Income Tax Appellate Tribunal - Mumbai
Grain Merchants Co-Op.Hsg. Ltd, Mumbai vs Pr.Cit-28, Mumbai on 25 July, 2018
आयकर अपीऱीय अधिकरण "G" न्यायपीठ मब
ुं ई में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपीऱ सं./I.T.A. No.2187/Mum/2018
(नििाारण वर्ा / Assessment Year: 2013 -14)
Grain Merchants Co - बिाम/ PR. CIT-28
Operative Housing Society Mumbai
Ltd, Plot no . 26/35, Sec -17, v.
Vashi, Navi Mumbai -400705
स्थायी ऱेखा सं ./ PAN : AAAAG3973H
(अपीऱाथी /Appellant) .. (प्रत्यथी / Respondent)
Assessee by: Shri. M. Subramanian
Revenue by : Shri. Abhijit Patankar,CIT-DR
सन
ु वाई की तारीख /Date of Hearin g : 25-07-2018
घोषणा की तारीख /Date of Pronouncement : 25-07-2018
आदे श / ORDER
PER RAMIT KOCHAR, Accountant Member
This appeals, filed by the assessee, being ITA No. 2187/Mum/2018 for assessment year 2013-14 is directed against the revisionary order dated 16.03.2018 passed by learned Principal Commissioner of Income-tax-28, Vashi, Navi Mumbai (hereinafter called "the Pr. CIT") for assessment year 2013-14 passed u/s 263 of the Income-tax Act, 1961 (hereinafter called "the Act") .
2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") in ITA no. 2187/Mum/2018 for AY 2013-14, read as under:-
"1) On the facts and in the circumstances of the case and in law the learned CIT erred in
i) Passing the order u/s 263 of the Income Tax Act 1961,
ii) holding that the order passed by the A.O.. U/S 143 (3) was erroneous and also prejudicial to the interest of the revenue,
2) The appellant craves leave to add, amend or delete any ground(s) of appeal before or during the course of hearing of the appeal."
I.T.A. No.2187/ Mum/2018
3. The assessee is a co-operative housing society . The assessee is stated to have earned income from its members as well earned interest on deposits with Cooperative Banks as well interest on saving bank from nationalised banks to the tune of Rs. 13,78,620/- which was claimed by the assessee as deduction u/s. 80P(2)(c) and (d) of the 1961 Act in the return of income filed with the Revenue which was allowed by the AO to the tune of Rs. 13,78,340/- in an assessment framed u/s 143(3) vide orders dated 30- 12-2015. The copy of aforesaid assessment order is placed on record. It is a matter of fact based on perusal of the assessment order dated 30-12-2015 passed by the AO u/s 143(3) that there is no comment/observation of the AO about making any enquiries or undertaking any verification before allowing this claim of deductions to the tune of Rs. 13,78,620/- u/s 80P(2)(c) and (d) of the 1961 Act in an assessment framed u/s 143(3) of the 1961 Act . The assessee during the course of appellate proceedings before the tribunal has filed paper book containing 24 pages but there is no document/evidence brought on record by the assessee which could substantiate that the AO made any enquiry or verification exercise before allowing the claim of the assessee for deduction to the tune of Rs.13,78,620/- u/s 80P(2)(c) and (d) of the 1961 Act while framing an assessment order dated 30.12.2015 passed u/s 143(3) of the 1961 Act. The Ld. Pr. CIT after perusal of records issued notice u/s. 263 as to why the order passed by the AO u/s. 143(3) dated 30.12.2015 should not be treated as erroneous so far as is prejudicial to the interest of revenue to be brought within ambit of revisionary powers of learned Pr. CIT within provisions of Section 263 of the 1961 Act as in the opinion of learned Pr. CIT , the AO erred in allowing claim of deduction u/s. 80P(2)(d) of the 1961 Act to the assessee to the tune of Rs. 13,78,340/- without verification and the assessee has wrongly claimed the said deduction as the investment/deposits were made with the Cooperative Banks and not Cooperative Societies as is envisaged by provisions of Section 80P(2)(d) of the 1961 Act. The learned Pr. CIT was of the view that surplus funds invested in bank deposits and