2020 (9) TMI 34

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....in law. the Ld CIT(A) erred in allow deduction u/s 80P(2)(d) of the I. T. Act, 1961. without appreciating the facts that assessee has earned interest income from investment of idle funds with cooperative bank 3. On the facts and in circumstances of the case and in law. the Ld. CIT(A) erred allowing deduction u/s 80P(2)(d) of the I. T. Act, 1961, without considering the decision of the Karnataka High Court in the case of Pr. CIT vs. Totagars Co-operative & Society (395 ITR 611) that the interest income received from investment of idle funds with cooperative banks is not eligible for claiming deduction u/s 80(P)(2)(d) of the Act. 4 The appellant prays that the order of the CIT (Appeals) on the above grounds be aside and that of the AO be restored 5. The appellant craves leave to amend or alter any ground or submit additional ground which may be necessary." 3. The brief facts of the case are that the assessee filed its return of income on 02.11.2015 declaring total income to the tune of Rs. 53,720/-. The case was selected for scrutiny under CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee/AOP is a co-oper....

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.... IT Act, 1961. For sake of convenience all the grounds are being adjudicated together. These grounds of the appeal pertain to disallowance of deduction claimed u/s 80P(2)(d) of the Act amounting to Rs. 1,57,80,440/- and interest on fixed deposits of Rs. 8,83,167/ aggregating to Rs. 1,66,63,607/-. The appellant is a Cooperative Housing Society. It has earned interest income on FDR from Co-operative Banks to the tune of Rs. 1,66,63,607/-. Section 80P(2)(d) of the Act reads as under: - "in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income......" (shall be deducted) The Assessing Officer held the view that a co-operative bank is a commercial bank and does not fall under the purview of a "Co-operative Society" referred to in section 80P(2)(d) of the IT Act, 1961. In the view of the above the Assessing Officer disallowed the deduction of the appellant to the extent of Rs. 1.6643,607/- 4.1.1. PER CONTRA: The AR has submitted that the appellant is a Co-operative Housing Society and if a co-operative society receives any income from ano....

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....at 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 ClT(A). The AO is directed accordingly" 4.1.4. In the ACIT vs. Ws. Jawala Cooperative Urban Thrift & Credit Society Ltd., - it was held that:- We have heard rival parties and have gone through the material placed on record We find that total income earned by the assessee included income on fixed deposits placed with Bombay Mercantile Bank. interest income from a scheduled bank and dividend income from Delhi Cooperative Bank From the certificate as placed at paper book page 30, we find that Bombay Mercantile Cooperative Bank is a cooperative society registered under Maharashtra Cooperative Societies Act and we further find that the said society has been assessed u/s 143(3) as a cooperative society and its income was allowed to the exempt u/s 80P(2)(i) as held by Mumbai Tribunal in ITA. No. 4128 and 4129 vide its order dated 30.11.2005, for Assessment Year 1990-91 and 1991-92 and further by Mumbai Tribunal vide order dated 07.09 2011 in ITA. No. 529....

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....e Co-operative Society Bank is merely a variety of the Cooperative Societies. Thus, the Co-operative Batik which is a species of the genus Cooperative societies would necessarily be covered by the word 'Co-operative Society'. A Co-operative Bank is always registered under the relevant Cooperative Societies Act of the relevant State. In view of this and by respectfully following various judicial pronouncements. the appellant is entitled to claim deduction u1s 80P(2)(d) of the Act. Hence. AO is directed to allow Rs. 1,66,63,607/-as deduction U/s 80P(2)(d) of the Act. Thus grounds of appeal raised by appellant are allowed. 4.3 Ground number 4 & 5 refers to initiation of penalty proceedings u/s 271(l)(c) of the I.T Act 1961. Since the AO has not imposed penalty, this ground of appeal filed by the appellant is premature and accordingly the same is dismissed." 5. The Ld. Representative of the revenue has relied upon the decision of the Hon'ble Karnataka High Court (supra) and the decision of the Hon'ble Supreme Court in the case of Citizen Co-operative Society (supra) but we noticed that the Hon'ble ITAT in the case of Kaliandas Udyog Bhavan Premises Co-op So....

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....ied in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall bethefollowing,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 cooperative 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 cooperative 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 agre....

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....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. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-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 cooperative 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. ....