2024 (9) TMI 1110 - AT - Income Tax

Tribunal Upholds Cooperative Society's Eligibility for Sec. 80P Deductions, Rejects Revenue's Appeals and PCIT's Directions.

The tribunal dismissed the Revenue's appeals against the former assessee, affirming the CIT(A)-NFAC's reversal of the Assessing Officer's disallowance of ... Denial of deduction u/s 80P - treating it as a cooperative bank than a cooperative society so as to be eligible for the impugned deduction - HELD THAT:- We find no merit in the Revenue’s instant sole substantive ground for the precise reason once the assessee is admittedly a cooperative society registered under such cooperative law which has been held to be a decisive factor in Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] Their lordships’ have settled the law that it is the assessee’s corresponding registration under the cooperative law which only deserves to be considered in sec. 80P deduction issue. We thus reject the Revenue’s instant quantum appeal for latter assessment year in very terms. Revision u/s 263 - DR vehemently contended that case law Totagars Co-operative Sales Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] and Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. [2022 (1) TMI 1309 - GUJARAT HIGH COURT] against the assessee -HELD THAT:- We note that The Vaveru Co-operative Rural Bank Ltd., [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] has treated the interest income from nationalized banks as well as eligible for sec. 80P deduction. All these divergent judicial opinions from various hon’ble non-jurisdictional high courts and absence of the issue being decided in hon’ble jurisdictional high court; make it clear that the instant issue of interest income from cooperative banks as eligible for sec. 80P deduction is indeed a debatable one and therefore, AO’s regular assessment dated 20.05.2021 herein could not be termed as an erroneous one causing prejudice to the interest of Revenue in light of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] Once the impugned assessment herein framed as per the PCIT’s sec. 263 revision directions itself stands annulled; the consequential assessment framed by the Assessing Officer forming subject matter of Revenue’s appeal herein has no legs to stand going by ‘sublato fundamento cadit opus’ i.e., when the foundation itself does not exist, the superstructure raised thereupon also follows the suit. Issues:- Allowability of sec. 80P deduction for twin assessees- Reversal of Assessing Officer's assessment disallowing sec. 80P deduction- Classification of assessee as cooperative bank or cooperative society for sec. 80P deduction- Validity of Assessing Officer's assessment causing prejudice to Revenue's interest- Interpretation of judicial opinions on interest income from cooperative banks for sec. 80P deductionAnalysis:The judgment pertains to four appeals involving twin assessees and the allowability of sec. 80P deduction in their respective cases. The first issue arises from the Revenue's appeal challenging the CIT(A)-NFAC's decision to reverse the Assessing Officer's assessment disallowing sec. 80P deduction claim of the former assessee. The tribunal finds that since the assessment was framed based on revision directions that were later reversed, the consequential assessment has no basis to stand, leading to the dismissal of the Revenue's appeal.In the second issue, the Revenue contests the classification of the former assessee as a cooperative bank to disallow the sec. 80P deduction claim. However, the tribunal rules that the assessee being a cooperative society registered under cooperative law is the decisive factor, citing a Supreme Court judgment. Consequently, the Revenue's appeal related to the quantum disallowance is rejected.The third issue involves the Revenue's penalty appeal, which is deemed consequential and dismissed accordingly. The final issue concerns the latter assessee's appeal against the PCIT's revision directions, which were found erroneous by the tribunal. The tribunal notes divergent judicial opinions on interest income from cooperative banks for sec. 80P deduction, making it a debatable issue. Relying on relevant case law, the tribunal allows the latter assessee's appeal, emphasizing the non-prejudicial nature of the Assessing Officer's assessment.In conclusion, the tribunal dismisses the Revenue's appeals in the case of the former assessee and allows the latter assessee's appeal. The judgment provides a detailed analysis of each issue, clarifying the legal interpretation and application of sec. 80P deduction in the context of cooperative societies and banks.