Income Tax Appellate Tribunal - Mumbai
Meherbad Co-Operative Housing Society ... vs Acit-19(2), Mumbai on 5 March, 2021
ITA No.2418/Mum/2019 A.Y. 2015-16 1
Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2)
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "SMC" MUMBAI
BEFORE SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) AND
SHRI RAVISH SOOD (JUDICIAL MEMBER)
ITA No.2418/MUM/2019
(Assessment Year: 2015-16)
Meherbad Co-operative ACIT-19(2)
Housing Society Ltd, Vs. Matru Mandir, Tardeo,
1/594, Meherabad, Bhulabai Mumbai - 400007
Desai Road, Warden Road,
Mumbai - 400026
PAN No. AAAAM1739M
(Assessee) (Revenue)
Assessee by : Shri Bhupendra Shah, A.R
Revenue by : Ms. Smita Verma, D.R
Date of Hearing : 03/03/2021
Date of pronouncement : 05/03/2021
ORDER
PER RAVISH SOOD, J.M:
The present appeal filed by the assessee is directed against the order passed by the CIT(A-18, Mumbai, dated 14.03.2019, which in turn arises from the assessment order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 11.12.2017 for A.Y. 2015-16. The assessee has assailed the impugned order on the following grounds of appeal before us:
"1. In the facts and circumstances of the case and in law, the learned A.O. erred in not granting deduction u/s 80P(2)(d) amounting to Rs.19,36,997/- by way of income from other sources in respect of interest earned on fixed deposit with Co-operative banks.
2. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax(A) erred in confirming the same by rejecting written submissions and several judgments cited before him.
3. The A.O has wrongly charged interest u/s 234A, B & C and wrongly initiated penalty u/s 271(1) (c)."ITA No.2418/Mum/2019 A.Y. 2015-16 2
Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2)
2. Briefly stated, the assessee a co-operative housing society had filed its return of income for A.Y. 2015-16 on 28.09.2015, declaring an income of Rs.25,42,220/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
3. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed deduction under Sec. 80P of Rs.19,36,997/-. As per the details furnished by the assessee, it was noticed by the A.O that the aforesaid claim of deduction was raised by the assessee w.r.t the interest income that was earned by it from its investments held with co- operative banks. Observing that the deduction under Sec. 80P(2)(d) was only as regards the interest and dividend income earned by a co-operative society from its investments with another co-operative society, the A.O was of the view that the assessee‟s claim for deduction under the aforesaid statutory provision as regards the interest income earned from its investments held with a co-operative bank did not merit acceptance. Accordingly, on the basis of exhaustive deliberations the A.O declined the assessee‟s claim for deduction under Sec. 80P(2)(d) of Rs.19,36,997/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) was not inclined to accept the contentions advanced by the assessee w.r.t its entitlement for claim of deduction under Sec. 80P(2)(d) of the Act. Observing that the interest income earned by the assessee from investments of surplus funds with co-operative banks was not eligible for deduction under Sec. 80P(2)(d) of the Act, the CIT(A) upheld the disallowance of Rs.19,36,997/- under Sec. 80P(2)(d) so made by the A.O.
5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) for the assessee in support of its claim that the interest earned by a co-operative society on its investments with the co-operative banks was entitled for deduction under Sec. 80P(2)(d) of the Act relied on the following judicial pronouncements:
"(i) M/s Sea Grean Co-operative Housing Society ltd. Vs. The Income Tax Officer 21(3)(2), Mumbai ITAT
(ii) Income Tax Officer 24(1)(4) Vs. M/s Citiscape Co Op Housing Society Ltd., Mumbai ITAT
(iii) M/s Parsik Janata Sahakari Bank Ltd. Vs. Income Tax Officer, Mumbai ITAT, 50 ITD 318 Mum.ITA No.2418/Mum/2019 A.Y. 2015-16 3
Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2)
(iv) M/s Jafari Momin Vikas Co Op Credit Society Ltd. Vs. Income Tax Officer, Ahmedabad
(v) Income Tax Officer Vs. M/s Divyajyothi Credit Co-operative Society Ltd., Bangalore
(vi) M/s Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. Income Tax Officer, Mumbai
(vii) M/s Lady Ratan Tower Cooperative Housing Society Ltd. Vs. Income Tax Officer, Mumbai
(viii) Principal Commissioner of Income Tax an Another Vs. Totagars Co-Operative Sale Society, Karnataka High Court."
