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Facts
The assessee, a Co-operative Housing Society, filed its return claiming deduction under Section 80P(2)(d) for interest earned from co-operative banks. The ADIT(CPC) disallowed this claim under Section 143(1) without providing any reasons. The CIT(A) upheld this disallowance.
Held
The Tribunal held that the disallowance made under Section 143(1) without assigning any reasons is unsustainable in law. It further noted that interest earned from co-operative banks is eligible for deduction under Section 80P(2)(d), relying on various ITAT decisions.
Key Issues
Whether disallowance of deduction under Section 80P(2)(d) by ADIT(CPC) under Section 143(1) without assigning reasons is valid, and whether interest earned from co-operative banks is eligible for such deduction.
Sections Cited
143(1), 143(3), 80P(2)(d), 139(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
Assessment Year: 2020-21 Wildernest Better Living V The Income Tax Officer, Maintenance Co-Operative s Ward-6(1), Pune. Society Limited, Plot No.58, 59 and 60, Woldernest Society, Khadakwasla, Taluka Haveli, Pune – 411024. Maharashtra. PAN: Appellant/ Assessee Respondent / Revenue Assessee by Shri Arpit Dnyandeo Dambhare & Shri Deepak Sasar – CA’s Revenue by Shri Madhan Thirmanpalli – Addl.CIT(DR) Date of hearing 15/05/2025 Date of pronouncement 23/05/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee directed against the order of ld.Addl./Joint Commissioner of Income Tax(Appeal), Panaji under section 250 of the Income Tax Act, 1961 for the A.Y.2021-22 dated 23.10.2024. The Assessee has raised the following grounds of appeal :
1. The Ld. CIT(A) has wrongly confirmed the disallowance of Deduction amounting to Rs. 16,19,123/-us. 80P(2)(d) and 80P(2)(c)(11) of the Income Tax Act, 1961.
2. The Ld. CIT(A) has not followed the Principle of Natural Justice.
3. The Appellant crave leave to add, delete, amend, alter, vary and/or withdrawal or any one of the above grounds of appeal.” Submission of ld.AR :
2. Ld.AR Mr.Deepak S. Sasar(CA) filed a factual paper book and case law paper book. Ld.AR submitted that Assessee is a Co- operative Housing Society duly registered under Maharashtra Co- operative Societies Act. Copy of the Certificate is at page no.1 of the paper book. Mr.Deepak S.Sasar submitted that during the year assessee had filed Return of Income u/s.139(1) of the Act, and claimed deduction 80P of the Act. However, the ADIT(CPC), Bangalore vide order dated 19.10.2022 u/s.143(1) of the Act, disallowed the claim of the Assessee of deduction u/s.80P of the Act, without giving any reasons. Ld.AR took us through all the 14 pages of order u/s.143(1) of the Act, to demonstrate that nowhere ADIT(CPC) has mentioned the reasons for disallowance of Deduction u/s.80P of the Act. Therefore, ld.AR pleaded that disallowance is bad in law, as there is no provision u/s.143(1) of the Act, for any such disallowance.
2.1 Without prejudice, ld.AR submitted that ld.CIT(A) has upheld the disallowance stating that Assessee is not eligible for deduction u/s.80P(2)(d) of the Act, on the interest income earned from Co- operative Banks as Co-operative Banks are not Co-operative Societies. Ld.AR submitted that Assessee had earned interest from Co-operative Banks which are duly registered as Co-operative Societies. Ld.AR submitted that in the Assessee’s case for A.Y.2017-18, the Department had allowed the Assessee’s case in the assessment order passed under section 143(3) of the Act. Ld.AR took us through the Assessment Order u/s.143(3) for A.Y.2017-18 dated 30.11.2019 in assessee’s own case. Ld.AR also took us through the Computation of Income for A.Y.2017-18. Ld.AR submitted that therefore assessee is eligible for deduction u/s.80P of the Act. Ld.AR relied on the following case laws : Nyati Estate Cooperative Housing Society vs. ITO, Ward 14(2), Pune. dated 20.03.2019. M/s Torino Co-operative Housing Society Ltd. vs. ITO-41(1) (5). dated 02.08.2024.
Ashok Tower D Co Op Housing Society Ltd. Vs. Income Tax Officer, dated 21.06.2024. Sonmarg Co-operative Housing Society Ltd. vs. CIT (A), NFAC. dated 29.03.2022. The Venus Parkland Co-Op. Housing Service Society Ltd. Vs. The Income Tax Officer. Ahmedabad, (2024) 209 ITD 0229 (Ahmedabad-Trib). Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of the Assessing Officer and ld.CIT(A). During the hearing, we specifically asked ld.DR to explain us the reason for not allowing deduction u/s.80P of the Act, to the assessee u/s.143(1) of the Act. Ld.DR could not explain us.
Findings & Analysis : 4. We have heard both the parties and perused the material placed before us. As per the order u/s.143(1) dated 19.10.2022 the Return of Income was filed on 08.03.2022 and Due Date for filing the Return of Income was 15.03.2022. Thus, the Return of Income was filed u/s.139(1) of the Act, within the statutory time limit. However, the ADIT(CPC) has not allowed assessee the deduction claimed u/s.80P(2)(d) of Rs.16,19,123/- without giving any reason. We have studied the entire order under section 143(1) consisting of 14 pages and observed that nowhere the reason for disallowance is mentioned. Therefore, prima facie this order is not sustainable.
4.1 The Section 143(1) is reproduced here as under : Assessment. 143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure 68[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 69[section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee: Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to, him: Provided further that no intimation under this sub-section shall be sent after the expiry of 70[nine months] from the end of the financial year in which the return is made. Explanation.—For the purposes of this sub-section,— (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,— (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b) the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a).
4.2 Thus, in none of the sub-clauses of section 143(1), Assessee’s case fits into for disallowance. Inspite of this, assessee’s claim u/s.80P(2)(d) was disallowed. Ld.CIT(A) has upheld the said claim on the ground that interest earned from Co-operative Banks is not eligible for deduction u/s.80P(2)(d) of the Act. Prima facie, there is no evidence in the order u/s.143(1) of the Act, to presume that disallowance u/s.80P(2)(d) was because of the reason that interest earned from Co-operative Banks is not eligible for deduction u/s.80P(2)(d) of the Act. Therefore, ld.CIT(A) had no jurisdiction to presume. Be it as it may be, this issue is covered in favour of assessee. ITAT in various decisions has held that interest earned from Co-operative Banks is eligible for deduction u/s.80P(2)(d) of the Act.
M/s.Torino Co- operative Housing Society Ltd., vs. ITO held as under : “2 The assessee is a registered Co-operative Housing Society Ltd. filed its return of income on 08.01.2021 for AY. 202021 admitting a total income of Rs. 3,15,680 The assessee has claimed a deduction under section 80P(2)(d) of the Act, towards interest on deposits with cooperative banks to the tune of Rs. 16,42,639/- The return was processed by the CPC under section 143(1) of the Act, wherein the deduction under section 80P(2)(d) of the Act was disallowed. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) confirmed the disallowance by placing reliance on the decision of the Hon'ble Karnataka High Court in the case of PCIT Vs. Totgars Cooperative Sale Society (2017) 395 ITR 611 (Kar). The assessee is in appeal before the Tribunal against the order of the CIT(A). …………..
6. Considering that the issue in assessee's case being identical ie denial of deduction under section 80P(2)(d) towards interest earned from deposits with Cooperative Banks, respectfully following the above decision we hold that the assessee is entitled for deduction under section 80P(2)(d) towards income derived from deposits with Co- operative Bank. Accordingly, the AO is directed to allow the deduction claimed by the assessee.
The assessee has also raised grounds contending that the denial of deduction under section 80P(2)(d) does not fall within the scope of adjustments permissible under section 143(1)(a). Since we have already allowed the claim of deduction under section 80P(2)(d) based on merits, the above contention has become academic and does not warrant separate adjudication.
In the result, the appeal of the assessee is allowed.” 4.2.2 ITAT Mumbai in Sonmarg Housing Co-operative Housing Society Ltd., vs. CIT(A) held as under : “Accordingly, we hold the interest income derived by a co-operative society from a co-operative bank would be eligible for deduction under Sec.80P(2) (d) of the Act as a co-operative bank continues to be a co- operative society. Accordingly, Ground No. 1 and 2 are decided in favour of the Appellant. Addition of INR 19,54,427/- is deleted and the Appeal is allowed.”
The assessee’s claim for deduction u/s.80P(2)(d) was allowed by ADIT(CPC) u/s.143(1) for A.Y.2019-20, A.Y.2022-23, A.Y.2023-24. Assessee’s claim for deduction u/s.80P(2)(d) was allowed u/s.143(3) of the Act, for A.Y.2017-18. Therefore, consistency has to be followed by the ADIT(CPC) when there is no change in facts of the case. Thus, even for this reason the order under section 143(1) disallowing assessee’s claim of deduction under section 80P of the Act, is unsustainable.
5.1 Therefore, respectfully following the judicial precedents and consistency, the Assessing Officer is directed to allow deduction u/s.80P(2)(d) of Rs.16,19,123/- as claimed by assessee in the Return of Income. Accordingly, grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 23 May, 2025.