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Facts
The assessee's appeal was filed late by 38 days due to the resignation of the Chartered Accountant and the time taken to find a new tax consultant. The appeal challenged the CIT(A)'s order confirming the disallowance of deduction under section 80P(2)(d) and the denial of TDS credit.
Held
The Tribunal condoned the delay in filing the appeal, allowing it to be heard on merits. The Tribunal held that the interest income earned by the assessee from investments in cooperative banks is eligible for deduction under Section 80P(2)(d). The Tribunal also directed the AO to verify and grant the TDS credit as claimed by the assessee.
Key Issues
Whether the delay in filing the appeal can be condoned? Whether interest income from cooperative banks is deductible under Section 80P(2)(d)? Whether TDS credit can be claimed when the return was filed in response to a notice u/s 148?
Sections Cited
250, 80P, 80P(2)(d), 80P(2)(a)(i), 139, 148
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN
Date of Hearing 10.09.2025 Date of Pronouncement 03.11.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.:
The present appeal has been filed by the revenue challenging the impugned order dt. 31.12.2024 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2010-11.
At the outset, we noticed that the present appeal filed 2. by the assessee is time barred by 39 days and in this regard an application for seeking condonation of delay has been filed by the assessee, wherein it has been mentioned as under:
I, Nitin B Parikh, Treasurer of the Premium Tower Co Operative Housing Society Ltd would like to affirm and state on oath and declared as under:
The case of the appellant was handled by a Chartered Accountant. However, due to his pressure of work, he resigned.
2. The society had to find out new tax consultant to handle tax as well as appeal matters. There are number of appeals pending before the various authorities. It took some time for the new tax practitioner to understand the matter and take control of all the tax matters.
The society had received the order u/s.250 of the Income Tax Act on 01/01/2025. It was required to file an appeal within 60 days of the receipt of the order i.e. by 02/03/2025. The society is able to file appear on 08/04/2025. Therefore, there is a delay in filing appeal by 38 days .
4. There was no malafide intention or motive to delay in filing of an appeal.
5. The appellant request that the delay in filing of an appeal by 38 days may be condoned.
6. The appellant would be highly prejudiced and face irreparable loss if the appeal is not admitted by condoning the delay.
7. The appellant submits that the delay in filing of the appeal before the Income Tax Appellate Tribunal was neither willfully deliberate nor intentional but merely owing to unavoidable circumstances as stated therein above.
Whatever stated above is true and correct to the best of my knowledge and belief.
On the other hand Ld. DR refuted the contents contained in the application and requested for dismissal of the same as there are no ‘sufficient cause’ for not filing the appeal within the time.
Premium Tower Co. Op Housing Ltd, Mumbai.
After having heard the counsel for both the parties on this application for seeking condonation of delay and considering the entire factual position as explained before us and also keeping in view the principles laid down by Hon'ble Supreme Court in the case of Land Acquisition Collector Vs MST Katiji and others 1987 AIR 1353 Supreme Court, wherein it has been held that were substantial justice is pitted against technicalities of non deliberate delay, then in that eventuality substantial justice is to be preferred. However, considering the fact that delay in filing the present appeal had accrued on account of the fact that the CA of the assessee had resigned and during the course of finding new tax consultant had missed the date of filing the appeal in time. In our view the principals of advancing substantial justice is of prime importance. Hence considering the explanation put forth by the Assessee by justifiably and properly explaining the delay which occurred in filing the appeal and construing the expression "sufficient cause" liberally we are inclined to condone the delay in filing the appeal before us. Therefore we condone the delay and admit the appeal to be heard on merits.
6. Ground No.1, raised by the assessee relates to condonation of delay, I allow this ground as the delay has already been condoned.
