TaxTMI 
TaxTMI 
2015 (4) TMI 94
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....sed u/s 263 and though they pertain to different assessment year but the issue involved in both the years are identical except for the amount and therefore he has common submission to make for both the assessment years and therefore both the appeals can be disposed of together. Ld DR did not object to the aforesaid submission of ld. AR and therefore we proceed to dispose of both the appeals together for the sake of convenience and proceed with the facts for AY 09.10. 4. The facts as culled out from the material on record are as under. 5. Assessee is a co-operative society registered with Dist. Registrar, Gujarat State Co-op Act. It is stated to be registered with the object of accepting deposits from the employees of State Bank of India (SBI), Gujarat region with a view to encouraging thrift and providing credit facilities to them. For AY 2009-10, Assessee filed its return of income for on 21.8.2009 declaring total income of Rs Nil after claiming the entire amount of Rs. 29,69,444/- as deduction u/s 80P of the Act. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 24.5.2011 and the total income as filed by the Assess....
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....ty or guesswork but it should be an actual error either of facts or of law. He further submitted that when two views are possible and the AO has taken one view with which the CIT does not agree, the order of the AO cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the AO is unsustainable in law and for the aforesaid proposition he relied on the decision in the case of Malabar Ind. Co Vs CIT (2000) 243 ITR 83 (SC). He also relied on the decision of Hon'ble Apex Court in the case of CIT vs Max India Ltd (2007) 295 ITR 282 (SC) for the proposition that where two views are possible and the ITO has taken one view with which the CIT does not agree, the order of the ITO cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. With respect to the issue of claim of deduction u/s 80P, the Ld AR submitted that during the course of assessment proceedings, A.O, apart from raising various query, AO vide notice u/s 142(1) dated 29.4.2011, had raised a specific query with respect to the claim of deduction u/s 80P (the copy of which is placed at page 37....
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.... that when A.O has allowed the claim without any discussion, the order was erroneous and prejudicial to the interest of the Revenue and for which he placed reliance on the decision in the case of CIT vs. Infosys Technologies Ltd. 17 Taxman.com 203 (Karnataka). He also placed reliance on the decision in the case of CIT vs. Usha International Ltd. 348 ITR 485 (Del.) and other decisions. He further submitted that by setting aside the order of A.O no prejudice would be caused to Assessee as the Assessee will be getting an opportunity to represent its case once again. He thus supported the order of CIT. 9. We have heard the rival submissions and perused the material on record. The issue in the present case is above the invoking of provisions of Section 263 by CIT. 10. S. 263(1) of the Act, the powers under which CIT has assumed power for revision reads as under: "The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made....
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....rom which also it earns interest and therefore the deposits with SBI should not been seen in isolation. 14. Under Section 80P(2)(a)(i) of the Act, the profits and gains of a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is exempt. What is exempt is the business income attributable to the activities of banking or providing credit facilities to the members which is included in the gross total income of the society. Section 80P(2) provides that the deduction would only be available to the whole of the amount of profits and gains attributable to its activities meaning thereby that the deduction will be allowed only when there is direct or proximate connection with or nexus to the income and the business carried on by the Society. It is also an undisputed fact that the Assessee has earned interest from the deposits it has placed with SBI (State Bank of India) and it is Assessee's contention that the deposits with SBI is to ensure that the funds received from the members on the regular basis is not kept idle and thus earn interest. Here it will be relevant to note that Section 80P(2)(d) provides that interest and di....
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....s". The head note to s. 80P indicates that the said section deals with deductions in respect of income of co-operative societies. Sec. 80P(1), inter alia, states that where the gross total income of a cooperative society includes any income from one or more specified activities, then such income shall be deducted from the gross total income in computing the total taxable income of the assessee-society. An income, which is attributable to any of the specified activities in s. 80P(2) of the Act, would be eligible for deduction. The word "income" has been defined under s. 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically "business profits" into the definition of the word "income". Therefore, we are required to give a precise meaning to the words "profits and gains of business" mentioned in s. 80P(2) of the Act. In the present case, as stated above, assessee-society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression "profits and gains of business". Such interest income cannot be said also to ....