooperative sale societies versus income tax officer in 188 taxmann.com 282 Supreme Court has held that deduction is also not allowable under section 80P (2) (a) of the act. Therefore it was held that interest income from deposits With scheduled banks and cooperative banks are to be taxed under the head income from other sources, as nature of income shows that it cannot be charged to business income and therefore the assessee is not entitled to the benefit of deduction under 80 P (2) (a) (i) or under section 80 P (2) (d) of the act in respect of interest income earned out of investment made with the cooperative bank. Accordingly, the appeal of the assessee was dismissed and assessee is in appeal before us.

Similarly, for assessment year 2017 – 18 assessee filed its return of income on 4/10/2017 declaring total income of ₹ 3,345,340. The return was processed under section 143

The learned assessing officer on the same grounds held that assessee is not eligible for deduction under section 80 P (2) (d) of the act for ₹ 8,148,348. The same was disallowed and assessment order was passed under section 143 (3) of the act on 7/12/2019. The assessee challenged the same before the learned CIT – A who passed an order on 16/8/2023 on similar lines and dismissed the appeal of the assessee. Therefore, assessee is in appeal.

The only issue in both these appeal is whether the assessee is entitled to deduction of interest income received from cooperative bank under provisions of section 80 P (2) (a) of the act or 80 P (2) (d) of the act or not.

Before us, the assessee has filed detailed paper book containing 368 pages for assessment year 2013 – 14 and 278 pages for assessment year 2017 – 18. Assessee was heard.

Learned Departmental representative supported the orders of the lower authorities.

We have carefully considered the rival contention and perused the orders of the learned lower authorities. The

Assessee is a co-operative society primarily engaged into arranging for prompt payment to beneficiaries of diseased employees. In addition, arrangements have been made to refund the welfare Society dues to employees who ceases to the member of the society due to superannuation, voluntary retirement, termination, resignation etc. For these purpose contribution towards capital in monthly deduction from salary and subscription to the society is made by the members. Such surplus is kept by the assessee with the cooperative banks and interest thereon is earned.

According to the provisions of section 80 P, wherein case of an assessee being a co-operative society the gross total income includes any income referred to in subsection (2) it shall be deducted in accordance with and subject to the provisions of the section in computing the total income of the assessee. According to subsection (2) in case of a co- operative society engaged in carrying on the business of banking or providing credit facilities to its member is eligible for deduction of the whole of the amount of profits and gains of business attributable to anyone or more of such activities. The claim of the revenue authorities is that the amount of interest earned by this entity is not the business income of the assessee and

Accordingly, both the appeals of the assessee are allowed.