government securities is income from other sources chargeable to tax under head „Income from other sources‟ to be assessed u/s 56 of the 1961 Act not eligible for deduction u/s 80P as it is not related to earning income by way of contribution from mutuality and investment. The learned Pr. CIT was of the view that keeping in view provisions of Section 80P(4) of the 1961 Act no deduction shall be allowable to the assessee u/s 2 I.T.A. No.2187/ Mum/2018 80P of the 1961 Act which the AO ought to have disallowed and omission to do so has resulted in under assessment of income. The assessee in reply to the notice dated 28.11.2017 issued by learned Pr. CIT u/s 263 of the 1961 Act , submitted that society's main sources of income is contribution made by members to meet the society's establishment expenses, property taxes, water charges etc. . It was submitted that the assessee earned income from deposits with Co-operative bank to the tune of Rs. 13,77,919/- while income from saving bank account with nationalised banks stood at Rs. 701/-. It was submitted that the assessee does not have any business activity or running club etc. for non-members. The assessee relied upon decision of ITAT-Mumbai in the case of Lands End Co-operative Housing Society Limited v. ITO in ITA no. 3566/Mum/2014 dated 15.01.2016. The assessee submitted that for invocation of revisionary powers by learned Pr. CIT u/s 263, the assessment order should be erroneous as well prejudicial to the interest of Revenue. The assessee relied upon decision of Hon‟ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT reported in (2000) 243 ITR 83(SC) . The assessee also relied upon following decisions to support its contentions :
a) Bismillah Trading Co. v. Intelligence Officer (2001) 248 ITR 292(Ker.)
b) Venkatakrishna Rice Co. v. CIT (1987) 163 ITR 129(Mad.)
c) Smt Tara Devi Aggarwal v. CIT (1973) 88 ITR 323(SC)
d) Thalibai F. Jain v. ITO (1975) 101 ITR 1(Kar.)
e) CIT v. Pushpa Devi (1987) 164 ITR 639(Pat.) The learned Pr. CIT rejected the contentions of the assessee by holding as under:-
" 6. The submission of the assessee is duly considered and found not tenable. The assessee has earned interest income of Rs. 13,78,340/- form interest from FDR with Co-Op Bank. A Co-Op Bank does not fall under the purview of a "Co-Op Society" referred in section '80P(2)(d)' of the Income-tax Act, 1961. The amended provisions of section 80(P)(4) r.w. sub clause (viia) of clause (24) of section 2 of the I T Act, 1961, that the deduction claimed shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural society or a primary co-operative agricultural and rural development bank. Further, it is provided that the profits and gains of any business of banking (including providing credit 3 I.T.A. No.2187/ Mum/2018 facilities) carried on by co-operative society with its members shall be included in the definition of income. During the assessment proceedings, the AO has not examined the aforesaid issues at all and allowed the claims made without verification, resulting in excess claims being allowed. Hence, the assessee's claim of deduction u/s 80P cannot be allowed. The A.O. ought to have disallowed the deduction u/s 80P of Rs. 13,78,340/-
7. Therefore, it is held that the order dated 30.12.2015 u/s. 143(3) of the Income-tax Act, 1961 is erroneous in so far as it is prejudicial to the interests of the revenue within the meaning of Sec. 263 of the Income- tax Act, 1961 and, as the Assessing Officer failed to conduct proper inquiries, investigation and examination, the assessment order is set aside to the Assessing Officer with the direction to disallow the deduction u/s 80P of Rs. 13,78,340/- pass a fresh assessment order in accordance with law after affording an opportunity of being heard to the assessee. The order shall be passed under the supervision and guidance of the Jt.CIT-28(l), Mumbai."
