2024 (6) TMI 1287 - AT - Income Tax

Deduction u/s 80P(2)(d) denied in adjustment u/s 143(1) - assessee has earned interest income from Maharashtra State cooperative bank Ltd which is a scheduled bank - whether such an adjustment can be made under the provisions of section 143 (1) of the act or not? - HELD THAT - In this case return is not filed beyond the due date prescribed under the provisions of section 139 of the act and therefore the disallowance of deduction claimed under chapter VIA for that reason cannot be made. It is also not the case of AO that it is an incorrect claim made by the assessee as per explanation (a) of that section. Therefore, the disallowance of deduction under section 80P(2)(d) of the act is not permitted adjustment under the provisions of section 143 (1) of the act - Such adjustment made is beyond the powers and therefore such an intimation deserves to be quashed and hence quashed. Deduction u/s 80P - Assessee is entitled to deduction u/s 80P(2)(d) for the reason that assessee has placed the sum with the Maharashtra State cooperative bank which is also cooperative society as per Maharashtra cooperative societies act. Therefore, in terms of the provisions of section 80(P)(2)(d) read with the provisions of section 2(19) of the income tax act where the definition of cooperative societies is provided and further reading the same with respect to the Maharashtra cooperative societies act, it is apparently clear that the cooperative banks are also the cooperative societies under that act. Assessee is eligible for a deduction earned by the assessee cooperative society from the investment made in another cooperative society i.e., Maharashtra state cooperative Bank Limited u/s 80P(2)(d) Supreme Court in case of Citizen cooperative society Ltd 2017 (8) TMI 536 - SUPREME COURT has categorically held that the section 80P of the act is a benevolent provision, which was enacted by the Parliament in order to encourage and promote the growth of the cooperative sector generally in the economic life of the country and must therefore, berated liberally and in favour of the assessee. Even otherwise if the strict interpretation of the law is made, the assessee is entitled to the deduction under section 80P(2)(d) of the act with respect to the interest earned by the assessee on its investment with other cooperative banks who are in fact cooperative societies as per the Maharashtra State cooperative societies act. Accordingly, CIT A is not correct in not allowing the assessee deduction under section 80P(2)(d) of the act on such interest income. Hence the order of the learned CIT A reversed, and the learned assessing officer is directed to grant the deduction u/s 80 (P) (2) (d) - Decided in favour of assessee.

Summary

Issues:
- Denial of deduction under section 80P(2)(d) of the Income Tax Act.
- Validity of adjustment made under section 143(1) of the Act.

Analysis:
- The appeal was filed by a cooperative housing society against the denial of a deduction under section 80P(2)(d) of the Income Tax Act by the Additional Commissioner/Joint Commissioner of Income Tax. The society claimed a deduction of Rs. 510,497 under section 80P(2)(d) for interest received from a cooperative bank, which was denied during processing of the return by the central processing center.
- The main issue was whether the adjustment made under section 143(1) of the Act to deny the deduction was valid. The tribunal found that the adjustment was not permitted under the provisions of section 143(1) as there was no arithmetical error or incorrect claim apparent from the return. Therefore, the adjustment was beyond the powers and was quashed.
- On the merits, the tribunal held that the society was entitled to the deduction under section 80P(2)(d) as the cooperative bank was considered a cooperative society under the Maharashtra Cooperative Societies Act. The tribunal also noted that a previous decision in the society's favor for a similar issue supported their claim for the deduction.
- The tribunal disagreed with the lower authorities' reliance on a Supreme Court decision regarding a different type of cooperative society, stating that the decision did not apply to the current case. The tribunal emphasized that section 80P of the Act should be interpreted liberally in favor of the assessee to promote the growth of the cooperative sector.
- Ultimately, the tribunal reversed the order of the lower authorities and directed the assessing officer to grant the deduction of Rs. 510,497 under section 80P(2)(d) to the cooperative housing society. The appeal of the assessee was allowed, and the order was pronounced in open court on 24th June 2024.