TaxTMI 
2026 (11) TMI 336
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....se and in law, the Learned CIT(A) has erred in confirming the action of CPC Bengaluru in respect of disallowance of deduction claimed by the appellant under Section 80P(2)(d) amounting to Rs. 91,26,052. The said action of the Ld. A.O. is grossly incorrect, invalid and bad in law. 2. On the facts and circumstances of the case and in law, the action of the Learned CIT(A) in upholding the adjustment made under Section 143(1)(a) of the Act is grossly incorrect, invalid and bad in law, since CPC Bengaluru has no such power for making disallowance of deduction claimed u/s. 80P(2)(d) of the I. T. Act, 1961. Such power for disallowing any deduction claimed under Chapter VIA under the heading C Deductions in respect of certain incomes was introduced vide Finance Act 2021 and was applicable for subsequent years. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) while passing the order at para 5.5 of the order has mentioned that, having failed to comply to the provisions of S.80AC, which is applicable from the A.Y. 2018.19, deduction u/s.80P (2)(d) was rightly denied by the CPC, however such disallowance cannot be made by CPC as such powers deduc....
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....allow the deduction claimed u/s. 80P(2)(d) merely on the ground that the return was filed beyond the due date prescribed u/s. 139(1). In this regard, specific reliance was placed upon the decision of the Coordinate Bench in Vishva Villa Co-operative Housing Society Ltd. v. ITO, ITA Nos.682 to 684/Mum/2024, order dated 27/06/2024, which has also been specifically referred to in Ground No.3 raised before us. 4.1 On merits, the Ld. AR submitted that the interest income was earned from deposits/investments with co-operative banks and was eligible for deduction u/s. 80P(2)(d). 4.2 The Ld. DR relied upon the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of the record placed before us. 5. The first issue that arises for consideration is whether, for A.Y. 2019-20, the CPC could have denied the assessee's claim of deduction u/s. 80P(2)(d) while processing the return u/s. 143(1)(a), on the ground that the return was furnished beyond the due date specified u/s. 139(1). 5.1. We find that the Coordinate Bench in Vishva Villa Co-operative Housing Society Ltd. v. ITO, ITA Nos.682 to 684/Mum/2024, order dated 27/06/2024, ....
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.... scope of section 143(1)(a)(v) applicable to A.Y. 2019-20, the disallowance cannot be sustained in the manner in which it has been made. 5.5. Even otherwise, on the substantive eligibility of the income, the Coordinate Bench of this Tribunal in case of Kaliandas Udyog Bhavan Premises Co-operative Society Ltd. v. ITO reported in (2018) 94 taxmann.com 15, held that although section 80P(4) excludes a co-operative bank from claiming deduction u/s. 80P, a co-operative bank continues to be a "co-operative society" within the meaning of section 2(19) of the Act. Consequently, interest income earned by a co-operative society from its investments with a co-operative bank is eligible for deduction u/s. 80P(2)(d). 5.6. The same view has been reiterated by the Coordinate Bench of this Tribunal in ITO v. Mittal Court Premises Co-operative Society Ltd., ITA Nos.1535 to 1537/Mum/2022, order dated 31/10/2022, wherein it was held that interest income derived by a co-operative society from investments made with a co-operative bank is eligible for deduction u/s. 80P(2)(d). 5.7. In the present case, the Ld.CIT(A) has himself recorded that the deduction of Rs. 91,26,052/- represented interest ....
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....t Income under the head Other Income in the Profit & Loss Account. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the mechanical action of CPC in restricting deduction claimed by the appellant u/s. 80P(2)(d) by applying the 'lower of' validation formula without appreciating that the corresponding income was otherwise fully disclosed in the return of income and formed part of the total income offered to tax. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that CPC, Bengaluru while processing the return under Section 143(1), could not have mechanically denied the deduction claimed u/s. 80P(2)(d) without proper verification of the books of account and supporting records, especially when the income itself stood disclosed in the return. 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that substantive tax benefits cannot be denied on account of mere technical or clerical defects in the return of income, particularly when there is no dispute regarding the genuineness, taxability, or disclosure of the underlying inco....
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.... before us. 9. The issue before this Tribunal in the present appeal is whether, a substantive deduction that is otherwise admissible u/s. 80P(2)(d) to the assessee, could be denied merely because the assessee, while disclosing the corresponding income and specifically claiming the deduction in Schedule 80P, classified the income under an incorrect column in another part of the return. 9.1 It is an admitted position from the impugned order itself that the assessee disclosed Rs. 81,57,789/- as income from other sources and separately disclosed Rs. 65,52,150/- in Schedule 80P as interest/dividend from investment in other co-operative society u/s. 80P(2)(d). Thus, this is not a case where either the income or the claim of deduction was altogether absent from the return. 9.2. The denial arose only because interest/dividend income was reflected at nil in Part A-P&L, resulting in application of the system-generated "lower of" validation. In our considered view, such inter-schedule classification cannot by itself determine the substantive eligibility of the assessee under the provisions of the Act when the corresponding income stands disclosed and the deduction has also specifical....