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Income Tax Appellate Tribunal, MUMBAI “B” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.
अपीलाथ� क� ओर से/By Appellant : Smt. Aarti Vissanji, & Shri Shavin S. Divatia, A.R. ��यथ� क� ओर से/By Respondent: Shri Chandra Vijay, D.R. सुनवाई क� तार�ख/Date of Hearing : 16.08.2016 घोषणा क� तार�ख/Date of Pronouncement : 24.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M:
Both appeals have been filed by assessee against the orders of Commissioner of Income-Tax (Appeals)-32, Mumbai, dated 14.10.2013 & 15.10.2013 for A.Ys. i.e. 2009-10 & 2010- & 7204/Mum/13 A.Y. 2009-10 & 2010-11 [Nutan Laxmi CHS Ltd. vs. ITO] Page 2 11 respectively. Since, these appeals pertain to same assessee and on similar issue, so they are being disposed of by common order for the sake of convenience.
In A.Y. 2009-10, assessee has filed appeal on following grounds:
1. “The Learned Commissioner of Income Tax (Appeals) - 32 erred in confirming the order of the Assessing Officer charging to tax contribution received from members aggregating to Rs.64,00,000/- incidental to sale of plot ["Transfer Fees"] which was exempt on the Principle of Mutuality.
2. The Learned Commissioner of Income Tax (Appeals) - 32 erred in confirming the order of the Assessing Officer charging to tax Rs.25,20,000/- being contribution received by the Society from a member on the occasion of the use of TDR by the member and which was exempt on the Principle of Mutuality
3. The Learned Commissioner of Income Tax (Appeals)-32 erred not following the order of the jurisdictional Bombay High Court in the case of Sind Co-operative Housing Society vs. ITO, Pune, 317 ITR 47 (Bom).
4. The Learned Commissioner of Income Tax (Appeals)-32 erred in not allowing further deduction u/s 80P(2)(d) up to the Gross Total Income in the manner laid down in Chapter VI- A of the Income Tax Act, 1961 consequent to the additions made to total income
5. The appellant craves leave to add, alter or amend any of the Grounds of appeal and submit a detailed statement of facts and case laws relied upon at the time of the hearing.”
3. First issue in assessee’s appeal is with regard to the confirmation of the order of the Assessing Officer charging to tax contribution received from members aggregating to Rs.64,00,000/- incidental to sale of plot [Transfer Fees] which was exempt on the Principle of Mutuality. Next issue is with regard to allowability of deduction u/s.80P(2)(d).
ITA No.7203 & 7204/Mum/13 A.Y. 2009-10 & 2010-11 [Nutan Laxmi CHS Ltd. vs. ITO] Page 3 3.1 Learned Authorized Representative pointed out that all these appeals are covered in favour of the assessee by the order of ITAT ‘A’ Bench Mumbai in the case of Land End Co- operative Housing Society Ltd. V/s. ITO Mumbai in A.Y.2009-10 order dated 15.01.2016 wherein this issue of mutuality is decided in favour of the assessee by holding as under: “8.3 We have heard the rival submission and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u/s. 80P(2)(d) of the Act of Rs. 14,88,107/- being interest on investment with other Coop. banks by following the decision in the case of Bancira Samruddihi Co-operative Housing Society Ltd.(Supra) which was passed on the basis of the decision passed by the Hon'b!e Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. In the case of Totagar's Co-operative Sale Society Ltd v/s. ITAT (supra) the Hon'ble Supreme Court while interpreting the section 80P(2)(a)(1) of the Act held that surplus funds not immediately required in the business and invested in the short term deposit would be assessable under the head "income from other sources" where the Cooperative society is engaged in carrying on business of banking or providing credit facilities to its members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative banks is entitled to deduction u/s 80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on investments made with other Cooperative society. For the purposes of better proper understanding of these two provisions the relevant extract of the section are reproduced below:
8OP: Deduction in respect of income of co-operative Societies. Where, in the case of an assesssee being a co-operative & 7204/Mum/13 A.Y. 2009-10 & 2010-11 [Nutan Laxmi CHS Ltd. vs. ITO] Page 4 society, the gross total income, includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. The sums referred to in sub-section (1) shall be the following, namely.
