TaxTMI 
TaxTMI 
2021 (3) TMI 256
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....turn was filed on 25.09.2012 declaring total income of Rs. 54,47,540.00 u/sec. 139 of Act. The assessment was completed u/sec. 143(3) of Act on 02.03.2015 on returned income. Later on, notice u/sec. 148 was issued & order u/sec. 143(3) / 147 was passed by A.O. on 07.12.2017 on returned income itself. Thereafter, a show-cause notice u/sec. 263 has been issued on 05.03.2020 considering the assessment orders erroneous & prejudicial to revenue for the reasons as below:- "2. On examination of the assessment record, it is noticed that you have adopted mercantile system of accounting during the year under consideration but claimed various provisions, as detailed below:- Sr. no. Particulars Amount Remarks 1 Audit fee 5,00,000.00 2 Cess 51,00,000.00 Allowable on payment basis 3 Repairs & maintenance 4,05,600.00 4 Leave encashment 50,00,000.00 Allowable on payment basis 5 Milk DCS 7,00,000.00 6 Packing material 5,00,000.00 7 TA & other with BOB 1,35,330.00 As per Income Tax Act, 1961, the above provisions are not allowable. Howeve....
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....e. It was submitted that once a view has been taken by the higher appellate authority which has been followed by the Assessing Officer, there is no basis for ld. Pr. CIT to hold that the view taken by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In this regard, our reference was drawn to the detailed findings of the Co-ordinate Bench in ITA No. 90/JP/2019 which reads as under:- "7. We have heard the rival contentions and perused the material available on record. The issue under consideration is whether the interest income on FDRs placed by the assessee cooperative society with Ajmer Central Cooperative Bank Ltd is eligible for deduction u/s 80P(2)(d) of the Act which reads as under: "80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) .............. ....
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....of banking or providing credit facilities to its members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative banks is entitled to deduction u/s 80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on investments made with other Cooperative society. For the purposes of better proper understanding of these two provisions the relevant extract of the section are reproduced below: 80P: Deduction in respect of income of co-operative Societies. 1. Where, in the case of an assesssee being a co-operative society, the gross total income, includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. 2. The sums referred to in sub-section (1) shall be the following, namely:- (a) In the case of a co-operative society engaged in- (i) Carrying on the business of banki....
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.... from its investments with other coop. society if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/-in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directly accordingly." 6.2 We further note that the Hon'ble Jurisdictional High Court in the case of CIT vs. Rajasthan Rajya Sahakari Kray Vikray Sangh Ltd. (supra) by following the decision of Hon'ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. Vs. ACIT, 72 taxmann.com 169 has held in as under:- "8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under: '4. The effect of Section 80AB is that, for the purpose o....
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.... paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said co- operative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under : "80P. (2)(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income." 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : "...In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used," 7. The principle laid down by Rowlatt J., ....
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....g on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits. 9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside." 6. Further the Hon'ble Karnataka High Court in case of PCIT and Another vs. Totagars Co-operative Sale Society 392 ITR 0074 as relied upon by the Ld. AR of the assessee as held in para 7 to 11 as under:- "7. However, the contention being taken by the learned counsel is untenable. For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Co-operative Ban....
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....the decisions as cited (supra), we do not find any error or illegality in the orders of the ld. CIT(A) to the extent of the allowing the claim of the assessee u/s 80P(2)(d) in respect of interest income from deposits/FDRs with the Co-operative Banks." 9. In the instance case, there is no dispute that Ajmer Central Cooperative Bank Ltd is a co-operative society. Therefore, in light of the aforesaid discussions, for the purposes of section 80P(2)(d) of the Act, it shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. 10. Now, coming to a related issue as to whether by virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) can be denied to the assessee society. The relevant provisions of section 80P(4) reads as under: "(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank." 11. In case of Bhilwara Zila Dugdh Utpadak Sahak....
