New Ideal Vs ITO (ITAT Mumbai)
A recent ruling by the Income Tax Appellate Tribunal (ITAT) Mumbai in the case of New Ideal (Co-operative Housing Society) versus the Income Tax Officer (ITO) has shed light on the permissible adjustments under Section 143(1)(a) of the Income Tax Act, 1961, and the eligibility of cooperative societies for deductions under Section 80P. The appeal, filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Year 2015-16, challenged the disallowance of deductions claimed under Section 80P(2)(d) and Section 80P(2)(c)(ii) by the Centralized Processing Centre (CPC), Bengaluru.
Background of the Case
The assessee, a cooperative housing society, filed its income tax return on December 28, 2016, claiming deductions of Rs. 2,47,769/- under Section 80P(2)(d) for interest income from fixed deposits with cooperative banks and Rs. 50,000/- under Section 80P(2)(c)(ii). However, during the processing of the return under Section 143(1) of the Act by the CPC, Bengaluru, these deductions were not granted. This resulted in a computed total income of Rs. 15,50,090/- and a demand of Rs. 1,34,864/-.
Upon the assessee’s appeal, the CIT(A) primarily focused on the disallowance under Section 80P(2)(d). The CIT(A) acknowledged that the adjustment was made without prior intimation to the assessee, as required by Section 143(1)(a). Despite this, the CIT(A) upheld the disallowance, citing various decisions, including the Karnataka High Court ruling in PCIT vs. Totagars Co-operative Sale Society. The CIT(A) concluded that interest income earned from investments of surplus funds with cooperative banks was not eligible for deduction under Section 80P(2)(d). Furthermore, the CIT(A) did not adjudicate on the ground concerning the denial of the statutory deduction under Section 80P(2)(c)(ii) for Rs. 50,000/-.