4. The assessee has now come in an appeal before the tribunal. The Ld. Counsel for the assessee strenuously argued that Ld. Pr. CIT has erred in invoking provision of Section 263 of the 1961 Act and assessee is a Cooperative Housing Society and is governed by principles of mutuality . It was submitted that the assessee has deposited surplus money with co- operative banks which are in itself cooperative societies and as per the provision of Section 80P(2)(d) , the deduction cannot be disallowed to the assessee u/s 80P(2)(d) of the 1961 Act. It was submitted that although no enquiries were made by the AO during the assessment proceedings conducted u/s 143(3) r.w.s. 143(2) of the 1961 Act but post assessment the AO made some enquiries as to the assessee claim for deduction u/s 80P(2)(d) w.r.t. interest on deposits with co-operative banks , to which replies were given by the assessee vide written submissions dated 11-09-2017 which are placed in paper book at page no. 12 to 14 , which written submissions are reproduced here under:-
"S. V. PAREKH & CO.
CHARTERED ACCOUNTANTS S. V. Parekh; B.Com, F.C.A. 8/10/12, Narayan Dhuru Street, Sana Apartment, Opp. Beg. Mohd. School, Mumbai- 400003.
To The Income Tax Officer Wd 28(1 )(5) Room no 325 3ED floor VASHI 4 I.T.A. No.2187/ Mum/2018 NAVI MUMBAI 400607.
Dt 11/09/2017 Dear sir,
Re; GRAIN MERCHANT CO-OP HSG SOC LTD PAN NO AAAAG3973H A.Y.2013=2014 EXPLANATION of deduction u/s 80p(2)(d).
With reference to the above named our client GRAIN MERCHANT CO-OP HSG SOC LTD has received a message from you office to clarify deduction claimed u/s 80P(2)(d) in the return of income, and was in details submitted, explained to ITO. However we would like to submit you as under. Society's main sources of income is contribution made by members to meet the society's establishment expenses, property taxes, water charges etc Enclosed with this letter statement of different heads contribution made by them. Surplus remain or if any specific contribution made ie Sinking Fund, Major BIdg Repair Fund etc invested in Co-Op Bank.
Details of FD INT & SB from CO-OP BANK & NATIONALISED BANK. Co-op Bank income deduct bale u/s 80P(2) RS 1327950 + 49969 =1377919 OTHER INCOME FROM NATINALISEDE BANK deduct bale u/s 80P(2)©.UP TO Rs 50000/- However such income is of Rs 421+280=701 Further society do not have any business activity or run club house etc for non members. Detail note on S 80P(2)(d) is attached with this letter. We in the matter would like to invite your kind attention that ITAT NO 3566 in the matter of Lands End Coop Hsg Soc ltd Mumbai has in depth discussed and allowed Deductions u/s 80P2(d) and concept of mutuality which it squarely apply.
Enclosed please find a copy of ITAT order for you kind perusal and record. We request you kindly accept above submission and close objection. Thanking your in the matter, Yours faithfully, FOR S V PAREKH & CO.
S V PAREKH sd/-
------------------------------------------------------------------------------------ Note on Deduction U/s 80P(2)(a) of the Income Tax Act 1961 5 I.T.A. No.2187/ Mum/2018 Section 80P deals with deductions available to co-operative societies. It lays down as under :-
1} Where in the case of an assessee being a co-operative 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 sum specified in sub-section (2), in computing the total income of the assessee.
Sub section (d) of sub-section (2) refers to "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".
It would mean that any co-operative society which derives income by way of interest on savings accounts, time-deposits with any other co-operative society as well as dividends distributed by cooperative society would not attract any tax liability.
A co-operative society is a wider term and includes a co-operative bank. In the case of the cooperative Housing Society namely Grain merchants Co-operative Housing society Ltd. the following items of income for F.Y. 2012-13 relevant to A.Y. 2013-14 would not be taxable.
1) Interest of fixed deposits with co-operative banks 13,27,950/-
2) Interest on savings bank account with co-operative banks 49,969/-
Total 13,77,919 Further sub-section (C) of sub section (2) allows a deduction of Rs. 50,000. Thus the society is eligible for the following deductions:-
1) Interest on savings A/C & Fixed deposits with any co-operative society or bank,
2) Dividend received from the above entities,
3) Basic deduction of Rs. 50,000.
The decision of the Mumbai I.T.A.T in the matter of Lands End co-op Hsg.scy Ltd. (3566/MUM/2014) for A.Y. 2009-10 is squarely applicable.
FOR S V PAREKH & CO.
