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Income Tax Appellate Tribunal, VISAKHAPATNAM“DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI K. NARASIMHA CHARY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. These appeals are filed by the assessee against different orders of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre,
I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited Delhi[hereinafter in short “Ld. CIT(A)] vide respective DIN &Order No. as stated below: -
ITA No. & A.Y. DIN & Order No. Dated ITBA/NFAC/S/250/2023-24/1061628746(1) 28.02.2024 (A.Y. 2017-18)
ITBA/NFAC/S/250/2023-24/1061628736(1) 28.02.2024 (A.Y. 2018-19) ITBA/NFAC/S/250/2023-24/1061628733(1) 28.02.2024 (A.Y. 2020-21)
Since the grounds raised by the assessee for all the three appeals are identical in nature, theseappeals are being clubbed and a consolidated order being passed. We now take up the appeal in A.Y.2017-18 as a lead appeal.
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No. ITBA/NFAC/S/250/2023- 24/1061628746(1) dated 28.02.2024 for the A.Y. 2017-18 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 11.12.2019.
Brief facts of the case are that, assessee is a cooperative society registered with District Cooperative Officer, Visakhapatnam whose main object is to Page No. 2
I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited provide residential plots to its members to construct residential houses. Assessee filed his return of income on 26.07.2017 admitting a total income of Rs.1,73,87,930/- after claiming deduction under section 80P of the Act. Subsequently, the case was selected for scrutiny under CASS. Accordingly, statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee, calling for information. Subsequent to change in the incumbent a fresh opportunity of being heard under section 129 of the Act were issued to the assessee vide letter dated 13.09.2019 and notice under section 142(1) of the Act dated 13.09.2019 were also issued calling for information. In response, assessee submitted required information through e-proceedings and also certain information physically. On verification of the Income & Expenditure Account for the F.Y. 2016-17, the Ld. Assessing Officer [hereinafter in short “Ld. AO"] noticed that assessee has earned interest income on fixed deposits amounting to Rs. 1,15,47,867/- from cooperative banks. It was also observed by the Ld. AO that the assessee has claimed deduction of Rs.1,15,47,867/- under section 80P of the Act in its return of income. Ld. AO, thereafter, issued show-cause notice dated 28.11.2019 requesting the assessee to show-cause why the deduction claimed under section 80P of the Act should not be disallowed as the provisions of section 80P clearly stated that it does not apply to a cooperative bank. Assessee submitted its reply through e-proceedings. Ld. AO on considering the provisions of section 80P(2)(d) of Page No. 3
I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited the Act concluded that, this section only envisages interest from cooperative society and not a cooperative bank. Therefore, Ld. AO disallowed the claim of Rs. 1,15,97,867/- claimed by the assessee under section 80P of the Act.
Aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld.CIT(A), NFAC, Delhi. Assessee submitted similar information before Ld.CIT(A). Ld. CIT(A) after considering the submissions made by the assessee dismissed the appeal of the assessee.
Being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising the following revised grounds of appeal: -
“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.1,15,97,867 made by the assessing officer towards disallowance of deduction claimed u/s 80P(2)(d) of the Act in respect of interest received from Co-Operative Bank. 3. Any other ground that may be urged at the time of appeal hearing.”
The only issue contested by the assessee is with respect to disallowance of interest under section 80P(2)(d) of the Act consideringthe interest received from a cooperative bank is not eligible for deduction u/s 80P(2)(d) of the Act. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the assessee is a cooperative society registered under the District Cooperative Officer, Visakhapatnam. Ld.AR further submitted that the assessee
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I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited is not a cooperative bank and has invested its surplus funds which were immediately not required by the members, in a cooperative bank to earn interest. Ld.AR further submitted that the provisions of section 80P is not applicable only to cooperative banks and not to cooperative societies. He therefore, pleaded that the deduction claimed by the assessee under section 80P(2)(d) of the Act be allowed. Ld.AR relied on the following case laws: - i. Decision of the Hon’ble Madras High Court in the case of Thorapadi Urban Co-op Credit Society Limited v. ITO in W.P.Nos. 11172, 11174, 11177 and 11180 of 2023 dated 10.10.2023. ii. Decision of the Hon’ble Madras High Court in the case of CIT v. The Salem Agricultural Producers Co-Operative Marketing Society Ltd in Tax Case Appeal No. 5 of 2015 dated 10.08.2016. iii. Order of the Co-ordinate Bench of the Tribunal in the case of Manikpur Urban Co-Operative Society Ltd. v. ITO in dated 27.02.2023 (2023) 102 ITR (Trib) 0062 (Mumbai).
