2019 (7) TMI 1078 - AT - Income Tax

Tribunal rules in favor of cooperative society, allowing deduction for interest income under Income Tax Act.

The Tribunal found that the Trust was a legitimate member of the cooperative society, and the funds given were in the form of a loan, not a deposit. It ... Revision u/s 263 - deduction u/s 80P - allegation that AO has allowed exemption without calling for any documentary evidence in support of the assessee’s claim that the Trust is a member of the society - interest received from advance to trust - HELD THAT:-The assessee also furnished copy of the admission register, wherein, it is seen that the Trust is a member of the society. There is sufficient material available in paper book to show that the Trust became member of the society and the society is permitted to give loan to its members. The society had advanced the amounts to the Trust and collected the interest. Since the interest received was from the member of the society, the interest collected by the society is entitled for deduction u/s 80P. As seen from the assessment order, the assessment was completed u/s 143(3) and during the assessment proceedings, the AO called for the books of accounts, and the other details, in response to which the Ld.AR furnished the details. After examining the books of accounts and the other details, vouchers for expenses, the assessment was completed by the AO allowing deduction u/s 80P. Therefore, it is incorrect to say that the AO allowed exemption u/s 80P without examining the details. The sole issue involved in the assessment is deduction u/s 80P and hence we are not inclined to accept the contention of the revenue that the AO has allowed deduction u/s 80P without examining the details. From the above discussion, it is clear that there is no revenue loss which caused prejudice to the revenue and we do not see any error in the assessment. Therefore, we hold that there is no reason to take up the case for revision and we set aside the order of the Ld.Pr.CIT passed u/s 263 and restore the assessment order. Appeal of the assessee is allowed. Issues: Validity of order passed by Pr.CIT u/s 263 of the Income Tax Act, 1961Analysis:The appeal was filed against the order of the Pr.Commissioner of Income Tax (Pr.CIT) for the Assessment Year 2013-14. The grounds of appeal questioned the validity of the order passed by Pr.CIT u/s 263 of the Income Tax Act. The Pr.CIT found that the assessee had received interest on deposits made in a Trust, which was not a cooperative society. The Pr.CIT held that the interest received was not entitled to deduction u/s 80P(2)(a)(i) of the Act and should be taxed separately under section 56 of the Act. The Pr.CIT deemed the order passed by the AO as erroneous and prejudicial to the revenue, directing a fresh assessment.Analysis:The assessee argued before the Tribunal that the Trust was a member of the cooperative society, and the funds given were in the form of a loan, not a deposit. The assessee provided various documents to establish this, including admission forms, loan agreements, and other relevant paperwork. The assessee contended that there was no under-assessment causing prejudice to the revenue, as the Trust was a legitimate member of the society, and the funds given were in compliance with the society's bye-laws.Analysis:The Departmental Representative (DR) argued that the assessment order did not address the issue of interest collected from the Trust, indicating a lack of verification by the AO. The DR asserted that this non-verification constituted an error necessitating revision under section 263. The DR supported the Pr.CIT's decision to invoke section 263 for a fresh assessment.Analysis:After considering the arguments and evidence presented, the Tribunal found that the Trust was indeed a member of the society, and the funds provided were in the form of a loan, not a deposit. The Tribunal observed that the society was permitted to give loans to its members, and the interest collected from the Trust was eligible for deduction u/s 80P of the Act. The Tribunal noted that the AO had examined the books of accounts and details provided by the assessee before allowing the deduction u/s 80P. The Tribunal concluded that there was no error in the assessment order, and no revenue loss causing prejudice to the revenue. Therefore, the Tribunal set aside the Pr.CIT's order under section 263 and restored the original assessment order, allowing the appeal of the assessee.