Sec 80P ITAT Mumbai order

Sea Grean Co Operatove Housing … vs Ito 21(3)(2), Mumbai on 31 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “E”, MUMBAI
BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER
ITA No.1343/MUM/2017 (AY. 2013-14)

M/s. Sea Grean Go-operative Housing
Society Ltd.,Plot No.CD-74 RSC 25,
7/15, Worli Sea Face,
Mumbai 400 012 …… Appellant
Vs.
The Income Tax Officer 21(3)(2),
Room No.203, 2nd Floor,
Piramal Chambers, Lalbaug,
Mumbai 400012. …. Respondent
Appellant : Shri Biren Ganga wala Respondent : Shri A.K.Nayak
Date of hearing : 30/03/2017 Date of pronouncement : 31/03/2017

ORDER
PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 2013-14 is directed against an order passed by CIT(A)-33,Mumbai dated 10/02/2017, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961(in short ‘the Act’), dated 18/01/2016.
2. The Ground of appeal raised by the assessee read as under:-
1. “On the facts and in the circumstances of case and in law, the Hon. CIT(A) has erred in upholding that the appellant is not eligible for deduction u/s. 8OP(2)(d) of ITA No.1343/MUM/2017 (AY. 2013-14) the I.T.Act,1961 at Rs.27,41,747/- relying on the decisions of the Hon. ITAT, Ahmedabad in the case of SBI Employees Cooperative Credit Society Ltd. (2015) 57 taxman.com 367 and the Hon. ITAT, Mumbai Bench in the case of Shri Saidatta Cooperative Credit Society Ltd. Vs. ITO in ITA No.2379/Mum/2015 without appreciating that the Hon. ITAT, A- Bench, Mumbai in the case of Lands End Cooperative Housing Society Ltd. In ITA No.3566Mum/2014, wherein on an identical issue i.e. claim of deduction u/s.SOP(2)(d) of the Act in respect of interest on fixed deposit with cooperative banks was involved, has held that the assesse is entitled to the deduction for interest derived by it on deposits with cooperative banks.”
2.1 Briefly put, the relevant facts are that the appellant is a Co-operative housing society, which had, inter-alia, earned an interest income of Rs.27,41,747/-,on which deduction under section80P of the Act was denied. The claim of the assessee was that the said interest is earned on deposits with a Co-operative bank and, therefore, it was eligible for the benefits of section 80P(2)(d) of the Act. The Assessing Officer as well as CIT(A) however, denied the exemption on the ground that the provisions of section 80P(2)(d) of the Act restrict the exemption to the interest earned from ” any other Co-operative society”, whereas the impugned interest income was earned from a Co-operative bank.
3. Before us, the Ld. Representative for the assessee pointed out that the claim of exemption has been denied by the lower authorities on a wrong basis inasmuch as even interest earned from a Co-operative bank is covered within the scope of section 80P(2)(d)of the Act, because even a Co-operative bank is essentially a Co-operative society. In this context, he has relied upon the decision of the Mumbai Tribunal in the case of Lands End Co-operative Housing Society Ltd. Vs. ITO in ITA No.2379/Mum/2015 dated 15/01/2016, wherein interest earned by a Co-operative housing society on investment with a Co-operative bank has been held to be eligible for exemption under section80P(2)(d) of the Act . By referring to the discussion made by the ITA No.1343/MUM/2017 (AY. 2013-14) Tribunal, the Ld. Representative for the assessee pointed out that even the judgment of the Hon’ble Supreme Court in the case of Totagar’s Co- operative Sales Society Ltd. vs. ITO,322ITR 283(SC) has been considered.
4. On the other hand, Ld. Departmental Representative pointed out that the decision of the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. Vs.ITO in ITA No. 2379/Mum/2015dated 15/1/2016(supra)is to the contrary and, therefore, the CIT(A) was justified in denying the claim for exemption under section 80P(2)(d) of the Act.
5. We have carefully considered the rival submissions. The facts lie in a narrow compass, inasmuch as, the appellant is a Co-operative society, whose income , inter-alia, included interest earned on deposits with another Co- operative bank. Accordingly, such income was claimed as exempt under section 80P(2)(d) of the Act. The claim has been denied primarily on account of the fact that section 80P(2)(d) of the Act relates to the income earned from a Co-operative society. In this context, the decision of the Mumbai Tribunal in the case of Lands End Co-operative Housing Society Ltd. (supra) is rendered under identical circumstances and the following discussion is relevant:-
“8.3 We have heard the rival submissions 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 Bandra Samruddihi Co-operative Housing Society Ltd.(Supra) which was passed on the basis of the decision passed by the Hon’ble 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)(i) 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 ITA No.1343/MUM/2017 (AY. 2013-14) 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: 80P: Deduction in respect of income of co-operative Societies.
1. Where, in the case of an assesssee 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)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 Honble Supreme Court in the case of 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 ITA No.1343/MUM/2017 (AY. 2013-14) from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) 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 income 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.
5.1 It is clear that the Tribunal in the case of Lands End Co-operative Housing Society Ltd. (supra) has considered a similar situation and allowed the claim of the assessee. We find that the CIT(A) has placed reliance on the decision of the Ahmedabad Bench of the Tribunal in the case of State Bank of India Employees Co-operative Credit Society Ltd 57 taxman.com 367. It is further noted by the CIT(A) that the said decision of the Ahmedabad Bench of the Tribunal has been referred to by the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. (supra). In our view, the reliance placed by the CIT(A) on the judgment of the Ahmedabad Bench of the Tribunal is quite untenable, inasmuch as, in the said case the interest income in question was earned from deposits kept with State Bank of India. Obviously, State Bank of India is not a Co-operative society so as to justify the claim that such interest earnings fall within the scope of section 80P(2)(d) of the Act. Further, the reliance placed by the CIT(A) on the decision of the SMC Bench of Mumbai Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd.(supra) is also of no avail, inasmuch as, the Bench merely set-aside the matter to the file of the Assessing Officer for examination afresh, whereas in the case of Lands End Co-operative Housing Society Ltd(supra), the claim of exemption under section 80P(2)(d) of the Act ITA No.1343/MUM/2017 (AY. 2013-14) with respect to the interest earned from a Co-operative bank has been upheld. Therefore, in view of the said precedent, the claim of the assessee deserves to be allowed. We hold so.
6. In view of the above, the order of the CIT(A) is set-aside and the Assessing Officer is directed to allow deduction under section 80P(2)(d) of the Act with respect to the interest income earned from a Co-operative bank.
7. In the result, appeal of the assessee is allowed, as above.

Order pronounced in the open court on 31/03/2017
Sd/- Sd/-
(AMARJIT SINGH ) (G.S. PANNU)
JUDICIAL MEMBER ACCOCUNTANT MEMBER
Mumbai, Dated 31/03/2017
Vm, Sr. PS
Copy of the Order forwarded to :

1. The Appellant ,
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.

BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai

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