TaxTMI 
TaxTMI 
2021 (3) TMI 256
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....39 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. However, the A.O. failed to disallow the same during the assessment proceedings which makes the assessment order erroneous in so far as it is prejudicial to the interest of th....
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....he 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) .............. (b) .............. (c) .............. (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, the whole of such income." 8. The aforesa....
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....d 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 banking or providing credit facilities to its members. The whole of the amount of profits and gains of business attributable to any one or more of much attributes. (d) In respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative so....
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....ks 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 of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken in....
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....or 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., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759. 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative societ....
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....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 Bank would necessarily be deductable under Section 80P(1) of the Act. 8. The issue whether a Co-operative Bank is considered to be a Cooperative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word "Cooperative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a par....
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....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 Sahakari Sangh Ltd., Bhilwara (Supra), the issue under consideration was allowability of deduction u/s 80P(2)(d) in the context of interest on deposits placed with Baroda Rajasthan Kshetriya Gramin Bank which was held as Rural Bank and not a co-operative society by the Assessing officer and by invoking provisions of section 80P(4), the deduction was denied to the assessee. The Coordinate Bench has held that that the assessee which is claiming deduction is the co-operative society and not the Regional Rural Bank and Baroda Rajasthan Kshetr....
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....m 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 or not. We find that the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P, as had been made available on the statute by the legislature vide the Finance Act 2006, with effect from 01.04.2007. We find that the lower authorities had taken a view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) of the interest income earned on the amounts parked as investments with co-operative banks, other than a Prima....
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....d 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 statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term 'co-operative society' had been defined under Sec. 2(19) of the Act, as under:- '(19) "Co-operative society" means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;' We are of the considered view, 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....
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....ace 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 issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT 'SMC' Bench, Mumbai in the case of Shri Sai Datta Co-operative Credit Society Ltd. (supra), would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka i....
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.... 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 adopted mercantile system of accounting during the year and has claimed following provisions as per details below:- SR. NO. PARTICULAR AMOUNT REMARKS 1 Audit Fee 5,00,000/- 2 Cess 51,00,000/- Allowable on payment basis 3 Repairs & Maintenance 4,05,600/- 4 Leave Encashment 50,00,000/- Allowable on payment basis 5 Milk DCS 7,00,000/- 6 Packing Material 5,00,000/- 7 TA & Other with BOB 1,35,330/- 6. It was submitted that since these are specific provisions for liabilities based on mercantile system of accounting followed by assessee & Income Tax permits such specific provisions on "CRYSTALIZED" basis on accounting system followed. ....
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....tion is to be allowed irrespective that the liability may have to be quantified and discharged at a future date. 8. Regarding payment of bonus Rs. 13,00,000 considered disallowable u/sec. 43B, it was submitted that as per AO's order u/sec. 143(3) of Act, the same has already been considered "disallowed" in terms of section 43B of Act and therefore, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of Revenue. 9. Per contra, the ld. CIT/DR has relied on the order and finding of the ld. CIT and our reference was drawn to the relevant findings which read as under:- "7. Regarding the claim of various provisions, the assessee has submitted that the section 37(1) of the Act allowed the business liability which has arisen in an accounting year and the deduction is to be allowed irrespective that the liability, may have to be quantified and discharged at a future date. The assessee\also furnished a chart with remarks showing analysis of specific provisions for outstanding liability as on 31.03.2012. The reply as well as the chart furnished by the assessee, has been perused and it has been observed that the allowability of expenses on acc....
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....padak Sahakari Sangh Ltd. in ITA No. 437/Jodh/2017 dated 31.10.2018 for AY 2014-15 whereby the Tribunal has allowed the claim u/s 80P(2)(d) of the I.T. Act, 1961. The decision of the Tribunal was not accepted by the Revenue and further appeal was preferred before the Hon'ble High Court, Jodhpur and the Hon'bie High Court vide its order dated 13.08.2019 in DBIT Appeal No. 2/2019 dismissed the appeal of the Revenue, against which the SLP has been recommended to be filed before the Hon'ble Supreme Court. 8.5 Similarly, the assessee relied upon the decision of the Hon'ble ITAT, Jaipur taken in the case of assessee itself in ITA No. 90/JP/2019 dated 28.08.2019 for AY 2014-15 whereby the Tribunal has allowed the appeal of the assessee on the issue of claim u/s 80P(2)(d) of the I.T. Act, 1961. The decision of the Tribunal has not been accepted by the Revenue and further appeal has been preferred before the Hon'ble High Court, Jaipur. 9. On the issue of provision of bonus, the assessee has submitted that the same has already been considered disallowed in terms of section 43B of the Act and provision made of Rs. 15,00,000/- (F.Y. 2010-11) paid during the year and disal....
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....as per the tax audit report and our reference was drawn to tax audit report available as APB page 42 as well as details of invoices/payments submitted during the course of hearing. It was further submitted that complete proof of payments/discharge of liability were filed before the AO during the assessment proceedings and therefore, where the matter has been examined by the AO, the order so passed by the AO cannot be held as erroneous and prejudicial in nature. We have given a careful consideration to rival contentions and find that though the details of various provisions and subsequent payments find mention in one of the annexures to the tax audit report, however, the context of such details available as annexure to the tax audit report is not clear and there is nothing in law that the AO cannot call for such details and seek to examine the same where the same find mention in the tax audit report. There is nothing on record that these details have been called for and examined by the AO during the assessment proceedings and are available on record as so contended by the ld AR and in absence of such examination and relevant material on record, the assessment order passed by the AO....