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Facts
The assessee, a cooperative housing society, claimed deduction under Section 80P(2)(d) for interest income earned from deposits with cooperative banks. The AO denied this deduction, and the CIT(A) affirmed it, citing the assessee's failure to file the return within the due date and the applicability of Section 80P(4).
Held
The Tribunal held that Section 80P(4) does not exclude cooperative societies earning interest income from other cooperative banks. It also noted that the assessee filed its return within the extended due date for AY 2018-19. Therefore, the deduction under Section 80P(2)(d) should be allowed.
Key Issues
Whether interest income earned by a cooperative society from deposits with cooperative banks is eligible for deduction under Section 80P(2)(d) and if the return was filed within the due date.
Sections Cited
80P(2)(d), 80P(4), 139(1), 119(2)(b), 250, 2(19)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
O R D E R
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 16.03.2021, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2018-19.
In this case, the Assessee by filing its return of income on dated 19.09.2018 had declared gross total income of Rs.26,69,680/- under the head Income from the other sources and claimed the same as exempt under section 80P(2)(d) of the Act.
The return filed by the Assessee was selected for scrutiny and resulted into making the disallowance of deduction claimed to the tune of Rs.26,69,680/- being interest income earned from fixed deposits maintained with Saraswat Cooperative Bank Ltd. and Maharashtra State Cooperative Bank.
The Assessee being aggrieved with the said addition preferred first appeal before the Ld. Commissioner, who by impugned order affirmed the aforesaid addition by dismissing appeal of the Assessee on various grounds, inter-alia that the claim of deduction is eligible only when the return is filed within the due date specified under Section 139 (1) of the Act, otherwise not eligible, which can be verified from the provisions of Section 80 A C of the Act as amended. As in the instant case, the due date for filing the ITR was 31.08.2017 but the assessee filed the same only on 19.09.2018 and also not filed any condonation of delay under Section 119 (2) (b) of the Act.
Thus, the Assessee being aggrieved has challenged the aforesaid addition.
This Court has given thoughtful consideration to the peculiar facts and circumstances of the case. Admittedly the issue qua deduction claimed under Section 80 (2) (d) of the Act, on account of interest income earned from Cooperative Bank has been decided in favour of the Assessee, by various courts including the Hon'ble Coordinate bench of the Tribunal in the case of Pathare Prabhu Co- operative Housing Society Ltd. Vs. ITO (ITA No.1346 & 1347/M/2023 decided on 27.07.2023) (2023) 153 taxmann.com 714 (Mum. – Trib.) by observing and holding as under:
“8. We have considered the submissions of both sides and perused the material available on record. The only dispute raised by the assessee is against the disallowance of deduction under section 80P(2)(d) of the Act in respect of interest income received from the Co-operative Banks. The assessee is a registered Co-operative Housing Society and during the assessment year 2018-19 earned interest income of Rs. 50,39,861 from the investments made in various Co-operative Banks.
9. Before proceeding further, it is relevant to note the provisions of section 80P of the Act under which the assessee has claimed the deduction in the present case. 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) ..... (d) in respect of any income by way of interest or dividends derived by the cooperative 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 CoOperative Housing Society. Thus, if any income as 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 a deduction. It is pertinent to note that since the assessee is registered under the Maharashtra Co- operative Societies Act, 1960, 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 Cooperative Bank. Accordingly, the assessee kept the deposits in Co-operative Banks registered under the Maharashtra Co-operative Societies Act and earned interest, which was claimed as a deduction under section 80P(2)(d) of the Act. The AO denied the deduction under section 80P(2)(d) of the Act on the basis that the Co- operative Bank is covered under the provisions of section 80P(4) of the Act. We find that the Hon‟ble Supreme Court in Mavilayi Service Cooperative Bank Ltd. vs CIT, Calicut, [2021] 431 ITR 1 (SC) while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Cooperative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. The Hon‟ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, we are of the considered view that section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction under section 80P of the Act which is not the facts of the present case. Therefore, we find no merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the assessee.
As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note 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 Coop 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 cooperative 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 Pathare Prabhu Co– operative Housing Society ITA no.1346/Mum./2023 ITA no.1347/Mum./2023 Page | 8 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 cooperative 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 cooperative 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 '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 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 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 Cooperative 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 investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.”
