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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, HONBLE & MS KAVITHA RAJAGOPAL, HONBLE
Date of Hearing : 23.01.2023 Date of Pronouncement : 17.04.2023 O R D E R PER S. RIFAUR RAHMAN (AM)
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 29.09.2022 for the A.Y.2018-19. (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited 2. Brief facts of the case are, assessee filed its return of income on 10.10.2018 declaring total income of ₹.2,69,310/-. The return of income was processed by Centralized Processing Centre, Bengaluru, and order u/s. 143(1) of Income-tax Act, 1961 (in short “Act”) was passed on 07.06.2019 assessing the total income of ₹.24,52,040/- after making disallowance u/s. 80P of the Act of ₹.21,82,728/-.
Aggrieved with the above order, assessee preferred an appeal before the Ld.CIT(A) contesting that the Centralized Processing Centre, Bangalore cannot make the disallowance u/s.80P(2) under 143(1) of the Act and the order passed is illegal, arbitrary, unjustified, unreasonable, non-judicious, factually incorrect, bad in law and void ab-initio and assessee also filed submissions before Ld.CIT(A). In appellate proceedings, Ld.CIT(A) asked the assessee details of computation of 80P, background of the assessee and its registration etc., after considering the submissions of the assessee, Ld.CIT(A) dismissed the appeal filed by the assessee and justified the disallowance made by Centralized Processing Centre by relying on the decision of Totgar Co-operative Sale Society Ltd., [322 ITR 283 (SC)].
Page No. | 2 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited 4. Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. The Ld. National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the "Ld. CIT(A)"] erred in passing the order dated 29.09.2022 upholding the action of the Ld. A.O. Deputy Commissioner of Income Tax, CPC, Bangalore in rejecting the deducting claimed under section 80P(2)(d) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'] amounting to Rs.21,82,728/- without appreciating the facts and circumstances of the case. Thus, the order passed by Ld. CIT(A) is against provisions of law and the same may be quashed.
2. The Ld. CIT(A) failed to appreciate that the Appellant satisfies all the condition precedent enumerated under section 80P(2)(d) of the Act to claim the deduction with respect to the interest income earned from the Co-Operative Banks. Hence, disallowance of deduction amounting to Rs.21,82,728/- claimed under section 80P(2)(d) of the Act is unjustified and the same may be deleted.
3. The Ld. CIT(A) failed to appreciate that the Appellant being a Co-Operative Society is eligible to claim the deduction under section 80P(2)(d) of the Act with respect to the interest earned on the investment made with the Co-operative Banks. Hence, denying the deduction amounting to Rs.21,82,728/- under section 80P(2)(d) of the Act is unjustified and the same may be deleted.
4. The Ld. CIT (A) fell in error of law in declining the deduction of Rs.21,82,728/- claimed under section 80P(2)(d) of the Act on some erroneous and extraneous consideration without even confronting the Appellant with the same. Hence, the order passed by Ld. CIT(A) is merely on conjecture and surmises and against the principals of natural justice and the same may be quashed.
5. The appellant craves leave to add, amend, alter, delete or rescind any of the grounds mentioned above.”
At the time of hearing, Ld. AR of the assessee submitted that this issue is covered in favour of the assessee and in the similar facts on record the Coordinate Bench in the case of New Ideal Cooperative Housing
Page No. | 3 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited Society Limited v. ITO in ITA.No. 2681/Mum/2019 dated 03.02.2021 considered and decided the issue in favour of the assessee. Copy of the order is placed on record.
On the other hand, Ld. DR however, supported the findings of the Ld.CIT(A).
