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of <h1>Assessee cooperative society entitled to deduction on interest income under Section 80P(2)(d), Section 80P(4) not applicable</h1> <h3>Vile Parle Model Cooperative Housing Society Ltd. Versus ACIT, Ward-25 (3) (5), Mumbai.</h3> Vile Parle Model Cooperative Housing Society Ltd. Versus ACIT, Ward-25 (3) (5), Mumbai. - TMI 1. ISSUES PRESENTED AND CONSIDERED Whether the adjustment disallowing deduction under section 80P(2)(d) of the Income Tax Act made under section 143(1)(a) is valid when the return was filed within the due date. Whether the interest income earned by a cooperative society from investments in cooperative banks qualifies for deduction under section 80P(2)(d) of the Income Tax Act. Whether cooperative banks qualify as cooperative societies within the meaning of section 2(19) of the Income Tax Act and relevant cooperative societies legislation. Whether provisions of section 80P(4) relating to cooperative banks apply to a cooperative society that is not itself a cooperative bank. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of adjustment under section 143(1)(a) disallowing deduction under section 80P(2)(d) when return is filed within due date - Relevant legal framework: Section 143(1)(a) of the Income Tax Act permits processing of returns with adjustments limited to specific grounds including arithmetical errors, incorrect claims apparent from the return, disallowance of loss claims due to late filing of previous year returns, disallowance of expenditure indicated in audit reports, disallowance of certain deductions if return is filed late, and addition of income appearing in specified forms but not included in the return. - Court's interpretation: The Tribunal examined the scope of section 143(1)(a) and found that disallowance of deductions under Chapter VI-A (which includes section 80P) can only be made under clause (v) if the return is furnished beyond the due date. Since the return was filed before the due date, this ground does not apply. - The explanation to clause (ii) defines 'incorrect claim apparent from any information in the return' as claims inconsistent with other entries, unsupported by required information, or exceeding statutory limits expressed as monetary amounts or ratios. Deduction under section 80P(2)(d) is not subject to any such limits or ratios. - Key findings: The adjustment disallowing the deduction under section 80P(2)(d) does not fall within the permissible grounds under section 143(1)(a) when the return is timely filed. - Conclusion: The intimation passed under section 143(1) disallowing the deduction is not sustainable in law. Issue 2: Eligibility of deduction under section 80P(2)(d) on interest income from investments in cooperative banks - Relevant legal framework: Section 80P(2)(d) allows deduction of the whole income by way of interest or dividends derived by a cooperative society from its investments with any other cooperative society. - Court's interpretation: The Tribunal considered whether cooperative banks qualify as cooperative societies for the purpose of this section. - Key evidence and findings: The Maharashtra Cooperative Societies Act, 1960 defines 'cooperative bank' as a cooperative society engaged in banking business as per the Banking Companies Act, 1949. Thus, cooperative banks are a subset of cooperative societies. - Application of law to facts: Since the cooperative banks in which the assessee invested are cooperative societies within the meaning of the Act, the interest income earned therefrom qualifies for deduction under section 80P(2)(d). - Treatment of competing arguments: The Department argued that the investments were not with cooperative societies but with cooperative banks, and thus deduction was not allowable. The Tribunal rejected this, holding that cooperative banks retain their status as cooperative societies. - Conclusion: The assessee is entitled to deduction under section 80P(2)(d) on interest income earned from investments in cooperative banks. Issue 3: Applicability of section 80P(4) to the assessee - Relevant legal framework: Section 80P(4) applies to cooperative banks and restricts certain deductions. - Court's interpretation: The assessee is not a cooperative bank but a cooperative housing society; hence, section 80P(4) does not apply. - Conclusion: The provisions of section 80P(4) are not applicable to the assessee, and thus do not affect its eligibility for deduction under section 80P(2)(d). Issue 4: Applicability of section 80P(2)(d) deduction for multiple assessment years - Facts: Identical claims for deduction under section 80P(2)(d) were made for assessment years 2012-13, 2014-15, and 2016-17. - Court's reasoning: Since facts and legal position remain unchanged across these years, the reasoning and conclusions for assessment year 2012-13 apply equally to the other years. - Conclusion: Deduction under section 80P(2)(d) is allowable for all three assessment years on the interest income earned from investments in cooperative banks.
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