The Commissioner has revised my co-operative society's assessment under s.263 because AMT on adjusted total income came out higher than the normal tax. The department's working grossed up my total income by the s.80P deduction. Is that right?
It is not. Clause (i) of s.115JC(2) requires total income to be increased by deductions claimed under any section "other than section 80P" included in Chapter VI-A under heading C. The Assessing Officer's internal working had added back the s.80P deduction of Rs.56,16,242, producing an adjusted total income of Rs.1,13,55,916 instead of the correct Rs.57,39,674; on the correct figure the AMT was lower than the normal tax, so there was no prejudice to the Revenue and no ground for revision.
Decided by the ITAT (Rajesh Kumar, Accountant Member and Ravish Sood, Judicial Member (ITAT Mumbai 'E' Bench)) on 2020-01-08, reported as ITA No.6433/Mum/2019, Assessment Year 2015-16; heard 18 December 2019, pronounced 8 January 2020. It bears on section 115JC, section 115JC(2), section 80P, section 80P(2)(d), section 80P(4), section 2(19), section 263, section 143(3), section 234B of the Income Tax Act 1961, in Revision & Rectification, Co-operative Societies and Deductions & Disallowances matters.
The carve-out for s.80P is easy to miss because it sits inside the clause rather than in a separate proviso, and the departmental computation sheet will not always respect it. The consequence in a revision context is complete: if the AMT correctly computed is lower than the tax under the normal provisions, the assessment cannot be prejudicial to the interests of the Revenue on that count and the s.263 jurisdiction fails. The same order also disposes of the s.80P(2)(d) point on interest from co-operative banks in the society's favour, holding that a co-operative bank remains a co-operative society registered under the Co-operative Societies Act notwithstanding s.80P(4), so that interest derived from investments with it qualifies. Both points are practical for housing and premises societies, which is where this combination of s.80P and AMT most often arises.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a co-operative society, returned total income of Rs.57,39,670 for AY 2015-16, and the assessment under s.143(3) dated 23 December 2017 was completed at that figure after allowing a deduction under s.80P of Rs.56,16,242 in respect of interest earned on investments with five co-operative banks. The Principal Commissioner considered the assessment erroneous and prejudicial to the interests of the Revenue on two counts: that the s.80P(2)(d) deduction had been wrongly allowed on interest from co-operative banks, and that the Assessing Officer had worked out the tax liability under the normal provisions at Rs.19,47,515 as against alternate minimum tax of Rs.23,80,257, resulting in a short levy of Rs.5,75,547 including interest under s.234B. By order dated 29 August 2019 he set aside the assessment and directed a fresh order. Before the Tribunal the assessee showed that the Assessing Officer's ITNS working had computed adjusted total income at Rs.1,13,55,916 by adding the s.80P deduction of Rs.56,16,242 to the total income, whereas on the assessee's working adjusted total income was Rs.57,39,674.
The appeal of the assessee was allowed, the order under s.263 set aside and the assessment under s.143(3) restored. On the AMT count, clause (i) of s.115JC(2) expressly provides that total income is not to be increased by the deduction claimed under s.80P; the Assessing Officer had erroneously computed adjusted total income at Rs.1,13,55,916 instead of Rs.57,39,674, and a correct working of AMT on Rs.57,39,674 at 18.5 per cent is lower than the tax of Rs.19,47,515 computed under the normal provisions, so the computation under the normal provisions could not be held prejudicial to the interests of the Revenue and the Commissioner was in error (paragraph 11). On the s.80P count, interest earned by a co-operative society on investments held with a co-operative bank is eligible for deduction under s.80P(2)(d), and in any event the Assessing Officer had taken a plausible view in conformity with the jurisdictional Tribunal's decisions, which itself divested the Commissioner of revisional jurisdiction (paragraphs 8 to 9).
