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Facts
The assessee, a cooperative housing society, claimed deduction under section 80 P (2) (d) for interest income earned from cooperative banks. The Assessing Officer disallowed this claim, which was upheld by the CIT(A). The assessee appealed to the Tribunal.
Held
The Tribunal held that interest income earned by a cooperative society from its investments with other cooperative societies is deductible under section 80 P (2) (d) of the Income Tax Act. The provisions of section 80 P (4) are not applicable as the assessee is not a cooperative bank.
Key Issues
Whether interest income earned by a cooperative housing society from cooperative banks is eligible for deduction under Section 80 P (2) (d) of the Income Tax Act.
Sections Cited
80 P (2) (d), 80 P (4), 143 (1) (a)
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI RAHUL CHAUDHRY, JM
This appeal is filed by samta cooperative housing society Ltd for assessment year 2021 – 22 against the appellate order passed by the additional CIT (A) – 3, Bangalore (the learned CIT – A) dated 23/1/2024 wherein the appeal filed by the assessee against the order passed under section 143 (1) of the income tax act 1961 (the act) by central processing Centre Bangalore dated
a. On the facts and in law, the Ld. CIT(A) erred in confirming the disallowance of Rs.58,68,245/- of interest income received from Co- operative Banks. The Ld. CIT(A) has failed to appreciate that interest income received by a Co-operative Society from Co-operative Bank is allowable under Section 80P(2)(d) of the Act. b. On the facts and in law, the Ld. CIT(A) ought to have appreciated that the issue of allowability of interest income earned by a Co-operative Society from a Co- operative Bank on surplus funds is allowable under Section 80P(2)(d) of the Act and its no longer res-integra as held in several decisions of this Hon'ble Court such as Pathare Prabhu Co- operative Housing Society Ltd. vs Income-tax Officer [2023] 153 taxmann.com 714 (Mumbai Trib.)andPalm Court M Premises Co-operative Society Ltd. V. Principal Commissioner of Income-tax [2022] 145 taxmann.com 415 (Mumbai - Trib.) c. On the facts and in law, the Ld. CIT(A) by mis- interpretingthe provision of law stating that interest income received from Co-operative Bank is not allowable as deduction under Section 80P of the Act as 80P(4) is in the nature of Proviso to Section 80P(1) and 80P(2) whereas interest income is allowable 80P(2)(d)of the Act. With great respect, the Learned CIT(A) has failed to note that the broad heading of the Section 80-P needed clarification. Hence, the Legislature stepped in. In other words, absent Section 80-P(4) which is inserted with effect from 1 April 2007, the benefit of deduction was
Brief facts of the case shows that assessee is a cooperative housing society filed its return of income on 25/1/2022 whereas the due date for filing of the return of income is 15/3/2022 declaring total income of ₹ 12,381,720/–. This return of income was processed by the central processing Centre determining total income of the assessee at Rs 182,88,900/–. The difference is arising because of the reason that assessee has claimed deduction under section 80 P (2) (d) of the act of ₹ 5,907,174/– on interest income earned by the assessee from co-operative banks was denied. Assessee preferred appeal before the learned CIT – A wherein the appeal of the assessee was dismissed. Therefore assessee has preferred appeal before us.
The learned authorised representative submitted a paper book containing several judicial precedent and stated that the issue is squarely covered in favour of the assessee.
The learned departmental representative supported the order of the learned CIT – A.
We have carefully considered the rival contention and perused the orders of the lower authorities. The facts clearly shows that assessee has earned interest on fixed deposit receipt amounting to ₹ 5,608,072 from various cooperative banks. Assessee has also received interest
Undisputedly the fact shows that assessee is a cooperative society. Assessee has filed return of income within the due date.
As per provisions of section 143 (1) (a) permits following adjustment to the total income of the assessee:- 143. 67[(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; 68[***] (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 69[(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 70[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 71[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)
The disallowance of deduction under chapter VI A can only be made under section 143 (1) (a) (v) of the act only on account of non-furnishing of return of income within the due date of filing of the return. This is not the reason.
2. Claim of the assessee cannot be said to be an incorrect claim in view of the explanation (a) which is as under:- (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;
It is not the case that deduction under section 80 P (2) (d) is a deduction provided by any monitoring limit or percentage ratio or fraction. Thus, claim of deduction under section 80 P (2) (d) is also not classified as incorrect claim.
Thus, the adjustment of disallowance of deduction under that section is not permissible adjustment provided under
On the merits of the case, provisions of section 2 (19) define a co-operative society as under:-
19) "co-operative society"97 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 ;
Thus, for the definition of the cooperative society whether covers the cooperative banks are not one has to look at the respective cooperative societies act is applicable.
THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960, Defines cooperative banks as per section 2 (10) of that Act as under :‖-
―Co-operative bank‖ means a Co-operative society which is doing the business of banking as defined in clause (b) of sub-sections (1) of section 5 of the Banking Companies Act, 1949 and includes any society which is functioning or is to function as an Agricultural and Rural Development Bank under Chapter X.
Thus it is apparent that cooperative banks are also a co- operative society. Only difference is that those cooperative societies are doing the business of banking as per the banking companies act 1949. Therefore, merely because these cooperative societies cooperative bank they do not lose their status as a co-operative society.
(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;
Thus, the assessee’s investment of earning interest income from such cooperative banks which are also cooperative societies whole of such income is deductible under this section.
It is not in dispute that assessee is not a cooperative bank and therefore provisions of section 80 P (4) of the act does not apply to it.
Thus the assessee is eligible for deduction under section 80 P (2) (d) of the act on its income received from all the above cooperative banks. Hence assessee is eligible for that deduction amounting to Rs. on fixed deposit interest of ₹ 5,608,072/– and savings bank interest of Rs 260,173/–. Assessee is not eligible for deduction of bank interest from bank of Baroda of ₹ 38,929/–.
Accordingly the order of the learned CIT – A is reversed and appeal of the assessee is partly allowed.
Order pronounced in the open court on 28.06.2024.