SHREE MANGIRISH CO-OPERATIVE HSG LTD.,MUMBAI vs. ITO, WARD-42(1)(5), MUMBAI

Therefore, in the interest of substantial justice, the delay of 26 days in filing the appeal is hereby condoned, and the appeal is admitted for adjudication on merits.

The assessee is a cooperative housing society registered under Maharashtra Co-operative Societies Act, 1960. For the year under consideration, the assessee did not file its original return of income.

3 I.T.A. No. 5936/Mum/2025 Subsequently, notice under section 148 of the Act was issued under the new regime after following the due procedure under section 148A of the Act on 23/03/2023. In lieu of the same, the assessee filed its return of income wherein it claimed deduction under section 80P(2)(d) for the first time. The Ld.AO, during the assessment proceedings, denied the claim of deduction under section 80P(2)(d) by observing that the interest income earned by the assessee out of fixed deposits is not attributable to its business operations and, therefore, is not eligible for deduction under section 80P(2)(a)(i). The Ld.AO also noted that the interest income is not eligible for deduction under section 80P(2)(d) by relying on the decision of the Hon’ble Karnataka High Court in the case of PCIT versus Totagars Co-operative Sales Society, reported in (2017) 83 taxmann.com 140. The Ld.AO thus observed as under:

“Once it is held that the co-operative banks are entirely different species than those of co-operative societies, the interest earned from such co- operative banks is not eligible for deduction u/s 80P(2)(d) of the Act. From the plain reading of section 80P(2)(d) of the I.T. Act, it is apparent that to claim of deduction under this section, the income must have been earned by way of interest or dividends and the income must be derived from investment with any other co-operative society only. Therefore, it is concluded that the person or body corporate (in this case, co-operative bank) from which such interest income is derived will not change the character of income, viz., the income from other sources, which is ineligible for deduction under section 80P(2)(d) of the Act. In view of the above discussion, it is beyond any doubt that the assessee’s claim for deduction with respect to interest income earned from different co-operative banks, commercial banks and other financial institutions is not found to be allowable deduction under any provision of section 80P of the I.T. Act. It is concluded that the interest income of Rs. 12,09,959/- earned by assessee-society from co-operative banks and other financial institutions is treated as income under the head “Other Income” u/s 56 of the Act. Penalty is initiated separately u/s 270A for under-reporting in consequence of misreporting of income for A.Y. 2019-20.”

4 I.T.A. No. 5936/Mum/2025 Aggrieved by the order of the Ld.AO, the assessee preferred an appeal before the Ld.CIT(A).

“5.4.1. This ground relates to addition of Rs. 12,09,959/- which was earned by the appellant as interest from its deposits in the bank. The appellant in his argument has submitted that this income is eligible for deduction u/s 80P more particularly u/s 80P(2)(d). I have carefully examine the facts of the present appeal. It is undisputed that return of income was not filed in the present case. As per provisions of section 80(5), an assessee is require to file his return of income in order to avail deduction in respect of income mentioned in Chapter VI-A Part- C. Deduction u/s 8OP falls in this part of chapter VI-A. Therefore, in order to avail deduction u/s 80P needs to be filed mandatorily. With effect from 01.04.2018 this mandate of filing of return was made more strict wherein it was specified that in order to avail deduction mention in Chapter VI-A Part-C the assessee needs to not only file his return of income but need to file it on or before the due date specified in section 139(1). It is admitted fact in this case that return of income was filed by the appellant only after the notice u/s 148 was issued. More specifically the return of income was filed on 16.10.2023. Undisputedly as per provisions of section 80AC the appellant is not eligible for any deduction u/s 80P. These provisions were interpreted in the above manner by Hon'ble Kerala High Court in the case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham Vs. CIT 459 ITR 730 (Kerala) [14-03-2023]. In which it was held as under: "1. On a consideration of the rival submissions and on a perusal of the statutory provisions, we find that a reading of section 80A(5) and Section 80AC of the IT Act as they stood prior to 1-4-2018, when the latter provision was amended by Finance Act 2018, would reveal that the statutory scheme under the IT Act was to admit only such claims for deduction under section 80P of the IT Act as were made by the assessee in a return of income filed by him. That return can be under sections 139(1), 139(4), 142(1) or section 148, and to be valid, had to be filed within the due date contemplated under those provisions. Under section 80A(5), the claim for deduction under section 80P could be made by an assessee in a return filed within the time prescribed for filing such returns under any of the above provisions. The amendment to Section 80AC with effect from 1-4- 2018, however, mandated that for an assessee to get a deduction under section 80P of the IT Act, he had to furnish a return of his income for such assessment year on or before the due date specified

5 I.T.A. No. 5936/Mum/2025 in section 139(1) of the IT Act. In other words, after 1-4-2018, even if the assessee makes his claim for deduction under section 80P in a return filed within time under sections 139(4), 142(1) or section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under section 139(1). Thus, it is clear that the statutory scheme permits the allowance of a deduction under section 80P of the IT Act only if it is made in a return recognised as such under the IT Act, and after 1-4-2018, only if that return is one filed within the time prescribed under section 139(1) of the Act. As the return in these cases, for the assessment years 2009-10 and 2010-11, were admittedly filed after the dates prescribed under sections 139(1) and 139(4) or in the notices issued under section 142(1) and section 148, the returns were indeed non- est and could not have been acted upon by the Assessing Officer even though they were filed before the completion of the assessment. The above proposition was followed by: ITAT Pune in the case of Solapur Dist M S K Samiti HMaster T and N T PathMydtPandharpur Vs. ITO ITAT PUNE, delivered on 8.03.3024. 5.4.2 In terms of above discussion the appellant is to found to be eligible for claim for deduction u/s 80P(2)(d) ground no. 5 is therefore dismissed.” Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.

4.1. The Ld.AR submitted that the assessee is required to file its return of income under section 139(1) of the Act in order to avail deduction in respect of the income mentioned in Part C of Chapter VI-A. He submitted that, as per section 80AC, the assessee is not eligible to claim deduction under section 80P if this condition is not satisfied. The Ld.AR further submitted that Chapter VI-A, Part C was introduced into section 80AC by way of the Finance Act, 2018, relevant to Assessment Year 2018-19. He submitted that the

6 I.T.A. No. 5936/Mum/2025 assessee was not aware of the amendment and was under a bona fide belief that the entire income of the assessee was exempt from income tax based on principle of mutuality.

4.1.1. The Ld. AR submitted that, the assessee did not file its return of income during the year under consideration as there was a change in the management of the society and there was uncertainty with respect to the procedures to be followed under the new management. In this process, an inadvertent lapse on the part of the assessee occurred. The Ld. AR submitted that, as the assessee thus lost its opportunity to file return of income under section 139(1) of the Act, and it could have filed its return only if notice under section 143(2) was issued or the assessment was reopened u/s 148 of the Act.

4.2. In the present facts of the case, the Ld. AR submitted that the assessee received reopening notice, in lieu of which the return was filed wherein the deduction was claimed. The Ld. AR placed reliance on the decision of the Hon’ble Ahmedabad Bench of this Tribunal in the case of Super Crop Safe Ltd. v. ACIT, reported in [2025] 174 taxmann.com 736 (Ahmedabad – Trib.) wherein identical situation was considered. Ld.AR submitted that, in the facts before Ahmedabad Tribunal, a return was filed by the assessee within the due date specified under section 139(1) of the Act. He further submitted that the Tribunal, while analyzing the provisions of section 80AC of the Act, as a precondition, observed that the same was only a procedural requirement and that the change in the

7 I.T.A. No. 5936/Mum/2025 statute was effected very recently, due to which a lenient approach was to be adopted.

4.3. The Ld. AR thus prayed for consideration of the issue in a lenient manner, with an undertaking that the assessee shall not ignore the provisions of law in future.

4.4. On the contrary, the Ld. DR vehemently opposed the arguments advanced by the Ld. AR. He submitted that the condition prescribed under section 80AC of the Act has to be strictly construed for the purposes of allowing the deduction claimed by the assessee under section 80P(2)(d) of the Act.

Perused the submissions advanced by both sides in light of the records placed on record.

5.1. It is also a fact that the management of the assessee changed, due to which there was procedural lapse on the part of the assessee. A lenient approach, deserves to be taken in the present circumstances. However, considering the fact that the assessee is a co-operative society working for the benefit of its members based on

8 I.T.A. No. 5936/Mum/2025 principle of mutuality, cannot be treated as a matter of right by the assessee. Considering the overall facts and circumstances, in present case, following the approach adopted by the Hon’ble Ahmedabad Bench (supra), directs the Ld.AO to examine the deduction claimed by the assessee u/s 80P(2)(d) of the Act. It may be noted that, this view shall not be treated as a precedent in any other case, as the circumstances will have to be analysed for each case based on law.

At this juncture, the Ld.AR submitted that, Ground Nos. 2 to 4 raised by assessee may be kept open.

Ground No. 1 is general in nature and requires no adjudication.

Accordingly, the effective Ground Nos. 5 & 6 raised by the assessee stand allowed for statistical purposes.

In the result, the appeal filed by the assessee stands allowed for statistical purposes.

Order pronounced in the open court on 06/02/2026

Sd/-

(BEENA PILLAI) Judicial Member Mumbai Dated: 06/02/2026 SC Sr. P.S.

9 I.T.A. No. 5936/Mum/2025 Copy of the order forwarded to:

(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.