Considered the rival submissions and material placed on record, we observe from the record that assessee has filed the return of income on 06.10.2018 and subsequently revised the same on 10.10.2018. The assessee’s case falls under section 139 Explanation 2(a)(ii), therefore, the due date for filing return of income is 30.09.2018. In this year, due date for filing of return of income was extend to 15.10.2018 by the CBDT Notification F.No. 225/358/2018/ITA dated 24.09.2018. From the above, it is clear that assessee has filed the return of income and revised return of income within the due date. However, the Centralized Processing Centre, has adopted the due date for filing the return of income as 31.08.2018. By adopting the wrong date of filing return of income, it has disallowed the claim of the assessee u/s. 80P of the Act. Since the assessee has filed the return of income on time, the Centralized Processing Centre has no jurisdiction to disallow the same u/s. 143(1)(a) of the Act. Page No. | 4 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited 8. We observe that Ld.CIT(A) has not addressed the above issue but proceeded to decide the issue on merit. In our considered view, there is no jurisdiction for making any adjustment u/s. 143(1)(a) of the Act to Centralized Processing Centre, when the assessee has filed the return of income within the due date and claimed the deduction u/s. 80P of the Act. On the similar facts on record the Coordinate Bench in the case of New Ideal Cooperative Housing Society Limited v. ITO (supra) has considered the same facts on record and decided the issue as under: - “8. First of all it is noted that the adjustment has been done by the CPC Bengaluru under section 143(1)(a) of the Act. Section 143(1)(a) provides for processing of return where the total income is computed after making certain adjustment. It reads as under :- “143.(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; [***] (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; [(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub- section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; Page No. | 5 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:] [Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;]” 9. In my considered opinion the adjustment done by denial of deduction u/s. 80P(2)(d) and 80P(2)(c)(ii) in this case does not fall in any of the above. That a cooperative society will not get exemption on the interest earned on deposits in cooperative bank is not something which is a subject matter of adjustment under section 143(1)(a) of the Act. I find that despite noting that there are tribunal decisions in favour of assessee, the learned CIT(A) has chosen not to follow the same by referring to some other decisions. I further find that learned CIT(A) has completely erred in treating the assessee as cooperative bank and invoking the provisions of section 80P(4). Section 80P(4) provides that :- (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.—For the purposes of this sub-section,—
Page No. | 6 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.
10. Honourable Supreme Court in the case of Citizen Cooperative Society Ltd. (Civil Appeal No. 10245 of 2017 vide order dated 8.8.2017) has settled the law that for being considered as a cooperative bank licence from RBI in this regard is a sine qua non. In absence of the RBI licence as such the assessee cannot be treated as cooperative bank. Hence disallowing the deduction by referring to the provisions of section 80P(4) is completely unsustainable. Moreover section 80P(2)(d) provides exemption to interest earned on fixed deposit in cooperative societies. It is nobody's case that cooperative bank are not cooperative societies.
Moreover similar issue was elaborately dealt by a larger bench of honourable Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT, Calicut & Ors. (Civil Appeal Nos. 7343-7350 of 2019 dated 12.1.2021 and the issue was decided in favour of the assessee. We may gainfully refer to the Hon'ble Apex Court observation in para 21 as under, wherein the Hon'ble Apex Court referred to its earlier decision of Citizen Cooperative Society Ltd. (supra) :- “The following propositions may be culled out from the judgment: I. That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; II. That once the assessee is entitled to avail of deduction, the entire amount of profits and Page No. | 7 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited gains of business that are attributable to any one or more activities mentioned in subsection (2) of section 80P must be given by way of deduction; III. That this Court in Kerala State Cooperative Marketing Federation Ltd. and Ors. (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; IV. This is for the reason that when the legislature wanted to restrict the deduction to a particular type of co-operative society, such as is evident from section 80P(2)(b) qua milk co-operative societies, the legislature expressly says so - which is not the case with section 80P(2)(a)(i); V. That section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2). This proviso specifically excludes only cooperative banks, which are cooperative societies who must possess a licence from the RBI to do banking business. Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the mischief of section 80P(4).”
Hence on merits also the order of learned CIT(A) denying the deduction u/s. 80P(2)(d) is not sustainable.
As regards the statutory deduction u/s. 80P(2)(c)(ii) of the Act, there is no reason why the same should be denied. Moreover, the said adjustment is not falling in any of the adjustment permitted by 143(1)(a) of the Act. Hence, assessee’s claim of deduction u/s. 80P(2)(c)(ii) has also been wrongly denied in the processing done u/s. 143(1)(a) of the Act. The learned CIT(A) has failed to decide the same despite assessee’s ground in this regard. The same is directed to be allowed.
Page No. | 8 (A.Y: 2018-19) Court Chambers Premises Co.Op Society Limited 13. Hence, in the background of the aforesaid discussion, respectfully following the precedent as above I set aside order of learned CIT appeals decide the issues in favour of assessee. 14. In the result, appeal filed by the assessee is allowed.”
Respectfully following the above said decision, we are inclined to set-aside the Assessment Order u/s. 143(1) order passed by the Centralized Processing Centre, Bangalore.
In the result, appeal filed by the assessee is allowed.