On the AMT issue the Tribunal set out s.115JC: where the regular income-tax payable for a previous year by a person other than a company is less than the alternate minimum tax, the adjusted total income is deemed to be the total income and tax is payable at 18.5 per cent; and under sub-section (2) adjusted total income is the total income increased by deductions claimed under any section other than s.80P included in Chapter VI-A, by a deduction under s.10AA, and by a deduction under s.35AD as reduced by the depreciation allowable under s.32 had no s.35AD deduction been allowed. For the purpose of computing adjusted total income the total income has therefore to be raised by Chapter VI-A deductions, but as specifically provided in clause (i) of sub-section (2) the total income is not to be increased by the deduction claimed under s.80P. On a perusal of the ITNS working the Assessing Officer had increased total income by the Rs.56,16,242 claimed under s.80P and so arrived at an adjusted total income of Rs.1,13,55,916 as against the correct Rs.57,39,674; the Commissioner's observation that AMT exceeded the normal tax was therefore founded on an incorrect working, and a correct computation showed the normal tax of Rs.19,47,515 to be higher than AMT on the correct adjusted total income (paragraph 11). On the s.80P issue, s.80P(2)(d) allows the whole of any income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society; although s.80P(4), inserted by the Finance Act 2006 with effect from 1 April 2007, denies a co-operative bank the benefit of s.80P, a co-operative bank remains a co-operative society registered under the Co-operative Societies Act 1912 or a corresponding State law and so falls within s.2(19), with the result that interest derived by a society from investments held with a co-operative bank qualifies (paragraphs 8 and 9).
However, as specifically provided in clause (i) of sub-section (2) to Sec. 115JC, the 'total income' of the assessee is not to be increased by the deduction claimed under Sec. 80P.
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Handle my notice → Ask a CA on WhatsAppIt is not. Clause (i) of s.115JC(2) requires total income to be increased by deductions claimed under any section "other than section 80P" included in Chapter VI-A under heading C. The Assessing Officer's internal working had added back the s.80P deduction of Rs.56,16,242, producing an adjusted total income of Rs.1,13,55,916 instead of the correct Rs.57,39,674; on the correct figure the AMT was lower than the normal tax, so there was no prejudice to the Revenue and no ground for revision. This was decided by the ITAT (Rajesh Kumar, Accountant Member and Ravish Sood, Judicial Member (ITAT Mumbai 'E' Bench)) and bears on section 115JC, section 115JC(2), section 80P, section 80P(2)(d), section 80P(4), section 2(19), section 263, section 143(3), section 234B of the Income Tax Act 1961. It is reported as ITA No.6433/Mum/2019, Assessment Year 2015-16; heard 18 December 2019, pronounced 8 January 2020. The carve-out for s.80P is easy to miss because it sits inside the clause rather than in a separate proviso, and the departmental computation sheet will not always respect it. The consequence in a revision context is complete: if the AMT correctly computed is lower than the tax under the normal provisions, the assessment cannot be prejudicial to the interests of the Revenue on that count and the s.263 jurisdiction fails. The same order also disposes of the s.80P(2)(d) point on interest from co-operative banks in the society's favour, holding that a co-operative bank remains a co-operative society registered under the Co-operative Societies Act notwithstanding s.80P(4), so that interest derived from investments with it qualifies. Both points are practical for housing and premises societies, which is where this combination of s.80P and AMT most often arises. If it applies to you, the first step is this: Reproduce clause (i) of s.115JC(2) with the words "other than section 80P" and put the two workings — the department's and the correct one — side by side.
