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Facts
The assessee, a co-operative housing society, claimed deduction under Section 80P(2)(d) on interest income earned from a co-operative bank. The AO disallowed the deduction, which was upheld by the CIT(A) on grounds of limitation. The assessee appealed to the Tribunal.
Held
The Tribunal condoned the delay in filing the appeal, stating that the expression "sufficient cause" should be interpreted liberally. The Tribunal held that interest income earned by a co-operative society from investments in a co-operative bank is eligible for deduction under Section 80P(2)(d) of the Act.
Key Issues
1. Whether the delay in filing the appeal before the CIT(A) was sufficiently explained to warrant condonation? 2. Whether interest income earned by a co-operative society from a co-operative bank is deductible under Section 80P(2)(d)?
Sections Cited
80P(2)(d), 154, 143(1), 249(3), 5
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1068435098(1), dated 08.09.2024 passed against the rectification order by Centralised Processing Centre, Bengaluru (CPC), u/s. 154 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 11.01.2023 for AY 2021-22.
2. Grounds taken by the assessee are reproduced as under: “1. Ld CIT(A) erred in disposing of appeal without going into merits of the case and causing substantive injustice. 2. The Ld CIT(Appeals) NFAC erred in confirming the action of the Ld. AO in disallowing the deduction u/s 80P(2)(d) of Rs. 3,83,980/- resulting into genuine hardship.”.
There is a delay of 33 days in filing the present appeals before the Tribunal for which petition and affidavit for condonation of delay is placed on record. We have considered the petition for condonation of the said delay. Upon perusal of the same and hearing both sides, we deem it fit to condone the delay on the ground that there was sufficient cause for the said delay. Accordingly, we condone the delay to take up the matter for adjudication.
Brief facts of the case as culled out from records are that assessee is a co-operative housing society formed in the year 1983 having 57 members. Assessee filed its return of income on 25.12.2021 reporting the total income at Nil, by claiming deduction u/s. 80P(2)(d) of Rs.3,83,981/-, comprising of interest on fixed deposit of Rs.3,48,086/- and on savings account of Rs.35,895/-. Assessee earned this interest income from Mumbai District Central Co-operative Bank. This return was not e-verified by the assessee and a fresh return was filed on 31.03.2022. Return was processed by Central Processing Centre (CPC), Bengaluru, u/s. 143(1) of the Act denying the deduction claimed u/s. 80P(2)(d). An online rectification application was moved by the assessee on 05.12.2022, u/s. 154 to rectify this mistake apparent from record. However, it did not yield the desired result. CPC passed an intimation order denying the application for rectification on 11.01.2023. Aggrieved, assessee went Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 in appeal before the ld.CIT(A), who dismissed it owing to appeal barred by limitation. Aggrieved, assessee is in appeal before the Tribunal.
5. The moot point before us is in respect of eligibility of deduction claimed u/s.80P(2)(d) in respect of interest income earned by the assessee from Co-operative Banks of Rs.3,83,981/- which according to the authorities below are not cooperative society.
6. In this respect, we note that ld. CIT(A) after reproducing the written submission of the assessee, dismissed it as not admissible on account of being barred by limitation. Assessee had furnished application for condoning the delay but not accepted by the ld. CIT(A) which are reproduced at page 15 and 16. From the perusal of the same, we note that assessee had moved application for rectification twice and was waiting for the same.
6.1. To address the issue of ld. CIT(A) dismissing the appeal on limitation and not addressing the merits of the case by condoning the delay, we need to delve into the understanding of the expression “sufficient cause”. Sub-section 3 of Section 249 contemplates that the CIT(A) may admit an appeal after expiry of relevant period, if he is satisfied that there was a “sufficient cause” for not presenting it within that period. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon'ble High Court as well as before the Hon'ble Supreme Court, then, Hon'ble Court were unanimous in their conclusion that this expression is to be used liberally.
6.2. We may make reference to the following observations of the Hon'ble Supreme Court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353: "1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.
It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so."
6.3. Similarly, we would like to make reference to authoritative pronouncement of Hon'ble Supreme Court in the case of N.Balakrishnan Vs. M. Krishnamurthy (supra). It reads as under:
"Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss."
6.4. We do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice, to say that the Hon'ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the delay, then such reasons are to be construed with a justice-oriented approach.
6.5. In light of the above, if we examine the facts then it would reveal that there is a delay of 206 days in filing of the first appeal by the assessee before the ld. CIT(A). In its submissions as considered in the order of ld. CIT(A), assessee has explained the reasons which prevented him in filing the appeal withing the prescribed limitation. In Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 this application dated 16.04.2024, assessee submitted that it was not aware about the demand raised as available on Income Tax portal and came to know about it only when the demand notice was received. Assessee had moved an application u/s. 154 against the said demand which was rejected by Centralised Processing Centre for which assessee was not aware. This fact submitted by the assessee was not considered by the ld. CIT(A) while rejecting the application for condonation of delay and is therefore not justifiable. Considering the said explanation of the assessee, we condone the same and take up the matter for its meritorious adjudication since in the given set of facts, the issue before us is no longer res integra as extensively dealt by Hon'ble High Court of Karnataka in case of the PCIT vs. Totagar Cooperative Sales Society Limited [2017] 392 ITR 74 / 78 taxmann.com 169 (SC). Relevant findings given in para 7 to 12 are as under: "7. However, the contention being taken by the learned counsel is untenable. For the issue that was before 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 Co-operative Society, then any interest earned by the Co-operative Society from a Co-operative Bank wo necessarily be deductable under Section SOP(I) 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 Cooperative 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".
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 Ban. would be included in the words 'Co- operative Society'.
10. 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 IT. Act, the said amount of interest earned from a Co-operative Society Bank would Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 be deductable from the gross income of the Co-operative Society inorder to assess it: total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assesse respondent. 11.The learned counsel has relied on the case of Totgars Co- operative Sale Society Ltd. v. IΠΟ (2010) 322 ITR 283/188 Taxman 282 (SC). 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 SOP(2)(d) of the L.T. Act and not Section S * 0P(2)(a)(i) of the IT. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of la canvassed by the learned counsel for the Revenue even arise it is the present case.
For the reasons stated above, this Court does not find any merit in the present appeal. Hence, the appeal is dismissed.”
6.6. From the above, we understand that the provisions of section 80P(2)(d) of the Act are very clear and assessee is entitled for deduction u/s.80P(2)(d) of the Act in respect of interest or dividends received from investments made with any other cooperative societies. The decision in the case of The Totagar Cooperative Sales Society Limited v. ITO 322 ITR 283 (SC), is not on the issue of whether the assessee is entitled for exemption u/s. 80P(2)(d) of the Act vis-a-vis the interest income earned by the cooperative society from investments in other cooperative societies. Hence the decision of Hon'ble Supreme Court in the case of The Totagar Cooperative Sales Society Limited v. ITO has no application to the facts of the present case.
6.7. From the above extraction, we also note that the Hon'ble High Court held that the word ‘cooperative society’ are the words of the large extent and denotes a genus, whereas the word ‘cooperative bank’ is a word of limited extent, which merely de-markets and identifies a particular species of the genus ‘cooperative societies’. Thus, a cooperative bank is merely a variety of the cooperative societies which can be of a different nature and can be involved in different activities.
Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 7. 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, since 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 cooperative societies, therefore, the interest income derived by a cooperative 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 also find that the issue before us of whether a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank or not is covered in favour of the assessee not only by the decision of Hon’ble High Court of Karnataka referred above but also in plethora of cases including few of the following cases: (i) Land and Cooperative Housing Society Ltd. v. ITO (2017) 46 CCH 52 (Mum) (ii) C. Green Cooperative Housing and Society Ltd. v. ITO 21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. v. ITO Range- 20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017.
8.1. In the decision by the coordinate bench of ITAT Mumbai in the case of Ashok Tower “D” Co. Op. Housing Society Ltd. vs. ITO [2024] 161 taxmann.com 518 (Mumbai - Trib.), this has been dealt with extensively. Relevant extracts are as under: “We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. v. Totagars Cooperative Sale Society Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 [2017] 78 taxmann.com 169/392 ITR 74 (Karnataka) and Hon'ble High Court of Gujarat in the case of State Bank of India v. CIT [2016] 72 taxmann.com 64/290 CTR 129/389 ITR 578/241 Taxman 163 (Gujarat), had also held that the interest income earned by the assessee on its investments held with a co- operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the cooperative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT(A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. v. ITO (2010) 322 ITR 283 (S.C) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a cooperative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT "F" bench, Mumbai in the case of M/s Vaibhav Cooperative Credit Society v. ITO -15(3)(4)(ITA No. 5819/Mum/2014, dated 17.03.2017 is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee cooperative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec. 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT "SMC" Bench, Mumbai in the case of Shri Sai Datta Cooperative Credit Society Ltd. v. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT v. Totagars co-operative Sale Society [2017] 83 taxmann.com 140/297 CTR 158/395 ITR 611 (Karnataka), the High Court had concluded that a co- operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. v. Siemens India Ltd. and Anr [1983] 36 CTR 197/[1985] 156 ITR 11/[1983] 15 Taxman 594 (Bombay), where there is a conflict between the decisions of non-jurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. v. Totagars Cooperative Sale Society [2017] 78 taxmann.com 169/392 ITR 74 (Karnataka) and Hon'ble High Court of Gujarat in the case of State Bank Of India v. CIT [2016] 72 taxmann.com 64/290 CTR 129/389 ITR 578/241 Taxman 163 (Gujarat), wherein it was observed that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act."
Mulund Samata Coop Hsg Soc Ltd., AY 2021-22 9. Considering the factual matrix in the present case which are akin to the judicial precedents dealt above, we hold that assessee is entitled to claim of deduction u/s. 80P(2)(d) towards interest earned on deposits with cooperative banks. Accordingly, the disallowance made is deleted and appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.