ITO-21(2)(2) v. MTNL Mumbai Employees Co-op Credit Society

Case snapshot

Sections / provisions: 80P

Questions before the Court / Tribunal

• Co-operative banks are basically Co-operative society, the income from the same fall under section 80(2)(d) and deduction can be
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

आयकर अपील सं/ I.T.A. No.3733/Mum/2019 (निर्धारण वर्ा / Assessment Year: 2014-15) ITO-21(2)(2) Piramal Chambers, 1st Floor Room NO.111 Lalbaug, Parel Mumbai-400 012

बिधम/ Vs. MTNL Mumbai Employees Cooperative Credit Society Limited Shivaji Park, Telephone Exchange Compound, Anant Patil Marg, Dadar Mumbai-400 028 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAAAM1777H (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent)

आदेश / O R D E R PER AMARJIT SINGH, JM: The revenue has filed the present appeal against the order dated 13/03/2019 passed by the Commissioner of Income Tax (Appeals) -32, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.201415. 2. The revenue has raised the following grounds: - 1. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the deduction u/s. 80P(2)(d) of the Income Tax Act, 1961 amounting to Rs. 97,80,230/- for without appreciating the action of the A.O. in this regard ?" Revenue by: Shri Bharat Anahale (DR) Assessee by: Deepak Tikekar, AR

2. "Whether on the facts and in the circumstances of the case and in law, the Ld.ClT(A) has erred in not appreciating the fact that since the assessee fulfils the conditions laid down u/s. 56(c)(ccv) of the Part V of Banking Regulation Act, 1949, it is to be considered as a co-operative bank, and therefore under the purview of a co-operative bank, the assessee is not eligible for deduction u/s. 80P(2)(d) of the Income Tax Act, 1961?"

3. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the deduction u/s. 80P(2)(d) of the Income Tax Act, 1961 as per the ground of appeal of the assessee, without appreciating the fact that in the instant assessment year, the assessee has failed to substantiate the source of bank from which it has earned interest income. Further in assessee's own case, it is noticed that assessee earned interest from Cooperative banks."

Appellant / petitioner / assessee submissions

of the Act,1961 was declined. Feeling aggrieved, the assessee filed appeal before the Ld.CIT(A) who allowed the claim of the assessee., th erefore, the revenue has filed the present appeal before us. ISSUE NO. 1 to 3:- 4. Mainly all these grounds are in connection with the disallowan ce of claim u/s 80P(2)(d) of the Act. At the very outset, the Ld. Representative for assessee has argued that the issue has dul y been covered by the decision of the Hon’ble ITAT in assessee ’s own case bearing ITA No. 7634/M/2016 titled as ITO -21(2)(2) vs MTNL (Mumbai employees Co -op Society), therefore, the claim of the assess ee has rightly been allowed by the CIT(A). However, on the other hand Ld. DR has argued that the claim of the assessee has wrongly been allowed by the Ld.CIT (A), t herefore, the revenue has filed the present appeal. Anyhow before going further , we deem it necessary to advert the finding of the CIT(A) on record.: -

5. On appraisal of the above mentioned finding, we find that the the issue has been decided in favour of the assessee by the CIT(A) on the basis of the decision of the Hon’ble ITAT in assessee’s own case bearing ITA N o. 7352/Mum/2016 for the A.Y.2013 -14. The facts are no distinguishable at this stage. Since the issue has dul y been decided by the CIT(A) on the basis of the decision of the Hon’ble ITA T bearing ITA No. 7352/Mum/2016, therefore, we are of the view that the Ld. CIT(A) decided the matter of controversy judiciously and correctly, which is not liable to be interfere with at this appellate stage. Accordingly, we upheld the finding of the CIT(A) on this issue and deci de these issues in favour of the assessee against the revenue. ISSUE NO.4 to 7 6. We have heard the argument advanced by the Ld. Representative of the parties, perused the record. The Ld. Representative of the assessee has argued that the issue has duly been covered by the decision of the Hon’ble ITAT in the assessees own case bearing ITA No. 7352/Mum/2016 for the A.Y. 2013-14. The CIT(A) has also relied upon the number of decisions which were in favour of the assessee and quoted in the orde r which are not liable to be reproduced on account of repetition . The Ld. D R has argued that the CI T(A) has wrongly allowed the claim of the assessee, t herefore,