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] fully supported the orders of the revenue authorities. Ld. DR argued that as per provisions of section 80P(2)(d) of the Act, interest earned from investments with any other cooperative society is only exempted not the interest from cooperative banks. On this issue, Ld. DR placed reliance on the decision of the Hon’ble High Court of Karnataka in the case of Pr.CIT v. Totagars Co- operative Sale Society [2017] 395 ITR 611 (Karnataka).
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I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited 9. We have heard both the sides and perused the material available on record including the cases cited by both the parties. The main grievance of the assessee is with respect to denial of deduction under section 80P(2)(d) of the Act in respect of interest income received from cooperative banks. The provisions of section 80P(1) of the Act allows deduction under section 80P(2) of the Act to an assessee being a cooperative society. Section 80P(2)(d) of the Act is reproduced below for ready reference: -
"80P. Deduction in respect of income of co-operative societies. (1) ...... (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) ..... (b) ..... (c) .... (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;”
From the bare reading of the provisions of section 80P(2)(d) of the Act, assessee should satisfy two conditions namely (i) income by way of interest or dividend is earned by the cooperative society from the investments; and (ii) such investments should be with any other cooperative society. The term “cooperative society” is defined undersection 2(19)of the Act as under:-
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I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited "(19) "co-operative society" 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;”
In the instant case, it is not disputed that assessee is a cooperative society and therefore any income referred in sub-section (2) of Section 80P of the Act which is included in the gross total income of the assessee, shall be allowed as deduction. The revenue denied the deduction under section 80P(2)(d) of the Act stating that interest income is earned from the cooperative bank whereas in the said provision only grants deduction in respect of interest earned from cooperative society. The Hon’ble High Court of Madras in the case of Thorapadi Urban Co-op Credit Society Limitedv. ITO (supra) held as follows: -
“10. A reading of the above definition would make it clear that 'Co- operative Society' means a Co-operative Society registered under Co- operative Societies Act, 1912. Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co- operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.”
The Hon’ble High Court of Madras in the case of CIT v. The Salem Agricultural Producers Co-Operative Marketing Society Ltd (supra) also affirmed the view that interest income earned from cooperative bank by cooperative society is also eligible for deduction under section 80P(2)(d) of the Act. Further various Co-ordinate Benches of the Tribunal had consistently taken a view and held that interest income earned from cooperative bank were Page No. 7
I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited allowable as deduction under section 80P(2)(d) of the Act. Further, we are also of the considered view that provisions of section 80P(4) excludes only cooperative banks possessing licence from RBI to do banking business to claim deduction u/s 80P(2) of the Act. Therefore, it is relevant only in the case of cooperative banks which is claiming deduction u/s 80P and does not apply to deposits made with the cooperative bank which is also a registered cooperative society under the Cooperative society Act, 1912 (2 of 1912) or under any other law for the time being in force in any state for the registration of cooperative societies. The case relied on by the Ld.DR is distinguishable on the facts that, in that case, the surplus funds which are liable to be paid to its members and shown on the liability side of the balance sheet was deposited with cooperative banks in order to circumvent the decision of the Hon’ble Supreme Court in the case of Totgar’s cooperative Sale Society Ltd. v. ITO [ (2010) 322 ITR 283]. Since the facts in the instant case are different, this case is not of any help to the revenue. We are therefore inclined to set-aside the order passed by the Ld.CIT(A) and direct the Ld. AO to allow the deduction claimed by the assessee under section 80P(2)(d) of the Act. Thus, Ground raised by the assessee is allowed.
In the result, appeal of the assessee is allowed.
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I.T.A.Nos.175, 176 & 177/VIZ/2024 Bheemunipatnam Mutually Aided Cooperative Building Society Limited (A.Y.2018-19) ITA No. 177/VIZ/2024(A.Y. 2020-21)
Coming to appeals relating to & 177/VIZ/2024 for the A.Ys. 2018-19 & A.Y. 2020-21 respectively, the assessee has raised identical grounds. Therefore, the decision taken in A.Y. 2017-18 in the aforesaid paragraph shall apply mutatis mutandis to the appeal numbers in & 177/VIZ/2024. Accordingly, appeals filed by the assessee are allowed.
To sum-up, appeals filed by the assessee are allowed.
Order pronounced in the open court on 25th November, 2024.