2022 (1) TMI 928 - AT - Income Tax

Disallowance of deduction u/s 80P(2)(d) - co-operative housing society situated in Mumbai - Amount received on account of interest from Co-operative Bank - HELD THAT - As reading of section 80P nowhere provides that co-operative housing society situated in Mumbai does not satisfy the clause of section 80P. In this regard, query was raised by the Bench to the Ld. DR as to how where section 80P shows that Co-operative Housing Society situated in Mumbai does not satisfy the clauses of section 80P, he could not make any cogent answer and relied upon the Ld.CIT(A) order. Hence, we hold that denial of deduction u/s. 80P for sole reason of its being situated in Mumbai is not legally sustainable. Hence, the order passed by the Ld.CIT(A) is set aside and this appeal by the assessee stands allowed.

Summary

Issues:
1. Disallowance of deduction u/s 80P(2)(d) of ?7,37,074 (including interest on Saving fund ?3,470) received from a Co-operative Bank.
2. Disallowance of deduction u/s 80P(2)(c)(ii) of ?50,000.
3. Failure to serve notice u/s 250 of the Income Tax Act, 1961 to the appellant.
4. Legality of the order passed.

Analysis:
1. The assessee, a Co-operative Housing Society, filed a return of income claiming deductions u/s 80P(2)(d) of ?7,37,074 and u/s 80P(2)(c)(ii) of ?50,000. The order u/s 143(1) disallowed these deductions. The National Faceless Appeal Centre noted the discrepancies in the claim. The Ld.CIT(A) confirmed the disallowance, stating that the society did not satisfy the clauses of section 80P. The ITAT observed that the denial of deduction solely based on the society being situated in Mumbai was not legally sustainable. Hence, the order disallowing the deductions was set aside, and the appeal by the assessee was allowed.

2. The Ld.CIT(A) dismissed the grounds of appeal related to the disallowance of deductions u/s 80P(2)(d) and u/s 80P(2)(c)(ii) as the appellant, a Co-operative Housing Society in Mumbai, was deemed not to meet the requirements of section 80P. However, the ITAT found this reasoning insufficient and set aside the order, allowing the deductions claimed by the assessee.

3. The issue of failure to serve notice u/s 250 of the Income Tax Act, 1961 to the appellant was raised. The ITAT did not provide detailed analysis or findings specific to this issue in the judgment.

4. The legality of the order passed was challenged by the appellant, claiming it was contrary to the provisions of the Act. The ITAT, after a thorough review, found the order disallowing deductions under section 80P to be legally unsustainable solely based on the society's location in Mumbai. Consequently, the order was set aside, and the appeal was allowed.