Revenue / respondent submissions

80P(2)(d) of the Act in respect of interest income received from co - operative banks. 4. The Ld CIT(A) allowed the claim of the assesse e in both the years by following the decision rendered by Hon'ble Karnataka High Court in the case of PCJT vs. Totagars Co -operative sale society (2017)(392 ITR 74), wherein the Hon'ble Karnataka High Court had held that the co operative banks are cooperat ive societies. Aggrieved, the revenue has filed these appeals. 5. The Ld D.R submitted that the Hon'ble Karnataka High had delivered the decision reported in 392 ITR 74 on January 5, 2017. However, in its subsequent decision in the case of very same assessee, the Hon'ble Karnataka High Court has taken a different view, viz., in the case of The Principal CIT Vs.

Court / Tribunal analysis and reasoning

The lower authorities had observed that as the co -operative banks with which the surplus funds of the assesses were parked as investments, were neither Primary Agricultur al 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 section 80P(2)(d). [Para 6] • From a perusal of the section 8 0P(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. What is relev ant for claim of deduction under section 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.

other than a primary agricultural cr edit society or a primary co - operative agricultural and rural development bank, but their view that the same shall also jeopardise the claim of deduction of a co - operative society under section 80P(2)(d) in respect of the interest income on their investmen ts parked with a co -operative bank cannot be accepted, • As long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other co - operative society, the claim of deduction under the aforesaid statutory provision, viz. section 80P(2)(d) would be duly available. The term 'co -operative society 1 had been defined under section 2(19) of the Act. • It is opined that though the co -operative bank pursuant to the insertion of sub -section (4) of section SO P would no more be entitled for claim of deduction under section SOP, but however, as a co -operative bank continues to be a co operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being enforced in any State for the registration of cooperative 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 section 80P(2)(d). /Para 7] • •-.-- . • Thus in the backdrop of aforesaid observations the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under section 80P(2)(d), in respect of the interest income on the investments made with the co -operative bank cannot be accepted.

the Co -operative Bank which is a species of the genus would necessarily be covered by the word 'Cooperative Society',...... Admittedly} the interest which the assesses responded had earned was from a Co -operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T Act, the said amount of interest earned from a Co -operative Society Bank would be deductible from the gross income of the Co-operative Society in order to assess its total income. . ' . 8. However, the very same Hon'ble Karnataka High Court in the very same assessee's case in ITA No. 100066 of 2016 & others dated 16-06-201 7 has taken the that the interest income earned by a co-operative society from a cooperative bank is not deductible u/s 80P(2)(d) of the Act. 9. The Ld A.R has referred to me the decision rendered by Hon'ble Himachal Pradesh High Court in the case of Kangra co -operative bank Ltd (supra), wherein the High Court has observed as under: '....Furthermore, the investments have been made in H.P. State Cooperative Bank which is also a co -operative society and therefore even under sec. 80P(2)(d) of the Act, interest income from investments made in any co -operative society would also be entitled for deduction."

5.3.2 In view of the above discussion and following the decision of the ITAT, Mumbai in appellant's own case for A.Y. 2013 -14, it is held that the appellant would be entitled for claim of deduction

the revenue has filed the present appeal. Before going further, it is necessary to advert the finding of the CIT(A) on record.: 4.3 I have considered the AO's order, appellant's submissions and details filed. I find that the appellant is a cooperative credit society carrying on the business of providing credit facilities only to its members who are employe es of MTNL located in the City of Mumbai & Raigad District, and cannot be considered as a cooperative bank. This is because the primary object of the appellant is not to do business of banking, which involves accepting deposits from public and making avail able numerous facilities like issue of cheque, draft etc., but merely to obtain deposits from its members or/and resort to borrowing from cooperative banks and lend funds to its members as per the schemes enumerated in the Registered Byelaws. Further, the appellant does not hold any banking license from RBI. Therefore, AO is not correct in holding that the appellant is a cooperative bank and not eligible for deduction on its income in view of provisions of section 80P(4) of the Act. Accordingly, it is held that the appellant is eligible for deduction u/s 80P(2 )(a)(i)) in respect of the whole of the profits or gains attributable to the activities of providing credit facilities to its members .