It was the claim of the ld. A.R that as a co-operative bank fell within the realm of the definition of "co-operative society" as contemplated in Sec. 2(19) of the Act thus, no adverse inferences as regards its entitlement for deduction under Sec.80P(2)(d) of its interest income on the investments held with the co-operative bank was liable to be drawn.
6. Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the order of the lower authorities.
7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As observed by us hereinabove, the solitary issue for which our indulgence has been sought by the assessee by preferring the present appeal is as to whether or not the interest income earned by a co-operative housing society on its investments lying with a co- operative bank would be eligible for deduction under Sec. 80P(2)(d) of the Act. As pointed out by the ld. A.R, and rightly so, the issue herein involved is squarely covered by the orders of the various benches of the Tribunal. We find, that the ITAT, Mumbai, in the case of Kaliandas Udyog Bhavan Premises Co-operative Society Ltd. Vs. ITO-21(2)(1), Mumbai, ITA No.6547/Mum/2017, dated 25.04.2018 had concluded that a co-operative society would duly be entitled for claim of deduction under Sec. 80P(2)(d) in respect of its interest income on the investments held with a co-operative bank. In its aforesaid order it was observed by the Tribunal, as under:
"6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought to adjudicate as to whether the claim of the assessee for deduction under section 80P(2)(d), in respect of interest income earned from the investments made with the co-operative banks is in order or not. We find that the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P, as had been made available on the statute by the legislature vide the Finance Act 2006, with effect from 01.04.2007. We find that the lower authorities had taken a view that ITA No.2418/Mum/2019 A.Y. 2015-16 4 Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2) pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) of the interest income earned on the amounts parked as investments with co-operative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. We find that the lower authorities had observed that as the co-operative bank with which the surplus funds of the assessee were parked as investments, were neither Primary Agricultural Credit Society nor a Primary Co-operative Agricultural and Rural Development Bank, therefore, the interest income earned on such investments would not be entitled for claim of deduction under Sec. 80P(2)(d) of the Act.
7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us.
"80P(2)(d) (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 sums specified in sub-section (2), in computing the total income of the assessee.
(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;"
Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee co-operative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co- operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term „co-operative society‟ had been defined under Sec. 2(19) of the Act, as under:-
ITA No.2418/Mum/2019 A.Y. 2015-16 5Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2) "(19) "Co-operative society" means a cooperative 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;"
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, as 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 co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.
8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that 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 is covered in favour of the assessee in the following cases:
(i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum)
(ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017
(iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017.
We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), 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 co-operative 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 Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C) being distinguishable on facts, thus, had wrongly been relied upon by 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 co-operative 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 Vs. 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 co- operative 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 Co-operative Credit Society Ltd. Vs. 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 ITA No.2418/Mum/2019 A.Y. 2015-16 6 Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2) 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 Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), 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. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), 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. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.
9. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside the order of the lower authorities and conclude that the interest income of Rs.27,48,553/- earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d)."
As the facts and the issue involved in the present appeal before us remains the same as was therein involved in the aforementioned case therefore, we respectfully follow the same. Accordingly, the order passed by the CIT(A) declining the assessee‟s claim for deduction of Rs.19,36, 997/- under Sec. 80P(2)(d) as regards the interest income earned on its investments held with the co-operative bank is herein vacated. The Grounds of appeal Nos. 1 & 2 are allowed in terms of our aforesaid observations.
8. The Ground of appeal No. 3 insofar deleting of interest under Rule 234A, 234B and 234C being consequential to the giving effect of our aforesaid order is disposed off accordingly. Insofar the initiation of penalty under Sec. 271(1)(c) as has been assailed by the assessee before us, the same being premature is accordingly dismissed.
9. The appeal of the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the open court on 05.03.2021
Sd/- Sd/-
Rajesh Kumar Ravish Sood
(ACCOUNTANT MEMBER) (JUDICIAL MEMBER)
Mumbai, Date: 05.03.2021
PS: Rohit
ITA No.2418/Mum/2019 A.Y. 2015-16 7
Meherbad Co-operative Housing Society Ltd. Vs.ACIT-19(2)
Copy of the Order forwarded to :
1. Assessee
2. Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. DR "F" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai