D.S.K. MADHUBAN (WING A&B) CO-OP HOUSING SOCIETY LID,MUMBAI vs. ITO 41(1)(1), MUMBAI

6. Aggrieved by the order of Ld. CIT(A) assessee has preferred the present appeal before me on the grounds mentioned hereinabove. DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai a) On the facts and circumstances of the case, and in Law, the CITA erred in confirming the addition made u/s 43B of the act amounting to Rs. 31,50,654/- of the amount of property tax not paid during the year till the date of filing of return. b) On the facts and circumstances of the case and in law the CITA failed to appreciate that: The assesse is co-operative housing society not providing any service to non-member f ii The assesse is covered under the concept of mutuality. Only the income which is earned outside the mutuality is taxed.

The assessee only collects contribution from members for managing the society. Accordingly, the assessee does not prepare profit and loss account instead they prepare income and expenditure account iv. Section 43B reads as "a deduction otherwise allowable", in this case since the assessee income from member's contribution is not taxable under the concept of mutuality, the assessee has not claimed the said expenses as deduction in its return. c) The appellant, therefore, prays that the disallowance made u/s 143(1) of the Act is bad at law and shall be deleted.

7. This ground raised by the assessee relates to challenging the order of Ld. CIT(A) in upholding the disallowance u/s 43B of the Act.

8. In this regard, Ld AR reiterated the same arguments as were raised by him before the revenue authorities, and also relied upon his submissions which are reproduced here below: DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai Note on Ground 1 pertaining to disallowance u/s 43B With regards 43b disallowance by CPC while processing the ITR u/s 143(1) of the Act, towards the property tax debited to income and expenditure account not paid till the due date for filing of ITR. CPC made the disallowance based on tax audit filed the assessee.

We submit that since the assessee is not having any business and covered under mutuality, the tax Audit was not required. The assessee has filed the Tax audit report based on advice of an consultant eventhough it was not required, and the auditor in the tax audit report showed the amount of property tax debited to Profit and loss but not paid till the due date of filing of return.

Due to COVID19 the tax payment due date was extened by the BMC and thus the tax was not paid before filing of return of income.

We further submit that the assessee is co-operative society and neither has business nor has any business income. All the income and expenses are solely for the purpose of members only and accordingly any excess of income over expenditure is not taxable under the concept of mutuality.

In line with the same we submit that the assessee maintains income and expenditure account and not profit and loss account. Return. In the ITR as well, the assessee has neither offered any income, nor claimed any expenditure, leave alone the municipal taxes, under the head income from business profession.

Thus, we submit that disallowance U/s 43B is bad at law and the disallowance may please be deleted.

9. On the other hand, Ld. DR appearing on behalf of the department relied upon the orders passed by the revenue authorities. DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai

GROUND 2 a) On the facts and circumstances of the case, and in Law, the CITA and Income Tax Officer Ward 41(1)(1), Mumbai erred in making disallowance u/s 143(1) of the Act which is bad at law. b) On the facts and circumstances of the case and in law the AO failed to appreciate that:

1. There is no discrepancy either clerical or technical in the return filed. ii. No addition can be made u/s 143(1) unless there is some clerical or technical discrepancies in the return.

CPC processed the return without considering the amount of deduction u/s 80P of the Act. iv. In this case, the amount disallowed from the eligible deduction of the assesse is a disallowance that cannot be made without assessment proceedings u/s 143(3) of the Act. c) The appellant, therefore, prays that the disallowance made u/s 143(1) of the Act is bad at law and shall be deleted.

GROUND 3 DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai a) On the facts and circumstances of the case, and in Law, CITA erred in confirming the disallowance made by the Income Tax Officer Ward 41(1)(1), Mumbai towards the deduction claimed on Interest earned of Rs. 13,47,644/- from cooperative banks u/s 80P(2)(d) of the Act. b) On the facts and circumstances of the case and in law the CITA and AO failed to appreciate that:

Denying the deduction benefit available to the assessee is bad at law. c) Thus, the appellant therefore prays that addition of Rs. 13,47,644/-may please be deleted.

Note on Ground 2 pertaining to disallowance u/s 80P(2)(d) DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai The assessee has filed its return claiming deduction u/s 80P(2)(d) amounting to Rs. 13,47,644/- towards interest income of Rs. 7,55,704/- from Saraswat Co-operative Bank and Rs.5,32,147/- from SVC Co-operative bank. CPC while processing the ITR disallowed the deduction claimed u/s 809(2)(d) of the act. The assessee filed an appeal against the same. CITA confirmed the disallowance.

CITA referred to the case of Totagars Cooperative Sale Society Ltd and held that Saraswat Co-operative Bank and SVC Co- operative bank function at par with Commercial Banks and accordingly interest earned from the said banks are not eligible for deduction u/s 80P(2) (d) of the act.

We submit that the assessee rely on the case of PRINCIPAL COMMISSIONER OF INCOME TAX vs. SAHYADRI CO-OPERATIVE CREDIT SOCIETY LTD, Source (2024) 8 NYPCTR 1475 (Ker): (2024) 301 Taxman 36 (Ker) wherein Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 229 CTR (SC) 209: (2010) 35 DTR (SC) 25: (2010) 322 ITR 283 (SC): (2010) 188 Taxman 282 (SC), is distinguished by pointing out that in the said case, the Supreme Court had to consider the case of a society that had appropriated amounts forming surplus receipts which were due to its members, and invested the same to earn interest during the period when the surplus receipts were in its hands. It is his submission that the factual situation in the instant cases is entirely different and the investment was of amounts that had already attained the character of surplus profits in the hands of the assessee.

We further rely on ASHOK TOWER "D" CO-OP. HOUSING SOCIETY LTD. vs. INCOME TAX OFFICER Source (2024) 38 NYPTTJ 474 (Mumbai) where it was held that Hon'ble High Court of Karnataka in the case of Principal CIT vs. Totagars Co-operative Sale Society (2017) 297 CTR (Kar) 158: (2017) 154 DTR (Kar) 25: (2017) 395 ITR 611 (Kar), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under s. 80P(2)(d). We however find that as held by the Hon'ble DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai High Court of Bombay in the case of K. Subramanian & Anr. vs. Siemens India Ltd. & Anr

(1983) 36 CTR (Bom) 197: (1985) 156 ITR 11 (Bom), 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 Principal CIT & Anr. vs. Totagars Co-operative Sale Society (supra) and Hon'ble High Court of Gujarat in the case of State Bank of India vs. CIT (supra), wherein it was observed that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under s. 80P(2)(d) of the Act."

In case of PATHARE PRABHU CO-OPERATIVE HOUSING SOCIETY LTD, vs. INCOME TAX OFFICER Source (2023) 37 NYPTTJ 1401 (Mumbai): (2023) 202 ITD 464 (Mumbai) deduction u/s 80P(2)(d) was allowed after considering Supreme Court's decision in Totgar's Co-operative Sales Society Ltd. Some more case laws 1 KERALA STATE CO OPERATIVE Assessee being a c operative credit society AGRICULTURAI & RURAL whose primary object is to provide financial DEVELOPMENT BANK LTD. accommodation to its members who are all (KSCARDB) vs. ASSESSING other co-operative societies and not OFFICER & ORS., SUPREME members of the public, it is not a co- COURT OF INDIA operative bank within the meaning of s. Date of decision 14th September, 5(b) r/w s. 56 of the BR Act, 1949 and, 2023 therefore, s. 80P(4) is not applicable and Source: (2023) 334 CTR (SC) 601: consequently, assessee is entitled to (2023) 230 DTR (SC) 1 deduction under s. 80P 2 RESERVE BANK STAFF & ssessee is a ci operative society and c OFFICERS OF CREDIT SOCIETY operative banks are also co-operative LTD. vs. INCOME TAX OFFCIER, societies-Provisions of s. 80P(4) specifically ITAT, MUMBAI 'D' BENCH, ITA denies deduction only to co-operative Nos. 3114 to 3118/Mum/2023; banks-Assessee is admittedly not a co- Asst. yrs. 2013-14, 2014-15, operative bank-AO instead of treating the 2017-18, 2018-19 & 2020-21, assessee as credit co-operative society Date of Decision 22nd January, considered the assessee as primary co- 2024, Source (2024) 38 NYPTTJ operative bank without any basis-In view DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai 85 (Mumbai) of the above facts, that interest income earned by the assessee on fixed deposits with the co-operative banks are eligible for deduction under s. 80P(2)(d) 3 MAKER TOWER A&B C During this year, assessee has claimed OPERATIVE HOUSING SOCIETY deduction uder s. 80P in respect of the LTD. vs. ASSISTANT interest income earned from the three co COMMISSIONER OF INCOME TAX, operative banks-Thus, co-operative banks ITAT, MUMBAI "E" BENCH, ITA in which assessee had invested are Nos. 1057 to 1060/Mum/2022; registered as co-operative societies and Asst. yrs. 2014- 15 to 2018-19, therefore these banks are ci operative Date of Decision 18th October, society as per the provisions of s 2(19)-AO 2022, Source (2022) 36 NYPTTJ is directed to allow deduction under s. 1233 (Mumbai) 80P(2)(d) of the Act. 4 PATHARE PRABHU CO he assessee kept the deposits in Coperative OPERATIVE HOUSING SOCIETY Banks registered under the Maharashtra LTD. vs. INCOME TAX OFFICER, Co-operative Societies Act and earned ITAT, MUMBAI 'C BENCH, ITA interest, which was claimed as a deduction Nos. 1346 & 1347/Mum/2023; under s. 80P(2)(d)- View that s. 80P(4) is Asst. yr. 2017-18 and 2018- 19 applicable to the assessee who is co- Date of Decision 27th July, 2023, operative bank claims deduction under s. Source (2023) 37 ΝΥΡTTJ 1401 80P-Hence s. 80P(4) not attracted in this (Mumbai): (2023) 202 ITD 464 case as the assessee is co-operative society (Mumbai) 5 JANSEVAK CO OPERATIVE Assessee is a c operative society, which is SOCIETY LTD. vs INCOME TAX engaged in providing credit facilities to its OFFICER, ITAT, MUMBAI 'F' members-Thus, if any income as referred to BENCH in sub-s. (2) to s. 80P is included in the Asst. yr. 2017-18 Date of Decision gross total income of the assessee, the 26th May, 2023, Source (2023) same shall be allowed as a deduction-It is pertinent to note that since the assessee is 37 NYPTTJ 739 (Mumbai) 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 s. 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 District Central Co-operative Bank and earned interest, which was claimed as a deduction under s. 80P-CIT(A) denied the deduction under s. 80P(2)(d) on the basis that the co-operative bank is covered under the provisions of s. 80P(4)-Not correct-Sec. 80P(4) is of relevance only in a case where the assessee, who is a co-operative bank, claims a deduction under s.80P DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai

6.1 It may be stated here that the co-ordinate bench of ITAT, Mumbai in large number of cases allowed claims of the assesseewhere the facts were exactly the same. In (Α.Υ: 2020-21) in the case of Hilla Heights Co-operative Housing Society Limitedalso the CPC had disallowed the claim of the assessee u/s 143(1) of the Act and the subsequent appeal before the ld.CIT(A) also went against the assessee. Relevant paras of the order are reproduced below for ready reference:

"1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter in short "Ld.CIT(A)"] dated 30.09.2022 for the A.Y.2020-21.Brief facts of the case are, assessee is a cooperative housing society and filed its return of income on 21.10.2020 within the extended due date applicable to Cooperative Society u/s. 139(1) of Income-tax Act, 1961 (in short "Act").

3. Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and filed a detailed written submissions during the course of the appellate proceedings. After considering the submissions of the assesseeLd.CIT(A) observed that the disallowance u/s. 80P(2) was made in the original Assessment Order u/s. 143(1) of the Act and not u/s. 154 of the Act. Therefore, the concept of merger will not be applicable in this case. Therefore, he is of the opinion that assessee cannot challenge the denial of deduction u/s. 80P under the order of section 154 by relying on certain decisions and assessee should have challenged the same u/s. 143(1) of the Act, accordingly, he dismissed the appeal filed by the assessee.

1. On the facts, and in circumstances of the case, and in law, dismissing the appeal on the ground stating that "the effect of the subsequent rectification u/s 154 dated 15.01.2022 has to be read as forming part of original intimation u/s 143(1) dated 25.11.2021 only and not independently. therefore, the impugned claim of deduction u/s 80p denied originally vide intimation u/s 143(1) cannot be challenged by the appellant through the present appeal against order under section 154" without appreciating that, adjustment made in intimation under section 143 (1) was beyond the scope of the section 143 (1) it being not incorrect claim apparent from any information in return, and therefore refusal of application under section 154 was independent of Intimation under section 143 (1).

2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in making disallowance of claimed under section 80P without appreciating that these were not incorrect claims apparent from any information in the Return of Income in terms of section 143 (1) of the Income-tax Act 1961. DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai

3. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) failed to appreciate that the Centralized Processing Centre (CPC), Bengaluru erred in disallowing the claim of deduction under Section 80P of the Income Tax Act, 1961 without mentioning any reasons for disallowance of the valid claim while processing the return of income under section 143 (1) of t the Income Tax Act, 1961 as in much as in order under section 154 of the Income-tax Act 1961.

4. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) failed to the Centralized Processing Centre (CPC), Bengaluru erred in disallowing the claim of deduction under Section 80P of the Income Tax Act, 1961 in spite of the fact, that the appellant had filed return of income within the "second due date" applicable in terms of section 139 (1) of the Income Tax Act, 1961 and the intimation issued under section 143 (1) of the Income Tax Act, 1961 had also mentioned due date for filing return of income as "extended due date" since, book of accounts of your appellant were liable to audit under Section 81 of the Maharashtra Co- operative Society Act, 1960. 5. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) failed to appreciate that, the Centralized Processing Centre (CPC), Bengaluru erred in disallowing the claim of deduction under Section 80P of the Income Tax Act, 1961 without considering the facts, that the appellant had made a rectification request under Section 154 of the Income tax Act, 1961 for re-processing the return of income but, the reprocessing of the return of income was considered on the same lines as intimation issued in terms of section 143 (1) of the Income Tax Act, 1961."

(d) was disallowed and he brought to our notice the findings of the Ld.CIT(A). However, Ld.CIT(A) has not decided the issue with regard to disallowance u/s. 80P(2)(d) and however, he has decided the issue on whether assessee should file the appeal DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai against the order u/s. 143(1) of the Act or u/s. 154 of the Act. Ld. AR prayed that the claim of the assessee may be allowed and in this regard he relied on the order of the Coordinate Bench in the case of Ashoka Palace Co-Op. Hsg. Soc. Ltd. v. ITO in ITA.No. 2062/Mum/2021 dated 31.10.2022.

7. Considered the rival submissions and material placed on record, we observe from the record that assessee has received income under the head income from the cooperative banks which are eligible to be claimed u/s. 80P(2)(d) of the Act. Since the disallowance was made u/s. 143(1) of the Act assessee filed a rectification application before Centralized Processing Centre, Bangalore, however, the same was denied without giving any proper reasons and assessee filed the appeal before Ld.CIT(A) and Ld.CIT(A) has not decided the issue on merit, however, he proceeded to decide the issue on technical ground whether assessee should file the appeal u/s. 143(1) or u/s. 154 of the Act. After considering the overall facts on record and the issue under consideration in our view, issue is squarely covered in various decisions of the Hon'ble Supreme Court, various High Courts and Coordinate Bench. In this regard, we observe that Coordinate Bench has decided the issue in favour of the assessee in the case of Ashoka Palace Co-Op. Hsg. Soc. Ltd. v. ITO (supra) observing as under: - "5. Both sides heard, orders of authorities below examined. The solitary issue raised by the assessee in appeal is with respect to assessee's eligibility to claim deduction u/s. 80P(2)(d) of the Act on interest income from deposits with Co- operative banks. It is not in dispute that the assessee has earned interest income from deposits with Co-operative Bank. The authorities below have denied the benefit of section 80P(2)(d) of the Act to the assessee on the premise that the interest income is not eligible for deduction u/s. 80P(2)(d) of the Act.

6. The issue whether interest income derived from deposits with cooperative banks is eligible for deduction under section 80P(2)(d) of the Act or not has been considered by Tribunal in catena of decisions. The Co-ordinate Bench in the case of DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO, 94 taxmann.com 15 (Mumbai) after considering various decisions by Hon'ble High Courts and the Tribunal and the provisions of the Act, has held that interest income derived by a co-operative society from investments with a co- operative bank, would be entitled for deduction under section 80P(2)(d) of the Act.

The relevant extract of the order reads as under: - "7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us:

"80P(2)(d) (1) Where in the case of an assessee being a co- operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee.

(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 cooperative society, the whole of such income; 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 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 DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai 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 cooperative 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 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 'cooperative 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 cooperative bank pursuant to the insertion of Subsection (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 cooperative 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 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."[Emphasized by us]" DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai

7.In another important decision Hon'ble ITAT, Mumbai Bench has also decided the issue in the favour of the assessee in in Dheeraj Gaurav Heights Co-operative Housing Society Limited. Relevant pars are extracted as below:

"The assessee in the grounds claimed that on the facts and circumstance of the case, under the provisions of Section 143(1)(a), the ADDL/JCIT(A) erred in confirming the rejection of claim under section 80P(2)(d) in the Intimation 143(1)(a) without appreciating the fact and law that the CPC was mandated to make only prima facie adjustments as provided in clauses (i) to (v) of Section 143(1)(a) and too by providing prior intimation/notice to the Appellant, for such denial, in writing or in electronic mode as per first proviso to Section 143(1)(a). We have considered the above submissions and found that the coordinate benches of Hon'ble ITAT, Mumbai in several cases have decided the issue of 80P (2) (d) in favour of the cooperative societies. In one of the cases of Blue Rose Industrial Premises Cooperative Society v. CIT Appeal, ITAT No. 4059 of 2023 it was held as under:

"11. In the present case, there is no dispute that the assessee is a Co-Operative 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 Co-operative Bank. Accordingly, the DSK Madhuban (Wing A&B) Co-Op Housing Society, Mumbai 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 Cooperative Bank is covered under the provisions of section 80P(4) of the Act.

8. It is also noticed that inthe case of Sterling Court in 75/Mum/2024 dated 11.06.2024 'SMC, Mumbai bench has allowed the appeals on exactly similar ground. After detailedanalysis of similar facts and the provisions of section 143(1) of the Act,it has been decidedthat adjustment of disallowance of deduction u/s 80P(2)(d) is not permissible adjustment under section 143(1) of the Act.

9. Respectfully following the view taken by the Hon'ble Coordinate Benches of Mumbai Tribunal, we hold that the CPC was not justified in disallowing the claim of decision u/s 154/143(1) of the order. We set aside the order of the ld.CIT(A) and allow the deduction claimed by the assessee u/s 80P(d)(2) of the Act.

ITA No. 6383/Mum/2024, A.Y 2023-24