Case Law Details
Hilla Heights Co-operative Housing Society Limited Vs Assistant Director of Income-Tax (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai has ruled in favor of Hilla Heights Co-operative Housing Society, allowing deduction under Section 80P(2)(d) of the Income-tax Act, 1961. The case arose after the Centralized Processing Centre (CPC), Bangalore, disallowed the society’s claim for deduction on interest income earned from cooperative banks while processing its return under Section 143(1). The society’s rectification application under Section 154 was also rejected without reasons, prompting an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the CPC’s decision.
Upon further appeal to ITAT, the Tribunal examined whether the cooperative housing society was eligible for deduction under Section 80P(2)(d) on interest income from cooperative banks. The ITAT noted that the CIT(A) had not adjudicated on the merit of the deduction claim and had instead ruled on a procedural technicality, stating that the appeal should have been made under Section 143(1) rather than Section 154. The Tribunal observed that the CPC’s disallowance lacked justification and should have been addressed substantively.
The ITAT relied on precedents such as Ashoka Palace Co-Op. Hsg. Soc. Ltd. v. ITO (ITA No. 2062/Mum/2021) and Kaliandas Udyog Bhavan Premises Co-op Society v. ITO (94 taxmann.com 15), which established that cooperative societies are entitled to deductions under Section 80P(2)(d) for interest income earned from cooperative banks. The Tribunal clarified that while Section 80P(4) excludes cooperative banks from availing the deduction, cooperative societies remain eligible to claim the benefit on interest income received from cooperative banks.
In conclusion, ITAT Mumbai ruled in favor of the assessee, affirming its entitlement to deduction under Section 80P(2)(d). This decision reinforces the principle that cooperative societies can claim tax benefits on interest income from cooperative banks, provided they meet the statutory conditions.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] dated 30.09.2022 for the Y.2020-21.
2. Brief facts of the case are, assessee is a cooperative housing society and filed its return of income on 10.2020 within the extended due date applicable to Cooperative Society u/s. 139(1) of Income-tax Act, 1961 (in short “Act”). During this assessment year assessee earned interest and dividend income from investments in cooperative banks for the year under consideration. Accordingly, assessee claimed deduction u/s. 80P(2)(d) in respect of the above said income earned from cooperative banks while filing the return of income. While processing the assessment u/s. 143(1) of the Act, Centralized Processing Centre, Bangalore disallowed the claim of the assessee u/s. 80P(2)(d) and has not assigned any reasons while processing the return of income u/s. 143(1) of the Act. Aggrieved, assessee filed an application u/s. 154 of the Act seeking rectification of the above order. However, Centralized Processing Centre, Bangalore has rejected the rectification application.
3. Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and filed a detailed written submissions during the course of the appellate proceedings. After considering the submissions of the assessee CIT(A) observed that the disallowance u/s. 80P(2) was made in the original Assessment Order u/s. 143(1) of the Act and not u/s. 154 of the Act. Therefore, the concept of merger will not be applicable in this case.
Therefore, he is of the opinion that assessee cannot challenge the denial of deduction u/s. 80P under the order of section 154 by relying on certain decisions and assessee should have challenged the same u/s. 143(1) of the Act, accordingly, he dismissed the appeal filed by the assessee.
4. Aggrieved, assessee is in appeal before us and submitted details statement of facts. Assessee raised following grounds in its appeal: –
“1. On the facts, and in circumstances of the case, and in law, dismissing the appeal on the ground stating that “the effect of the subsequent rectification u/s 154 dated 15.01.2022 has to be read as forming part of original intimation u/s 143(1) dated 25.11.2021 only and not independently. therefore, the impugned claim of deduction u/s 80p denied originally vide intimation u/s 143(1) cannot be challenged by the appellant through the present appeal against order under section 154” without appreciating that, adjustment made in intimation under section 143 (1) was beyond the scope of the section 143 (1) it being not incorrect claim apparent from any information in return, and therefore refusal of application under section 154 was independent of Intimation under section 143 (1).
2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in making disallowance of claimed under section 80P without appreciating that these were not incorrect claims apparent from any information in the Return of Income in terms of section 143 (1) of the Income-tax Act
3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) failed to appreciate that the Centralized Processing Centre (CPC), Bengaluru erred in disallowing the claim of deduction under Section 80P of the Income Tax Act, 1961 without mentioning any reasons for disallowance of the valid claim while processing the return of income under section 143 (1) of the Income Tax Act, 1961 in as much as in order under section 154 of the Income-tax Act
4. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) failed to appreciate that, the Centralized Processing Centre (CPC), Bengaluru erred in disallowing the claim of deduction under Section 80P of the Income Tax Act, 1961 in spite of the fact, that the appellant had filed return of income within the “second due date” applicable in terms of section 139 (1) of the Income Tax Act, 1961 and the intimation issued under section 143 (1) of the Income Tax Act, 1961 had also mentioned due date for filing return of income as “extended due date” since, book of accounts of your appellant were liable to audit under Section 81 of the Maharashtra Co-operative Society Act, 1960.
5. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) failed to appreciate that, the Centralized Processing Centre (CPC), Bengaluru erred in disallowing the claim of deduction under Section 80P of the Income Tax Act, 1961 without considering the facts, that the appellant had made a rectification request under Section 154 of the Income tax Act, 1961 for re-processing the return of income but, the reprocessing of the return of income was considered on the same lines as intimation issued in terms of section 143 (1) of the Income Tax Act, 1961.
6. Your Appellant craves leave to add to, amend, alter, modify, and / or delete any of the above grounds of appeal at or before final disposal of appeal.”
5. At the time of hearing, AR submitted that in 143(1) proceedings, claim of the assessee u/s. 80P(2)(d) was disallowed and he brought to our notice the findings of the Ld.CIT(A). However, Ld.CIT(A) has not decided the issue with regard to disallowance u/s. 80P(2)(d) and however, he has decided the issue on whether assessee should file the appeal against the order u/s. 143(1) of the Act or u/s. 154 of the Act. Ld. AR prayed that the claim of the assessee may be allowed and in this regard he relied on the order of the Coordinate Bench in the case of Ashoka Palace Co-Op. Hsg. Soc. Ltd. v. ITO in ITA.No. 2062/Mum/2021 dated 31.10.2022.
6. On the other hand, Ld. DR relied on the orders of the lower authorities.
7. Considered the rival submissions and material placed on record, we observe from the record that assessee has received income under the head income from the cooperative banks which are eligible to be claimed u/s. 80P(2)(d) of the Act. Since the disallowance was made u/s. 143(1) of the Act assessee filed a rectification application before Centralized Processing Centre, Bangalore, however, the same was denied without giving any proper reasons and assessee filed the appeal before CIT(A) and Ld.CIT(A) has not decided the issue on merit, however, he proceeded to decide the issue on technical ground whether assessee should file the appeal u/s. 143(1) or u/s. 154 of the Act. After considering the overall facts on record and the issue under consideration in our view, issue is squarely covered in various decisions of the Hon’ble Supreme Court, various High Courts and Coordinate Bench. In this regard, we observe that Coordinate Bench has decided the issue in favour of the assessee in the case of Ashoka Palace Co-Op. Hsg. Soc. Ltd. v. ITO (supra) observing as under: –
“5. Both sides heard, orders of authorities below examined. The solitary issue raised by the assessee in appeal is with respect to assessee’s eligibility to claim deduction u/s. 80P(2)(d) of the Act on interest income from deposits with Co-operative banks. It is not in dispute that the assessee has earned interest income from deposits with Co-operative Bank. The authorities below have denied the benefit of section 80P(2)(d) of the Act to the assessee on the premise that the interest income is not eligible for deduction u/s. 80P(2)(d) of the Act.
6. The issue whether interest income derived from deposits with cooperative banks is eligible for deduction under section 80P(2)(d) of the Act or not has been considered by Tribunal in catena of decisions. The Co-ordinate Bench in the case of Kaliandas Udyog Bhavan Premises Co-op Society Vs. ITO, 94 taxmann.com 15 (Mumbai) after considering various decisions by Hon’ble High Courts and the Tribunal and the provisions of the Act, has held that interest income derived by a co-operative society from investments with a co-operative bank, would be entitled for deduction under section 80P(2)(d) of the Act. The relevant extract of the order reads as under: –
“7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us:
“80P(2)(d)
(1) Where in the case of an assessee 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
(2) The sums referred to in sub-section (1) shall be the following, namely :—
(a) to (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 co-operative 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 agreement with the observations of the lower authorities that with the insertion of Sub- section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a cooperative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other cooperative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term ‘cooperative society’ had been defined under Sec. 2(19) of the Act, as under:—
‘(19) “Co-operative society” means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;’
We are of the considered view, that though the cooperative bank pursuant to the insertion of Subsection (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a cooperative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.”
[Emphasized by us]”
8. Respectfully following the above said decision, we are inclined to allow the claim of the assessee by holding that, the interest income derived by a cooperative society from its investments held with a cooperative bank, would be entitled for claim of deduction u/s. 80P(2)(d) of the Act.
9. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 03rd April, 2023
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