Vishal Cooperative Housing Service Vs ITO (ITAT Surat)
Summary: The Income Tax Appellate Tribunal, Surat, allowed the appeal of a co-operative housing society against the order dated 24 November 2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for assessment year 2018-19. The dispute concerned the assessee’s claim for deduction of Rs. 1,21,015, comprising interest of Rs. 1,21,000 earned from fixed deposits and dividend income of Rs. 15 received from Surat District Cooperative Bank. The Central Processing Centre had disallowed the deduction while processing the return, and the assessee’s application for deduction under Section 80P(2)(d) remained unsuccessful.
The assessee had filed an application for rectification under Section 154 of the Income-tax Act, 1961, which the Central Processing Centre rejected through its order dated 4 January 2022. Before the CIT(A), the assessee submitted a complete bifurcation of interest earned from deposits with Surat District Cooperative Bank and relied upon judicial decisions recognising that a co-operative bank is primarily a co-operative society for the purposes of Section 80P(2)(d). However, the CIT(A) upheld the adjustment, observing that interest earned on deposits or investments of surplus funds retained its character irrespective of whether it arose from a scheduled bank or a co-operative bank.
Before the Tribunal, the assessee relied upon the decisions in Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. Vs PCIT and Madhi Sugar Staff Co-operative Credit Society Ltd. Vs DCIT. It also referred to the jurisdictional Gujarat High Court decision in Surat Vankar Sahakari Sangh Ltd. Vs ACIT, (2016) 72 taxmann.com 169. Although the assessee sought an adjournment, the Tribunal proceeded to hear the Revenue after finding that the grounds of appeal were apparently covered in favour of the assessee by existing decisions.
The Tribunal noted that the CIT(A) had not disputed the source of the interest income and that the assessee had furnished a complete month-wise bifurcation of the interest received from Surat District Cooperative Bank. Following the jurisdictional Gujarat High Court and the consistent decisions of the Surat Bench, the Tribunal held that interest earned on deposits with co-operative banks was eligible for deduction under Section 80P(2)(d). Accordingly, the Assessing Officer was directed to delete the entire disallowance, and the appeal was allowed.
Cases Discussed
- Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. Vs PCIT — (2021) 127 taxmann.com 334 (ITAT Surat). Followed in deciding the eligibility of interest earned from co-operative bank deposits.
- Surat Vankar Sahakari Sangh Ltd. Vs ACIT — (2016) 72 taxmann.com 169 (Gujarat High Court). Jurisdictional High Court precedent followed by the Tribunal.
- Kona Seema Co-operative Society Vs ITO — ITA No. 2024/Mum/2023, dated 8 November 2023 (ITAT Mumbai). Cited by the assessee before the CIT(A).
- Thorapadi Urban Co-operative Society (Madras High Court) — Referred to by the assessee before the CIT(A).
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] dated 24/11/2023 for the Assessment Year (AY) 2018-19. The assessee has raised following grounds of appeal:
“1. On fact and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in confirming addition made by the Assessing officer order passed U/s. 154 on 04.01.2022.
2. On fact and circumstance of the case, the learned Commissioner of Income tax (Appeals) has erred by not allowing deduction 80P(2)(d) of Rs. 1,21,015/- Which is otherwise eligible being the assessee is Co.Op.Housing Society.
3. On fact and circumstance of the case, the learned Commissioner of Income tax (Appeals) has erred in not considering decision Madhi Sugar Staff Co. Op. Credit Society Limited V/s. Dy. CIT by Surat Branch ITAT Tribunal which followed the decision of Bardoli Vihag Gam Vikas Co.Op. Credit Society Ltd. V/s. principal commissioner of Income tax -2, Surat by Surat Branch ITAT. The both of decision given by Surat ITAT by relying on the decision of honourable High Court of Gujarat in case of Surat Vankar Sahakari Sangh Limited V/s. Assistant Commissioner of Income Tax, Surat.
4. The appellant reserves right to add, alter, vary any or all grounds of appeals.”
2. Brief facts of the case are that the assessee is a cooperative society, engaged in maintenance of group housing society. The assessee in its computation of income claimed deduction of Rs. 1,21,000/- on account of interest income earned on fixed deposit and Rs. 15 as a dividend income with Surat District Cooperative Bank. The Central Processing Centre (CPC) while processing the return of income, disallowed such deduction. The assessee filed application under Section 154 of the Income Tax Act, 1961 (in short, the Act) for seeking rectification in the order of CPC. Application of assessee was rejected by CPC vide order dated 04/01/2022.
3. Aggrieved by the disallowance/adjustment on account of deduction under Section 80P(2)(d) of the Act of Rs. 1,21,000/-, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has given complete bifurcation of interest earned on deposit with Surat District Cooperative Bank. The assessee also relied on certain case laws that the cooperative banks are primarily a cooperative society and the assessee is eligible for deduction of interest earned from such cooperative banks as has been held by Mumbai Tribunal in Kona Seema CO-operative society Vs ITO in ITA No. 2024/Mum/2023 dated 08.11.2023 and Madras High Court in Thorapadi Urban Co-operative Society.
4. The ld. CIT(A)/NFAC after considering the submissions of assessee upheld the order of adjustment made by CPC by holding that the income earned by way of interest from deposit or investment or surplus fund does not change its character irrespective of fact whether such income of interest is earned from scheduled bank or a cooperative bank. Further aggrieved, the assessee has filed present appeal before this Tribunal.
5. The assessee filed application for adjournment of hearing. However, on perusal of grounds of appeal, we find that the assessee in the grounds of appeal has specifically contended that the grounds of appeal is covered by the decision of this Tribunal in Bardoli Vibhag Gram Vikas Co. Op. Credit Society Ltd. Vs Pr.CIT as well as Madhi Sugar Staff Co. Op Credit Society Ltd. Vs DCIT. Finding the fact that the grounds of appeal raised by the assessee is apparently covered in favour of assessee, we have heard the submissions of the ld Sr DR for the revenue and perused the orders of lower authorities carefully.
6. The ld. Sr. DR for the revenue was asked to make his submission, then he supported the orders of lower authorities and would submit that the assessee may be directed to give details of interest income earned from Surat District Cooperative Bank. The notice of hearing of appeal was served upon the assessee and the assessee filed application for filing compilation/documents.
7. We have considered the submissions of ld. Sr. DR for the revenue and perused the orders of the lower authorities carefully. The dispute relates to deduction under Section 80P(2)(d) of the Act with regard to interest earned on fixed deposit with Surat District Cooperative Bank. We find that the ld. CIT(A) has not disputed about earning of such interest income from Surat District Cooperative Bank even otherwise the assessee has given complete month-wise bifurcation on interest earned from Surat District Cooperative Bank. We find that in a series of decisions, the combination of this Bench by following the decision of Hon’ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. Vs ACIT (2016) 72 taxmann.com 169 (Guj) has held that the cooperative banks are primarily the cooperative society and the interest earned on deposit with cooperative banks are eligible for deduction under Section 80P(2)(d) of the Act. Similar view was taken in Bardoli Vibhag Gram Vikas Co-op Credit Society Ltd. Vs PCIT (2021) 127 taxmann.com 334 (Surat-Trib). Taking a consistent view, the Assessing Officer is directed to delete the entire disallowance.
8. In the result, this appeal of assessee is allowed.
Order announced in open court on 22nd February, 2024.
