ITAT grants cooperative society deduction under section 80P(2)(d) for interest income from state cooperative bank

ITAT Mumbai held that adjustment denying deduction u/s 80P(2)(d) cannot be made under section 143(1) as the return was filed within due date and no incorrect claim was established by AO. The tribunal ruled that cooperative society assessee is entitled to deduction u/s 80P(2)(d) on interest income from Maharashtra State Cooperative Bank, which qualifies as cooperative society under Maharashtra Cooperative Societies Act. Citing SC precedent in Citizen Cooperative Society Ltd, ITAT emphasized section 80P as benevolent provision requiring liberal interpretation. CIT(A) order reversed, AO directed to grant deduction. Decided in favor of assessee.

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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.

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