7. Ground No. 2, raised by the assessee has not been pressed and hence the same is stands dismissed.
8. Ground No. 3, raised by the assessee relates to challenging the order Ld. CIT(A) in confirming the disallowance of deduction u/s 80P(2)(d) of the Act. In this regard Ld. AR submitted that this issue is squarely covered by the decision of Coordinate Bench of ITAT in assessee’s own case for the A.Y 2015-16 and the operative portion of the said order is reproduced herein below:
4.After hearing both the parties and on perusal of the impugned order, we find that the only issue is with respect of allowability of deduction of Rs.13,85,628/- claimed u/s. 80 P(2)(d) on account of interest received by the assessee from various cooperative banks. The ld. CIT(A) has held that the provision of Section 80 P(2)(d) and Section 80 P(2)(a)(i) only extend the benefit of deduction towards income earned by cooperative society engaged in the business of providing banking facility to its members and does not extend to the interest received from the investments made in the cooperative banks. The ld. AO has invoked Section 80P (4) holding that since investments have been made in the cooperative banks and therefore, deduction is to be denied. Here, we are not dealing with, whether assessee can be treated as cooperative bank or not. Here the issue is, assessee had made investment in the cooperative banks, whether interest earned from such investment falls in the category of interest earned from cooperative society or not so as to get benefit u/s 80 P(2)(d)? 5. Section 80P provides that in case of assessee being a cooperative society, the gross total income which includes any income referred to sub-section 2 shall be deducted in accordance with subject to provision of this section. Sub-section 2 of section 80P Clause (a) states that, “in the case of cooperative society engaged in cooperative business of banking and providing credit facilities to its members or ………, the whole of amount of profit and gains of the business attributable to anyone or more or such activity.” Clause (d) of Sub-section 2 of Section 80P reads as under:- (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;
6. Sub section 4 of section 80P carves out of exception that the provision of this section will not apply in relation to any cooperative bank. Further explanation provides that the definition of cooperative bank and primary cooperative bank. The said provision reads as under:-
(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- (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.]
7. Thus, assessee being a cooperative society cannot be reckoned as cooperative bank carrying out banking business. The Hon’ble Jurisdictional High court in the case of Quepem Urban Co-operative Credit Society Ltd. vs. ACIT reported in (2015) 377 ITR 272 (Bom), after analyzing the relevant provision of Section 80P including Sub-section (4) had categorically held that cooperative banks are to be treated as cooperative society. In so far as deduction of interest earned on investment made in cooperative bank, Clause (d) of section 80P(2) provides that any income by way of interest on dividend derived from cooperative societies from its investment with any other cooperative societies, the whole of such income is deductable u/s 80P. The cooperative bank has been defined in part 5 of the Banking Regulation Act 1949. Section 56(ccv) provides that primary cooperative bank means cooperative societies other than a primary agriculture society. This view had come up for the Hon’ble Karnataka High Court in the case of PCIT vs. Totagars Co-operative Sale Society (2017) 392 ITR 74 (Kar.) dated 5th Jan. 2017, wherein the Hon’ble High Court had observed as under:-
1. Whether the learned Tribunal was justified in deleting the additions made by the Assessing Authority being the disallowed deduction claimed u/S 80P(2)(d) of the Income Tax Act and in the light of the decision of the Supreme Court with regard to the same exact assessee as the present one, namely, The Totgars Co-operative Sale Society Ltd., Vs. Income Tax Officer in Civil Appeal Nos.1622 to 1629/2010 decided by the Apex Court on 08.02.2010 or not?
Whether, in the facts and circumstances of the case, the Tribunal is justified in not following the decision rendered by the Hon'ble Supreme Court in Civil Appeal No. 1622 of 2010, wherein the Apex Court has to be held that the words used in Section 80P "the whole of the amount of profits and gains of business" emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society and as such interest earned on funds which are not required for business purposes falls under the category of "other income" taxable under the Income Tax Act?
According to the learned counsel, the present appeal should be admitted on these two substantial questions of law.
However, the contention being taken by the learned counsel is untenable. For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co- operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Co- operative Bank would necessarily be deductable under Section 80P(1) of the Act.
8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word "Co- operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co- operative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co- operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co- operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society".
9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'.
Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said 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. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.
11. The learned counsel has relied on the case of The Totgars Co- operative Sale Society Ltd. Vs. Income Tax Officer, (supra). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.
This view has further been reiterated by the judgment of Hon’ble Kerala High Court in the case of PCIT vs. Percoorkada Service Co. Bank Ltd. (2022) 442 ITR 141 (Kerala) dated 01.11.2021, wherein one of the question before the Hon’ble High Court was, whether the interest income earned from deposits with the banks is eligible for deduction u/s 80P(2). The Hon’ble Kerala High Court has also considered the judgment of Hon’ble Supreme Court in the case of Totagars Cooperative Societies Ltd. 322 ITR 323, wherein the Hon’ble High Court has held that interest income earned from district cooperative bank or state cooperative bank, come within the ambit of section 80P (2)(d), therefore the income constitutes income from other sources and it is eligible for deduction covered u/s 80P(2)(d). Otherwise section 80P(2)(d) specifies any income by way of interest or dividend which is otherwise taxable under the head income from other sources, deduction is allowable if the same is derived from investment made with any other cooperative societies.
9. In contravention, section 80P (2)(a) provides income from carrying out various activities which is in the nature of business. Irrespective whether the interest income derived from activities as provided in section 80P (2)(a) which is otherwise the business income for which deduction is allowable, if there is any interest income which is earned on deposits or investment made with cooperative societies, the same must fall in the category activity or the business, but still is eligible for deduction under the specific provision of section 80P(2)(d). Thus, the interest derived by the assessee from cooperative bank is eligible for deduction u/s 80P(2)(d) because as noted above, cooperative are also cooperative societies for this purpose. This has been held so by the Hon’ble Karnataka High Court and latest judgment of Hon’ble Kerala High Court.
10. Lastly, in so far as judgment of Hon’ble Karnataka High Court in the case of Totagars Cooperative Sale Society (395 ITR 611), which has been referred and relied upon by the Ld. CIT(A), the Hon’ble High Court has held against and observed that income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or cooperative bank. Therefore, section 80P(2)(d) would not apply on the facts of that case. However, as noted above in one of the judgment, the Hon’ble Karnataka High Court has held the same issue in favour of the assessee.
Therefore, following the judgment of Hon’ble Karnataka High Court in the case of Totagars Cooperative Sale Society (2017) 392 ITR 74 (Kar.) dated 5th Jan. 2017 and judgment of Hon’ble Kerala High Court in the case of PCIT vs. Percoorkada Service Co. Bank Ltd. (supra), we hold that assessee is eligible for deduction of interest income earned from cooperative bank.
12. Thus, claim of deduction u/s.80P(2)(d) is allowed to the assessee.
In view of the above discussion and respectfully following the findings of the Tribunal in assessee’s own case for A.Y 2015-16 and also in order to maintain judicial consistency, I hold that assessee is eligible for deduction of interest income earned from cooperative banks and thus allow this ground raised by the assessee.
11. I have heard the counsels for both the parties, perused the material placed on record, judgments cited before me and also the orders passed by the revenue authorities. From the records I noticed Ld. CIT(A) while deciding the said issue in para 5.3.1 of its order was of the view that since assessee has not filed any return of income u/s 139 of the Act and had subsequently in response to notice u/s 148 of the Act had filed return of income claiming TDS credit available in Form No. 26AS. Thus as per Ld. CIT(A) assessee was not eligible to make afresh claim in return of income filed in response to the notice u/s 148 of the Act. However, Ld. AR based on record demonstrated that the income tax return was filed by the assessee u/s 139 of the Act wherein the claim of TDS credit has already been made. Therefore, in view of these facts the order passed by the Ld. CIT(A) is against the factual position and is thus quashed.
In view of the above correct factual position the AO is directed to verify the return filed u/s 139 of the Act, wherein assessee had already claimed TDS credit available in Form -26AS and in case the same is found in order then to grant credit accordingly.
Order pronounced in the open court on 03/11/2025