The assessee, a co-operative society, returned total income of Rs.57,39,670 for AY 2015-16, and the assessment under s.143(3) dated 23 December 2017 was completed at that figure after allowing a deduction under s.80P of Rs.56,16,242 in respect of interest earned on investments with five co-operative banks. The Principal Commissioner considered the assessment erroneous and prejudicial to the interests of the Revenue on two counts: that the s.80P(2)(d) deduction had been wrongly allowed on interest from co-operative banks, and that the Assessing Officer had worked out the tax liability under the normal provisions at Rs.19,47,515 as against alternate minimum tax of Rs.23,80,257, resulting in a short levy of Rs.5,75,547 including interest under s.234B. By order dated 29 August 2019 he set aside the assessment and directed a fresh order. Before the Tribunal the assessee showed that the Assessing Officer's ITNS working had computed adjusted total income at Rs.1,13,55,916 by adding the s.80P deduction of Rs.56,16,242 to the total income, whereas on the assessee's working adjusted total income was Rs.57,39,674. The matter was decided on 2020-01-08 by the ITAT (Rajesh Kumar, Accountant Member and Ravish Sood, Judicial Member (ITAT Mumbai 'E' Bench)). On those facts the ITAT held as follows. The appeal of the assessee was allowed, the order under s.263 set aside and the assessment under s.143(3) restored. On the AMT count, clause (i) of s.115JC(2) expressly provides that total income is not to be increased by the deduction claimed under s.80P; the Assessing Officer had erroneously computed adjusted total income at Rs.1,13,55,916 instead of Rs.57,39,674, and a correct working of AMT on Rs.57,39,674 at 18.5 per cent is lower than the tax of Rs.19,47,515 computed under the normal provisions, so the computation under the normal provisions could not be held prejudicial to the interests of the Revenue and the Commissioner was in error (paragraph 11). On the s.80P count, interest earned by a co-operative society on investments held with a co-operative bank is eligible for deduction under s.80P(2)(d), and in any event the Assessing Officer had taken a plausible view in conformity with the jurisdictional Tribunal's decisions, which itself divested the Commissioner of revisional jurisdiction (paragraphs 8 to 9).
On the AMT issue the Tribunal set out s.115JC: where the regular income-tax payable for a previous year by a person other than a company is less than the alternate minimum tax, the adjusted total income is deemed to be the total income and tax is payable at 18.5 per cent; and under sub-section (2) adjusted total income is the total income increased by deductions claimed under any section other than s.80P included in Chapter VI-A, by a deduction under s.10AA, and by a deduction under s.35AD as reduced by the depreciation allowable under s.32 had no s.35AD deduction been allowed. For the purpose of computing adjusted total income the total income has therefore to be raised by Chapter VI-A deductions, but as specifically provided in clause (i) of sub-section (2) the total income is not to be increased by the deduction claimed under s.80P. On a perusal of the ITNS working the Assessing Officer had increased total income by the Rs.56,16,242 claimed under s.80P and so arrived at an adjusted total income of Rs.1,13,55,916 as against the correct Rs.57,39,674; the Commissioner's observation that AMT exceeded the normal tax was therefore founded on an incorrect working, and a correct computation showed the normal tax of Rs.19,47,515 to be higher than AMT on the correct adjusted total income (paragraph 11). On the s.80P issue, s.80P(2)(d) allows the whole of any income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society; although s.80P(4), inserted by the Finance Act 2006 with effect from 1 April 2007, denies a co-operative bank the benefit of s.80P, a co-operative bank remains a co-operative society registered under the Co-operative Societies Act 1912 or a corresponding State law and so falls within s.2(19), with the result that interest derived by a society from investments held with a co-operative bank qualifies (paragraphs 8 and 9). In the words reproduced by the source cited on this page: "However, as specifically provided in clause (i) of sub-section (2) to Sec. 115JC, the 'total income' of the assessee is not to be increased by the deduction claimed under Sec. 80P." The decision followed or applied Pr. CIT v Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) — followed on s.80P(2)(d); State Bank of India v CIT (2016) 389 ITR 578 (Guj) — followed on s.80P(2)(d); Kaliandas Udyog Bhavan Premises Co-op Society Ltd v ITO [2018] 94 taxmann.com 15 (Mum-Trib) and other coordinate Bench decisions — relied on; Totgars Co-operative Sale Society Ltd v ITO (2010) 322 ITR 283 (SC) — distinguished as decided under s.80P(2)(a)(i).