4.3.1 For coming to the above conclusion, reliance is placed on t he following decisions . . ij Order of CIT(Appeals) -33 Mumbai in appellant's own case for AY2013-14 dated 17.04.2018 wherein the addition made by the AO on account of . disallowance of deduction u/s 80P(2jfaj(i) has been deleted. ii) Hon'ble Karnataka High Court in the case of Shri Vardhaman Urban Cooperative Credit Society Ltd. vs. CommiSvSioner of income Tax (ITA no. ' 100038 of 2014 dated 21-09-2015), has held that all the Co-operative Credit Societies are eligible for deduction u/s SOP(2)(aJ(iJ unless they are declared as bank by the Reserve Bank of India. iii) Quepem Urban Co -operative Credit Society Ltd. Vs ACIT dated 17 - 04-2015 (2015J 58 taxmann.com 113 (Bombay), wherein it is held that the assessee cannot be considered as a co-operative Bank for the purposes of section 80P(4) of the Act, unless following three conditions are satisfieda) the principal business or primary objective should be business of banking

Operative decision and relief

In these facts the jurisdictional ITAT has held as under and appeal filed by the assessee has been allowed –

Thus the order of the lower authorities is set aside and it is concluded that the interest income earned by the Appellant's own case for AY 2013 -14 has been decided in ITA No.7352/Mum/2016 by the ITAT Mumbai allowing deduction u/ s 80P2(dJ on the interest income earned fro MDC cooperative Bank Ltd. iii) ITO v. Citiscape Co -op. Housing Society Ltd. for A.Ys. 2011 -12 and 2012-13 [ITA Nos. 5435 -5436/Mum/2017 dated 08.12. 2017 in which the ITAT Mumbai has held as under:- *. "3. The AO t ook the view that the income of co -operative banks is not deductible u/s SOP of the Act in terms of sec.

Society vs Income Tax Officer (ITA No.1343/Mum/2017) order dated 31/03/2017. Following the aforesaid decisions and keeping in view, the principle of consistency, the appeal of the assessee is allowed.

8. Taking into account of all the facts and circumstances, we find that t his issue has been duly covered by the decision of the Hon’ble ITAT in assessees own case (supra), therefore, we are of the view that the f inding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, we upheld t he finding of the CIT(A) on these issues and decide these issues in favour of the assessee against the revenue. 9. In the result, the appeal filed by the revenue is hereby ordered to be dismissed. Order pronounced in the open court on 27/01/2021 Sd/- Sd/- (RAJESH KUMAR) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 27/01/2021 Thirumalesh, Sr.PS.

Ratio and legal principle

The narrow proposition associated with ITO-21(2)(2) v. MTNL Mumbai Employees Co-op Credit Society concerns co-operative banks are basically co-operative society, the income from the same fall under section 80(2)(d) and deduction can be The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in ITA No. 3733/M/2019.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Dismissed” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Co-operative banks are basically Co-operative society, the income from the same fall under section 80(2)(d) and deduction can be Its practical value lies in the way the Itat Mumbai connected the governing provisions—80P—to the procedural posture and evidence before it.

The authority level is Court / Tribunal. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 80P and the decision date 2021-01-27; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is ITO-21(2)(2) v. MTNL Mumbai Employees Co-op Credit Society, the proceeding is ITA No. 3733/M/2019, and the decision is dated 2021-01-27. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JM. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 80P. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Dismissed. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is Review / appeal / SLP status: check pending. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 80P — apply the exact version considered in the judgment.

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