Sd/-
S V PAREKH However no notice issued by the AO seeking such details post assessment is produced and there was no occasion for the AO to have asked the assessee for the explanation so sought is brought on record . It is submitted by ld. Counsel for the assessee that occasion could be the revenue audit objections or it may be that prior to the invocation of revisionary powers by learned Pr. CIT under section 263 of the 1961 Act, it was considered appropriate that 6 I.T.A. No.2187/ Mum/2018 the enquiries be made by the AO . It was submitted by learned counsel for the assessee that the AO has duly considered the assessee‟s activities which are in context of being a housing society dealing with its members on the basis of mutuality and deployment of surplus funds with banks/Co- operative Banks. Thus it was submitted by learned counsel for the assessee that AO has passed assessment order u/s 143(3) of the 1961 Act after due consideration and application of mind. It was submitted by learned counsel for the assessee that co-operative banks are also cooperative societies and hence deduction u/s. 80P(2)(d) cannot be denied to the assessee. It was submitted that one of the possible and plausible view was taken by the AO while framing assessment u/s 143(3) by allowing deduction u/s 80P(2)(d) on interest earned on deposits with co-operative banks and hence learned Pr. CIT cannot interfere with assessment order passed by the AO u/s 143(3) as it is neither erroneous nor prejudicial to the interest of revenue. The assessee relied upon the decision of ITAT-Mumbai in the case of Lands End Co-operative Housing Society Ltd. in ITA no. 3566/Mum/2014 for AY 2009- 10 dated 15.01.2016 , decision of Hon‟ble Punjab and Haryana High Court in the case of CIT v. Haryana State Co-Operative Society (1998) 234 ITR 714(P&H HC) , decision of Hon‟ble Himachal Pradesh in the case of CIT v. Kangra Cooperative Bank Ltd. (2009) 309 ITR 106( HP HC.), and decision of Hon‟ble Supreme Court in the case of CIT(Central) v. Max India Ltd. (2007) 295 ITR 282(SC).
The Ld. CIT-DR on the other hand submitted that the assessment order of the AO is a cryptic order and no enquiry was made by the AO to enquire into and verify whether the deduction as claimed by the assessee w.r.t. interest earned on deposits with Co-operative Banks can be allowed u/s. 80P(2)(d) of the 1961 Act. It was submitted that Explanation 2 is inserted to sub-section 1 to Section 263 of the 1961 Act by Finance Act, 2015 with effect from 01.06.2015 which has given wide amplitude to learned Pr. CIT . It was submitted by learned CIT-Dr that since the enquiries and verifications which ought to have been made by the AO was not made by the AO before allowing deduction u/s 80P(2)(d), it brought the assessment order passed by the AO within ambit of revisionary powers of learned Pr. CIT as are contained in Section 263 of the 1961 Act. The learned CIT-DR relied upon the decision of Hon‟ble Supreme Court in the case of Malabar Industrial 7 I.T.A. No.2187/ Mum/2018 Company Limited v. CIT reported in (2000) 243 ITR 83(SC) . The learned CIT-DR also cited Provisions of Section 80P(4) of the 1961 Act and he submitted that no enquiries were made by AO. He relied upon the decision of Hon‟ble Supreme Court in the case of Totgar‟s Co-operative Sale Society Limited v. ITO (2010) 322 ITR 283(SC) and it was submitted by learned CIT- DR that interest is incidental to the main income of the assessee which has arisen due to parking of surplus funds with banks and principle of mutuality is not applicable . Secondly it is to be treated as income under the head „Income from other sources‟ within provisions of Section 56 of the 1961 Act and no deduction can be allowed u/s. 80P with respect to the income from other sources as the deduction is to be restricted to the income from business. The deployment of funds in FDR with co-operative banks is not a main activity of the assessee and the learned CIT DR made an attempt to bring out a point that this aspect was not considered by the tribunal in its decisions in the case of Lands End Cooperative Society Ltd.(supra) . The Ld. AR in rejoinder submitted that learned Pr. CIT has on the one hand held that the AO has not made proper enquiries which ought to have been made and on the other hand learned Pr. CIT directed AO to disallow the claim of deduction by the assessee u/s 80P(2)(d) of the 1961 Act, which was not a correct stand of the learned Pr. CIT. It was submitted that if the AO has taken one of the possible and plausible view while framing an assessment u/s 143(3) , the Pr. CIT under its revisionary power u/s. 263 cannot revise the said assessment order of the AO.
5. We have considered rival contentions and perused the material on record including case laws cited by both the parties .We have observed that the assessee is a cooperative housing society and deals with its members . The assessee has surplus funds which are deposited with FDR‟s with co- operative Banks. The assessee earned income from interest to the tune of Rs.13,78,340/- which was claimed as deduction u/s. 80P(2)(d) of the 1961 Act. We have observed that the AO passed an assessment order u/s. 143(3) dated 30.12.2015 without making any enquiries/verifications as to the allowability of the claim of deduction filed by the assessee u/s 80P(2)(d) of the 1961 Act and there is no evidence on record that AO made any enquiries with respect to the allowability of claim of deduction made by the assessee u/s. 80P(2)(d) of the 1961 Act before allowing relief to the assessee by way of 8 I.T.A. No.2187/ Mum/2018 grant of deduction u/s 80P(2)(d) of the 1961 Act. Section 263 of the 1961 Act allows learned Pr. CIT to exercise his revisionary powers to revise assessment order passed by the AO u/s. 143(3) , if the enquiries/verifications which ought to have been made were not in-fact made by the AO before granting the relief to the assessee. It is a matter of fact based on material on record before the tribunal which undisputedly reveals that the AO did not made any enquiry/verifications during the course of assessment proceedings u/s 143(3) r.w.s. 143(2) of the Act before allowing claim of the assessee for deduction of interest income earned on deposits with Co-operative Banks u/s. 80P(2)(d) of the 1961 Act . It is the contentious issue wherein we are of the considered view that the AO ought to have made necessary enquiries / verifications w.r.t. both on facts as well on legal aspects as it raises mixed question of law and facts . At the same time , we have also observed that the Ld. Pr. CIT observed that the AO did not made necessary enquiries/verifications which ought to have been made before allowing claim of deduction of income from interest on deposits with Co-operative Bank under the provisions of Secin 80P(2)(d) but at the same time instead of setting aside/remanding the matter back to the file of the AO to re-adjudicate the issue after making necessary enquiries, the ld. Pr. CIT has directed AO to disallow the claim of deduction filed by the assessee u/s 80P(2)(d) of the 1961 Act, which in our considered view was not proper in these circumstances and in the interest of justice we are inclined to uphold the revisionary order passed by learned Pr. CIT u/s. 263 with the direction to the AO to reframe the assessment u/s. 143(3) of the 1961 Act after making necessary enquiries and verification with respect to the entitlement of the assessee towards claim of deduction u/s. 80P(2)(d) on interest income earned by it from deposits with Banks. The AO will decide the issue afresh on merits in accordance with law after making necessary enquires and verifications both on factual and legal context w.r.t. claim of the assessee for deduction u/s 80P(2)(d) towards allowability of interest income on deposits of surplus funds placed with banks. Needless to say that the AO shall grant proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law and evidences/contentions made by the assessee in its defence shall be admitted by the AO which shall be adjudicated by the AO on merits in accordance with law. We would like to clarify that we have not commented on merits of 9 I.T.A. No.2187/ Mum/2018 the issue both on legal as well on factual aspects and the AO shall be free to decide the issue on merits in accordance with law. We order accordingly.
6. In the result , the appeal of the assessee is partly allowed as indicated above.
Order pronounced in the open court on 25.07.2018 आदे श की घोषणा खुऱे न्यायाऱय में ददनांकः 25.07.2018 को की गई ।
Sd/- Sd/-
(C.N. PRASAD) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, dated: 25.07.2018
Nishant Verma
Sr. Private Secretary
copy to...
1. The appellant
2. The Respondent
3. The CIT(A) - Concerned, Mumbai
4. The CIT- Concerned, Mumbai
5. The DR Bench,
6. Master File
// Tue copy//
BY ORDER
DY/ASSTT. REGISTRAR
ITAT, MUMBAI
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