We find that the learned CIT(A) has placed reliance upon the decision of the Hon‟ble Karnataka High Court in Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 395 ITR 611 (Karn.), wherein it was held that interest earned by the assessee, a Co-operative Society, from surplus deposits kept with a Cooperative Bank, was not eligible for deduction under section 80P(2)(d) of the Act. We find that in an earlier decision the Hon‟ble Karnataka High Court in Pr.CIT v/s Totagars Co-operative Sales Society, [2017] 392 ITR 74 (Karn.) held that according to section 80P(2)(d) of the Act, the amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Thus, there are divergent views of the same Hon‟ble High Court on the issue of eligibility of deduction under section 80P(2)(d) of the Act in respect of interest Pathare Prabhu Co–operative Housing Society ITA no.1346/Mum./2023 ITA no.1347/Mum./2023 Page | 9 earned from Co-operative Bank. No decision of the Hon‟ble jurisdictional High Court was brought to our notice on this aspect. We have to, with our highest respect to both the views of the Hon'ble High Court, adopt an objective criterion for deciding as to which decision of the Hon'ble High Court should be followed by us. We find guidance from the judgment of the Hon'ble Supreme Court in CIT v. Vegetable Products Ltd., [1972] 88 ITR 192. In the aforesaid decision, the Hon'ble Supreme Court has laid down a principle that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted"
Therefore, in view of the above, we uphold the plea of the assessee and direct the AO to grant the deduction under section 80P(2)(d) of the Act to the assessee in respect of interest income earned from investment with Cooperative Banks. Accordingly, we set aside the impugned order passed by the learned CIT(A) for the assessment year 2018-19. As a result, grounds raised by the assessee are allowed.
Coming to the filing of the return of income on dated 19.09.2018, as against the last date on 31.08.2018, this Court observe that in the particular year, the last date for filing the return of income was up to 30.09.2018, which was further extended up to 31.10.2018 vide Finance Act, 2020 with effect from 01.04.2020, in the case of person (other than a Company, whose accounts were required to be audited under this Act or under any other law for the time being in force, as per explanantion-2 (a) (ii) of Section 139 (1) of the Act. Thus, in the instant case, as the Assessee is a person other than a company and its accounts were required to M/s. Rohit Chambers Premises Coop Society Limited be audited and therefore, was required to file its return of income was to be filed upto 31.10.2018, which in fact was filed within time on dated 19.09.2018 against the last date 31.10.2018 as extended.
The identical issue has also been dealt with by the Hon'ble Coordinate Bench of the Tribunal in the case of The Nutan Laxmi Cooperative Housing Society Ltd. Vs. Additional/JT/DY/ACID/ITO, NFAC, Delhi (IT No. 1214/Mumbai 2023 decided on 27.07.2023 and therefore, the decision of the Tribunal is reproduced herein below :-
“8.1 We have given thoughtful consideration to the peculiar and circumstances of the case, as well as the provisions of section 139 of the Act and observe that in the AY 2018-19, in case of person (other than a company) whose accounts were required to the audited under this Act or under any other law for the time being in force, as per Explanation-2 (a)(ii) of section 139(1) of the Act, the due date for filling of ITR was 30th September, however the said due date of 30th September, has subsequently been substituted with 31st October vide finance Act 2020 with effect from 1st April, 2020. 8.2 The Assessee being a Co-Operative Housing Society governed by Maharashtra Co-Operative Society Act 1960 required to be audited under Maharashtra State Co-Operative Act and therefore was liable to file its return of income upto 30-09-2018 and hence the Assessee filed on 18-09-2018, which goes to show that the Assessee has filed its return of income before the due date as prescribed u/s. 139 of the Act and therefore the Assessee is entitled for the deduction as claimed for. Hence we are inclined to accept the claim of the Assessee and consequently delete the addition made by the AO and affirmed by the Ld. Commissioner.
9. In the result, appeal filed by the Assessee stands allowed.”
8. Thus, on the aforesaid analyzations, the case is remanded to the file of the Assessing Officer for decision afresh, in view of above findings, suffice to by affording reasonable opportunity of being heard to the Assessee.
In the result appeal filed by the Assessee is allowed for statistical purposes, in the aforesaid terms.
Order pronounced in the open court on 28.11.2025.