(a) In the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members. The whole of the amount of profits and gains of business attributable to any one or more of much attributes. (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 close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) it is clear that the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect of its income assessable as business income and not as income from other sources if it carries on business of the banking or providing credit facilities to its members and has income assessable under the head business whereas for claiming u/s 80P(2)(d) it must have income of interest and dividend on investments with other Co-operative society may or may not be engaged in the banking for providing credit facilities to its members and the head under which the income is assessable is not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honbie Supreme Court in the case of & 7204/Mum/13 A.Y. 2009-10 & 2010-11 [Nutan Laxmi CHS Ltd. vs. ITO] Page 5 Totagar's Co-operative Sale Society Ltd.(Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(1) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(1) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop society if such income is included in the gross total neome of the such Coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/- in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directed accordingly.”
3.2 Nothing contrary was brought to our knowledge on behalf of Revenue. Facts being similar, so, following same reasoning, we are not inclined to concur with the finding of CIT(A) and Assessing Officer is directed to allow assessee’s claim accordingly. In view of above discussions, issue regarding contribution by the members and allowability deduction u/s.80P(2)(d) is also decided in favour of the assessee because same is exempt on principles of mutuality.
The other issue is with regard to the contribution received by the Society from a member on the occasion of the use of TDR by the member and which was exempt on the Principle of Mutuality. The similar issue is decided in favour of the ITA No.7203 & 7204/Mum/13 A.Y. 2009-10 & 2010-11 [Nutan Laxmi CHS Ltd. vs. ITO] Page 6 assessee by the order of ITAT ‘A’ Bench Mumbai in the case of Land End Co-operative Housing Society Ltd. V/s. ITO Mumbai in A.Y.2009-10 order dated 15.01.2016 wherein the issue of non occupancy charges from the members of the society has held as under.
“4.2. We have heard the rival submissions and perused the material on record and find that the assessee received non-occupancy charges from those members who let out their flats. The charges are received at the prescribed rates as per the byelaws of the society and are spent for the common purposes of the society for the benefit of the members. In the case of Mittal Court Premises Co-operative Society Ltd. v/s Income Tax Officer 320 ITR 414 the Hon'ble High Court held that the bye-laws themselves provided for non- occupation charges. The contribution, therefore, was by the members for the purpose of mutual benefit. The object of the contribution was the purpose of increasing the society's funds, which could be used for fulfilling the objects of the society. The object of the society was to provide service, amenities and facilities to its members. In these circumstances, the principle of mutuality would apply and therefore non-occupancy charges were not taxable. In our opinion the case of the assessee case is squarely covered by the aforesaid decision. We, therefore, respectfully following the decision of the Jurisdictional High Court delete the addition of Rs.6,04,500/- on account of non-occupancy charges. The AO is directed accordingly.”
4.1. Nothing contrary was brought to our knowledge on behalf of the Revenue. This issue is also falls on the same lines so following same reasoning, we are not inclined to concur with the finding of CIT(A) and Assessing Officer is directed to allow the same as exempt on principles of mutuality. & 7204/Mum/13 A.Y. 2009-10 & 2010-11 [Nutan Laxmi CHS Ltd. vs. ITO] Page 7 4.2 Similar issues arose in A.Y. 2010-11. Facts being similar, so, following the same reasoning, these issues in A.Y. 2010-11 are also decided in favour of assessee.
In the result, both the appeals filed by the assessee are allowed as indicated above.
Pronounced in the open Court on this the 24th day of August, 2016.
Sd/- Sd/- (RAJESH KUMAR) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 24/08/2016 True Copy Prabhat kesarwani आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।