HORIZON CO-OPERATIVE HOUSING SOCIETY LIMITED,MUMBAI vs. INCOME TAX OFFICER 22(1)(6), MUMBAI

When the appeal was called for hearing, no one appeared on behalf of the assessee, nor was any application seeking adjournment filed. Therefore, we proceed to decide the present appeal on the basis of the material available

The present appeal is delayed by 61 days. Along with the appeal, the assessee has filed an application seeking condonation of delay, which is duly supported by an affidavit sworn by the Authorised Signatory of the assessee society. Having considered the reasons stated by the assessee for seeking condonation of delay, we are of the considered view that the same fall within the parameters for grant of condonation laid down by the Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag v/s MST Katiji and others: 1987 SCR (2) 387. It is well established that rules of procedure are the handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee did not stand to benefit from the late filing of the appeal. In view of the above and having perused the application filed by the assessee, 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 proceed to decide the same on merits.

In this appeal, the assessee has raised the following grounds: - “Denial of deduction of Rs. 111,60,696/- under section 80P(2)(d) of the Income-tax Act "the Act' 1. On facts and circumstance of the case and in law, the learned Commissioner of Income (Appeals) ('CIT(A)) / National Faceless Appeal Centre (NFAC) erred in affirming the action of Assessing Officer ('AO') in denying deduction of Rs. 111,60,696 under section 80P(2)(d) of the Act without appreciating that the Hon'ble ITAT had, for AY 2017-18, already decided this very issue in the appellant's favour and deleted the disallowance.

The sole grievance of the assessee is against the denial of deduction claimed under section 80P(2)(d) of the Act on the interest income earned from deposits maintained with Co-operative Banks.

The brief facts of the case are that the assessee is a co-operative housing society duly registered under the Maharashtra Co-operative Society Act, 1960. For the year under consideration, the assessee filed its return of income on 16/03/2024, declaring a total income of INR 37,57,100, after claiming a deduction of INR 1,11,60,696 under section 80P(2)(d) of the Act in respect of interest income earned from deposits in the Co-operative Banks. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. Accordingly, the assessee was asked to show cause as to why the aforesaid interest income should not be disallowed and added back to the total income of the assessee. In response, the assessee submitted that the interest income has been earned from fixed deposits and deposits in savings bank accounts maintained with Co-operative banks, which are registered under the Maharashtra Co-operative Societies Act, 1960, and therefore, it should be treated as interest derived by a co-operative society from its investment with any other co-operative society under section

The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the disallowance of deduction claimed under section 80P(2)(d) of the Act. 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 is a co- operative housing society collecting money from its members for the maintenance of the society and spending it on the same. As per the assessee, the surplus funds collected from its members are kept from time to time in Deposits with Co-operative Banks, and the interest earned thereon is recognised as income of the society. Thus, during the year under consideration, the assessee earned interest income of INR 1,11,60,696 from its deposits maintained with the Co-operative Banks, viz. Mumbai District Central Cooperative Bank Ltd., Saraswat Cooperative Bank Ltd, Jankalyan Sahakari Bank Ltd., TJSB Sahakari Bank Ltd, and SVC Cooperative Bank, and

We find that while deciding a similar issue, the Coordinate Bench of the Tribunal in Pathare Prabhu Co–operative Housing Society v/s ITO, reported in (2023) 202 ITD 464 (Mum-Trib), held that interest income earned from investment with Co-operative Bank is eligible for deduction under section 80P(2)(d) of the Act. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: – “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) to (c) ** ** ** (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;" 10. 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 ;"

Therefore, respectfully following the decision of the Coordinate Bench of the cited supra, we direct the AO to grant a deduction under section 80P(2)(d) of the Act to the assessee in respect of the interest income earned from deposits made with the Co-operative Banks. Accordingly, the impugned order is set aside, and the Grounds No.1 and 2 raised in the assessee’s appeal are allowed.

In view of our aforesaid findings, Ground No.3 raised in the assessee’s appeal is rendered academic, and thus, is kept open.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 22/05/2026