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....nch that though the Co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, as a co-operative bank continues to be a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a cooperative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. We see no reason to deviate from the same and agree with the said view taken by the Co-ordinate Bench and the relevant findings of the Co-ordinate Bench read as under: "6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought to adjudicate as to whether the claim of the assessee for deduction under section 80P(2)(d), in respect of interest income earned from the investments made with the cooperative banks is in order ....
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.... the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Subsection (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statut....
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....oning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT (A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT "F" bench, Mumbai in the case of Vaibhav Cooperative Credit Society (supra) is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee co-operative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec. 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the is....
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....80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) cannot be denied to the assessee society as the deposits have been placed by the assessee co-operative society with Ajmer Central Co-operative Bank Ltd which is registered as a co-operative society and retains the same character even though it is carrying on the banking business. 13. We are therefore of the considered view that even though the Assessing officer has not examined the matter relating to deduction so claimed by the assessee, the order passed by the Assessing officer wherein he has allowed the deduction u/s 80(P)(2)(d) on interest on FDRs placed with Ajmer Central Co-operative Bank Ltd cannot be held as erroneous in view of the aforesaid discussion wherein there cannot be any dispute regarding claim of the deduction u/s 80(P)(2)(d) of the Act. In light of the same, the impugned order passed by the ld Pr CIT passed u/s 263 of the Act is set-aside and matter is decided in favour of the assessee." 5. Regarding specific provisions against liability which were considered as general provisions/contingent liability for Rs. 1,23,40,930.00 by the ld Pr. CIT, the ld. AR submitted that assessee has ....
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....nbsp; 7 TA & OTHERS WITH BOB 135330 33800 19/09/2012 STAFF BILLS 8400 12/11/2012 8400 16/11/2012 16800 19/11/2012 8400 12/02/2013 51400 31/03/2013 13674 31/03/2013 140874 7. It was submitted that these are "specific provisions" based on "mercantile system of accounting" and complete proof of payments / discharge of liability on or before due date receipts were filed before A.O. during assessment proceedings u/sec. 143(3) / 147 of Act. Even Form 3CD u/sec. 44AB audit report contain these details & never denied by A.O. Thus same cannot be disallowed or wrongly allowed by A.O. It was submitted that section 37(1) specifically allowed & provides that "if a business liability has definitely arise in an accounting year", the deduction is to be allowed irrespective that the liability may have to be quantified and discharged at a future date. ....
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....of Regional Rural Bank wherein vide CBDT Circular No. 6/2010 [F.No. 173(3)/44/2009-IT (A-1)] dated 20.09.2010, the Regional Rural Banks are not eligible for deduction under section 80P of the 1.T. Act, 1961 from the A.Y. 2007-08 onwards and also the Circular No. 319 dated 11.1.1982 deeming any Regional Rural Bank to be cooperative society stands withdrawn for application w.e.f. assessment year 2007-08. 8.3 Also, as per clause 22.2 of Circular No. 14/2006 dated 28.12.2006 on Finance Act, 2006 - Explanatory Notes on provisions relating to Direct Taxes, it has been explained that the cooperative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new subsection (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural-development bank. 8.4. The assessee relied upon the decision of the Hon'ble ITAT, Jodhpur in the case of M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. in ITA No. 437/Jodh/2017 dated 31.10.2018 ....
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....been preferred before the Hon'ble Rajasthan High Court cannot be a basis to hold that the order so passed by the AO allowing such deduction is erroneous in so far as prejudicial to the interest of Revenue and therefore, the findings of the ld Pr.CIT to this extent are set-aside. 11. Secondly, regarding the claim of various provisions, the assessee has submitted that these relates to liabilities which have crystallized during the year though the payment have been made in the subsequent financial year and thus are allowable business expense. The assessee has also furnished a chart with remarks showing analysis of specific provisions for outstanding liability as on 31.03.2012 and date of subsequent payment. The reason why the same was not found acceptable to ld Pr CIT was that due to non-availability of proper ledgers and other requisite details on assessment record, the same cannot be verified and even the AO has not verified the issue whether the business liabilities regarding these provisions were actually raised and ascertained during the year under consideration or not. Per contra, the ld AR submitted that the requisite details are available as per the tax audit report and ....