Case Law Details
Union Bank of India Staff Co-op Thrift and Credit Society Limited Vs ITO (ITAT Chennai)
The case of Union Bank of India Staff Co-op Thrift and Credit Society Limited vs. ITO (ITAT Chennai) revolves around the deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act for dividends received from shares in a cooperative bank. The dispute arose from the Commissioner of Income Tax (Appeals)’s order, which the assessee contested before the Income Tax Appellate Tribunal (ITAT) in Chennai.
The crux of the matter was the disallowance of the deduction by the Assessing Officer and subsequent confirmation by the CIT(A). The Assessing Officer argued that since the dividends were received from shares held in Chennai Central Co-operative Bank, which is considered a bank under the Companies Act, the deduction under Section 80P(2)(a)(i) wasn’t applicable.
However, the ITAT Chennai analyzed the nature of the assessee, a Multi-State Cooperative Society registered under the Multi State Cooperative Societies Act, 2012. It noted that the members of the society were all employees of Union Bank of India and that the society primarily extended credit facilities to its members. Despite the Chennai Central Co-operative Bank being registered under the Tamil Nadu State Co-operative Act, the Assessing Officer disallowed the deduction.
In its deliberation, the ITAT Chennai referenced precedents, including the judgment of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., which supported the eligibility of cooperative societies for deductions under Section 80P(2)(a)(i). It also cited a similar decision by the Tribunal and the Madras High Court.
After careful consideration, the ITAT Chennai allowed the claim of deduction under Section 80P(2)(a)(i) of the Income Tax Act. It ruled in favor of the assessee, stating that being a Cooperative Society, it was entitled to the deduction for dividends received from the Chennai Central Co-operative Bank. The decision highlights the importance of understanding the legal nuances surrounding cooperative societies and their entitlements under tax laws.
Overall, the ruling sets a precedent for similar cases and underscores the significance of legal interpretation in tax disputes, providing clarity on the applicability of deductions under Section 80P(2)(a)(i) for cooperative societies.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by assessee is arising out of the order of the Commissioner of Income Tax (Appeals), Nation-al Faceless Appeal Centre, 09.08.2023. The assessment was framed by the Income Tax Officer, Non Corporate Ward 12 (5), Chennai for the assessment year 2017-2018, u/s.143(3) of the Income Tax Act, 1961 (in short ‘’the Act’) vide order dated 23.12.2019.
2. The only issue in this appeal of the assessee is with regard to order of the CIT(A) in confirming the action of the ld. Assessing Officer in disallowing the claim of deduction u/s.80P(2) (a)(i) of the Act in regard to dividend received from shares held in Chennai Central Co-operative Bank. For this, assessee has raised various grounds, which are argumentative and factual and need not be reproduced.
3. Brief facts of the case are that assessee is a Multi-State Cooperative Society, registered under the Multi State Cooperative Societies Act, 2012 at Chennai. The members of the assessee’s society are all employees of Union Bank of India. Assessee extends credit facilities like surety loans, festival loans, calamity loans etc to its members. Assessee society does not provide any banking facility to its members or general public. For this assessment year 2017-2018, assessee filed its return of income claiming deduction u/s.80P(2) (a) (i) of the Act for an amount of Rs.3,77,800/- received as dividend from shares held in Chennai Central Co-operative Bank. The ld. Assessing Officer while framing the assessment noted that assessee received dividend from shares held in Chennai Central Co-operative Bank under Companies Act on dividend distribution tax u/s.115 O of the Act. According to the ld. Assessing Officer, Chennai Central Co-operative Bank is a bank and hence the assessee’s claim of deduction u/s.80P(2) (a)(i) of the Act is not allowable and accordingly he made addition. Aggrieved, assessee preferred an appeal before the ld. CIT(A).
4. The ld. CIT(A) also upheld the action of the ld. Assessing Officer by observing that Chennai Central Co-operative Bank is not a society. For this the ld. CIT(A) recorded the following findings.
‘’(xiv) Further, in light of the multiple judgments of Hon’ble SC as well as judgments of various High Courts, including recent judgment of Gujarat High Court, it is clear that after insertion of Sec. 80P(4), deduction u/s 80P(2)(d) has been limited to interest / dividend received from other cooperative societies only, and not Cooperative Banks (Other than PACS or Primary co-operative Agricultural and rural development bank). Therefore, it is clear that a cooperative bank is an urban commercial bank and does not fall under the purview of a “Co-operative Society” referred in section 80P(2)(d) of the Income Tax Act, 1961, and as such, the interest/dividend income earned from such cooperative bank is not allowable for the said deduction u/s 80P(2)(d) of the Act’’.
Aggrieved, assessee preferred an appeal before the Tribunal.
5. I have heard rival contentions and gone through the facts and circumstances of the case. Admittedly, the assessee is a Multi-State Cooperative Society, registered under the Multi State Cooperative Societies Act, 2012 at Chennai. The members of the assessee’s society are all employees of Union Bank of India. Assessee extends credit facilities like surety loans, festival loans, calamity loans etc to its members. Assessee received Rs.3,77,800/- as dividend from shares held in Chennai Central Co-operative Bank. Chennai Central Co-operative Bank is registered under Tamil Nadu State Co-operative Act and once it is registered under Tamil Nadu State Co-operative Act assessee is as such eligible for deduction. Since the assessee is a Co-operative Society and it has received dividend from Chennai Central Co-operative Bank, the same is eligible for claim of deduction in view of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., & Ors. Vs. CIT, 123 Taxmann.com 161 (SC). Similar view has been taken by the Tribunal in the case of Tamilnadu Co-operative State Agriculture and Rural Development Bank Limited in ITA Nos.31 to 33/CHNY/2021 vide order dated 29.04.2022 following the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., supra and the Hon’ble Madras High Court in the case S-1308, Ammapet Primary Agricultural Cooperative Bank Ltd., in T.C.A Nos.882 and 891 of 2018. Respectfully following the same, I allow the claim of deduction u/s.80P(2)(a)(i) of the Act. Accordingly, the appeal of the assessee is allowed.
6. In the result, the appeal of the assessee in ITA No.1131/Chny/2023 for assessment 2017-2018 stands allowed.
Order pronounced in the open court at the time of hearing on 22nd day of February, 2024, at Chennai.
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