It was decided by the ITAT on 2020-01-08 and is reported as ITA No.6433/Mum/2019, Assessment Year 2015-16; heard 18 December 2019, pronounced 8 January 2020. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 115JC, section 115JC(2), section 80P, section 80P(2)(d), section 80P(4), section 2(19), section 263, section 143(3), section 234B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal of the assessee was allowed, the order under s.263 set aside and the assessment under s.143(3) restored. On the AMT count, clause (i) of s.115JC(2) expressly provides that total income is not to be increased by the deduction claimed under s.80P; the Assessing Officer had erroneously computed adjusted total income at Rs.1,13,55,916 instead of Rs.57,39,674, and a correct working of AMT on Rs.57,39,674 at 18.5 per cent is lower than the tax of Rs.19,47,515 computed under the normal provisions, so the computation under the normal provisions could not be held prejudicial to the interests of the Revenue and the Commissioner was in error (paragraph 11). On the s.80P count, interest earned by a co-operative society on investments held with a co-operative bank is eligible for deduction under s.80P(2)(d), and in any event the Assessing Officer had taken a plausible view in conformity with the jurisdictional Tribunal's decisions, which itself divested the Commissioner of revisional jurisdiction (paragraphs 8 to 9). It arises in Revision & Rectification, Co-operative Societies and Deductions & Disallowances matters, on section 115JC, section 115JC(2), section 80P, section 80P(2)(d), section 80P(4), section 2(19), section 263, section 143(3), section 234B of the Income Tax Act 1961, and was decided by Rajesh Kumar, Accountant Member and Ravish Sood, Judicial Member (ITAT Mumbai 'E' Bench). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Recompute AMT on the corrected adjusted total income and show that it is lower than the tax under the normal provisions; that is what defeats the prejudice limb of s.263. Ask for the ITNS or system working relied on by the Commissioner; here the entire revision on this count rested on an incorrect internal computation rather than on any legal error in the assessment. Remember that s.80P is the only Chapter VI-A heading C deduction excluded from the add-back — every other deduction under that heading goes back into adjusted total income. Where the same order also disallows s.80P(2)(d) on interest from a co-operative bank, take the point that a co-operative bank remains a co-operative society under s.2(19) and that s.80P(4) only denies the bank its own deduction.
Validity check could not be completed. Validity check could not be completed. No later treatment of this order was located and it is not known whether the Revenue appealed under s.260A to the Bombay High Court. The s.80P(2)(d) half of the order sits in a contested area in which Benches and High Courts have differed over time; only the s.115JC(2) reading is relied on here, and that follows directly from the words of the clause. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The electronic text renders the source PDF's curly quotation marks as stray characters, so the phrase 'total income' inside the key quote appears in the raw text with mojibake around it; the quote is given here with plain single quotation marks and no other change. Two slips in the report: the order twice writes "alternate minimum tax (ALT)" where the abbreviation is AMT, and at paragraph 11 the tabulated "Total income (without rounding off)" is shown as Rs.57,39,674 in one column and Rs.57,39,574 in the other, while the narrative uses Rs.57,39,670 and Rs.57,39,674 — the difference is immaterial to the reasoning. At paragraph 12 the Tribunal sets aside the s.263 order and restores the assessment. The order also decides the s.80P(2)(d) issue on interest from co-operative banks, summarised only briefly here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal of the assessee was allowed, the order under s.263 set aside and the assessment under s.143(3) restored. On the AMT count, clause (i) of s.115JC(2) expressly provides that total income is not to be increased by the deduction claimed under s.80P; the Assessing Officer had erroneously computed adjusted total income at Rs.1,13,55,916 instead of Rs.57,39,674, and a correct working of AMT on Rs.57,39,674 at 18.5 per cent is lower than the tax of Rs.19,47,515 computed under the normal provisions, so the computation under the normal provisions could not be held prejudicial to the interests of the Revenue and the Commissioner was in error (paragraph 11). On the s.80P count, interest earned by a co-operative society on investments held with a co-operative bank is eligible for deduction under s.80P(2)(d), and in any event the Assessing Officer had taken a plausible view in conformity with the jurisdictional Tribunal's decisions, which itself divested the Commissioner of revisional jurisdiction (paragraphs 8 to 9).
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We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
My return was only processed under 143(1). Does that stop the department reopening it later?
A reassessment was done in between. Does the two-year clock for s.263 restart from it?
Can the Commissioner revise on a ground that was not in the show cause notice?