Claim of Deduction u/s 80P (2) of Income Tax Act by Co-op Society cannot be Denied on Breach of Principle of Mutuality or Violation of Bye Law: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the claim of deduction under Section 80P (2) of Income Tax Act 1961 by cooperative society could not be denied on breach of principle of mutuality or violation of bye law.

The assessee, Middle Income Group Co. Op. Hsg. Soc. Ltd, was a co-operative housing society, filed its return of income on 22.12.2017. The case of the assessee was selected for complete scrutiny and a notice under Section 143(2) of the Income Tax Act was issued and duly served on the assessee.

During the assessment proceedings AO came to know about the claim of the assessee under Section 80P of the Income Tax Act and an AIR information about payment by some developer MIG (Bandra) Realtors & Builders Pvt. Ltd towards stamp duty charges in terms of development agreement. Show cause was issued to treat the same as income of society and also for disallowance of claim under Section 80P of the Income Tax Act.

Assessee responded to both the show cause notices, but AO did not agree with the same and made addition and assessed the case.

Dharan Gandhi, on behalf of the assessee submitted that the restrictions put by this section was with regard to income received by way of interest on securities/income from house property, that the restriction could be extended to other subsections of Section 80P (2), of the Income Tax Act that there was no bar for claiming deduction under other sub-Sections of Section 80P (2) of the Income Tax Act by a Co-op. Hsg. Society.

He further submitted that the deductions could not be denied by observing that the society had breached the principle of mutuality or had violated the bye laws, that till the society was registered as a CHS in the Register of the Registrar of Co-op. Society deduction under Section 80P of the Income Tax Act could not be denied.

Mahita Nair, on behalf of the revenue submitted that the society had violated the principles of mutuality, that the provisions of Section 80P of the Income Tax Act were not applicable to a Co-op. Housing Society, that the assessee had made deposits out of money received against redevelopment agreement and from different channels, that same was not permissible under bye laws of the society.

The two-member Bench of Amit Shukla, (Judicial Member) and Gagan Goyal, (Accountant Member) allowed the appeal filed by the assessee holding that the claim of deduction under Section 80P(2)(d) and 80P(2)(c)(ii) of the Income Tax Act respectively, that the AO had invoked the provisions of Section 80P (2) (f) of the Income Tax Act and denied the society the benefits claimed by it.

It was also held that the provisions of one sub-Section could not be imported to another sub- Section.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates