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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 20/07/2022, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [―learned CIT(A)‖], for the assessment year 2018–19.
2. The present appeal is delayed by 141 days. The Secretary of the assessee has filed an affidavit praying for condonation of delay. In the said
Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023 affidavit sworn on 03/02/2023, the Secretary of the assessee has submitted as under:-
―1. Our society being the assessee which is a co. op. housing society & the day to day operations of the same were managed by the designated manager who had the exclusive access to all the society emails & communications. Unfortunately during the tenure when the appellate order dated 20-07-2022 for ay 2018-19 was passed, the society manger was on a long leave & the email communications were left unattended. During that period also no hard copies of any orders from the department were received by the society M.C. as a back up intimation. The matter came to light only on the manger resuming duties back & then the matter was highlighted & so the cognizance of the same was taken on immediate priority. Hence in view of the above unforeseen facts and considering the un- intentional delay, the fault or lapse on the part of society & the delay in filing the appeal may please be condoned by allowing the opportunity of providing the natural justice, it is our humble request to admit the appeal filed hereby and oblige.‖
In view of the above, the assessee has requested to condone the delay as the same is unintentional and due to circumstances beyond the control of the assessee. On the other hand, the learned Departmental Representative (“learned DR‖) did not raise any serious objection against the application seeking condonation of delay. Having perused the affidavit, we find that the impugned order dated 20/07/2022, was received by the assessee on the same date. Thus, as per the provisions of section 253(3) of the Act, the assessee was required to file the appeal within 60 days from the date of receipt of the order. However, the assessee filed the appeal, for the year under consideration, on 06/02/2023. The reasons stated by the assessee for seeking condonation of delay fall within the parameters for grant of condonation laid down by the Hon‟ble Supreme Court in the case of Collector Land Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. It is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial Page | 2
Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023 justice deserves to be preferred. In the present case, the assessee did not stand to benefit by late filing of the appeal. In view of the above and having perused the affidavit, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the appeal by the assessee and we proceed to decide the appeal on merits.
In this appeal, the assessee has raised the following grounds:– ―1. The Ld. Commissioner of Income-tax (Appeal), NFAC, erred in upholding the action of Ld. Assessing Officer in denying deduction of INR 28,89,538/- u/s 80P(2)(d) of the Act.
The impugned order dated 23.03.2021 passed u/s 143(3) r.w.s. 143(3A) and 143(3B) of the Act is bad in law, in as much as, the mandatory provisions prescribed u/s 143(3A) and 143(3B) read with Faceless Assessment Scheme has not been followed as no show cause notice in the form of draft assessment order was issued.
5. The Ld. AO has erred in levying interest u/s 234B and 234C of the Act.
The grounds of appeal
raised are independent and without prejudice to each other.
7. The Appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.‖
The brief facts of the case as emanating from the record are: The assessee is a co-operative housing society duly registered under Maharashtra Co-operative Societies Act, 1960, and is not engaged in any commercial business activity. For the year under consideration, the assessee filed its return of income declaring a total income of Rs.28,89,538. During the year under consideration, the standard and normal society management, collection from members, incurring common maintenance, and administrative activities were carried out by the assessee under the prevailing law and norms, as per Page | 3
Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023 the bye-laws. During the year, the assessee earned an interest income of Rs. Rs.28,52,748 from its investments such as fixed deposit, saving account, etc. with co-operative banks, which was claimed as a deduction under section 80P(2)(d), and interest income of Rs.36,790 earned from investments with non co-operative bank was claimed as deduction under section 80P(2)(c)(ii) of the Act. Thus, in the computation of total income, the assessee claimed a total deduction of Rs.28,89,538 under section 80P of the Act. The Assessing Officer (“AO”) vide order dated 23/03/2021 passed under section 143(3) read with sections 143(3A) and 143(3B) of the Act did not agree with the claim of the assessee and held that under section 80P(2)(d) of the Act only income by way of interest or dividend derived from the investment with any other co- operative society is allowable as deduction and the provision of the Act does not extend the deduction in respect of interest received from investments made with the co-operative banks. The AO referred to the provisions of section 80P(4) of the Act and held that the co-operative banks are excluded from the applicability of section 80P of the Act and therefore, even the interest income earned by the assessee from the deposits from the investment made by it with the co-operative bank would not be exempt. The AO further held that a co- operative bank is a commercial bank and does not fall under the purview of “co-operative society” referred to in section 80P(2)(d) of the Act. Accordingly, the deduction of Rs.28,89,538 was disallowed under section 80P(2)(d) of the Act.
6. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee and held that deduction under section 80P(2)(d) of the Act is not Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023 allowable in respect of interest earned by the assessee. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee earned an interest income of Rs.28,52,748 from its investments with co-operative banks, which was claimed as a deduction under section 80P(2)(d), and interest income of Rs.36,790 earned from investments with non co-operative bank was claimed as deduction under section 80P(2)(c)(ii) of the Act. As evident from the record, the lower authorities proceeded to determine the eligibility of the assessee in respect of the deduction claimed only as per provisions of section 80P(2)(d) of the Act, despite the fact that the assessee made specific submissions regarding its claim under section 80(2)(c)(ii) of the Act in respect of interest earned from non co-operative bank. Since there are no findings by any of the lower authorities in respect of assessee‟s claim of deduction under section 80P(2)(c)(ii) of the Act, we deem it appropriate to remand this issue to the file of AO for de novo adjudication only limited to this aspect.
As per the provisions of section 80P(1) of the Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an assessee being a co-operative society. Further, section 80P(2)(d) of the Act, reads as under:
“80P. Deduction in respect of income of co-operative societies. (1) ...... (2) The sums referred to in sub-section (1) shall be the following, namely:– (a) ..... (b) ..... (c) .....
Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023
(d) in respect of any income by way of interest or dividends derived by the co- operative society from its investments with any other co-operative society, the whole of such income;‖
Thus, for the purpose of provisions of section 80P(2)(d) of the Act, two conditions are required to be cumulatively satisfied- (i) income by way of interest or dividend is earned by the co-operative society from the investments; and (ii) such investments should be with any other co-operative society. Further, the term „co-operative society‟ is defined under section 2(19) of the Act as under:
“(19) "co-operative society" means a co-operative society registered under the Co-operative 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 ;‖
In the present case, there is no dispute that the assessee is a co- operative society and thus if any income referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as deduction. Since the assessee is registered under the Maharashtra Co-operative Societies Act, 1962, it is required to invest or deposit its funds in one of the modes provided in section 70 of the aforesaid Act, which includes investment or deposit of funds in the District Central Co- operative Bank or the State Co-operative Bank. Accordingly, the assessee kept the deposits in co-operative banks and earned interest of Rs.28,52,748, which was claimed as a deduction under section 80P(2)(d) of the Act. The Revenue denied the deduction under section 80P(2)(d) of the Act on the basis that the interest income earned from co-operative bank is not covered under the aforesaid provisions and the said provision only grants deduction in respect of interest earned from co-operative society. In this regard, it is pertinent to note Page | 6
Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023 that all co-operative banks are co-operative societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the co-operative banks is allowable as a deduction under section 80P(2)(d) of the Act. In Kaliandas Udyog Bhavan Premises Co-op Society Ltd vs ITO, in Mum./2017, vide order dated 25/04/2018, while dealing with the provisions of section 80P(2)(d) vis-à-vis section 80P(4) of the Act, the coordinate bench of the Tribunal observed as under:
―7. ……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 co-operative 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 co- operative 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 'co-operative society' had been defined under Sec. 2(19) of the Act, as under:— '(19) "Co-operative society" means a cooperative society registered under the Co- operative 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 co-operative bank pursuant to the insertion of Sub-section (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 co-operative 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 co-operative society from its Page | 7
Binaca Co–operative Housing Society Ltd. ITA no.339/Mum./2023 investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.‖
Therefore, in view of the above and respectfully following the decision of the coordinate bench, we uphold the plea of the assessee and direct the AO to grant deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with co-operative banks. Accordingly, we set aside the impugned order passed by the learned CIT(A). In view of our aforesaid findings, ground No. 1 raised by the assessee is allowed for statistical purposes.
In view of our aforesaid findings, ground No. 2, raised in assessee‟s appeal, is kept open.
The issue arising in ground No. 5, raised in assessee‟s appeal, is pertaining to the levy of interest under section 234B and section 234C of the Act, which is consequential in nature. Therefore, ground No. 5 is allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 13/04/2023