TaxTMI 
TaxTMI 
2021 (9) TMI 160
X X X X Extracts X X X X
X X X X Extracts X X X X
....Principal Commissioner of Income Tax erred in setting aside the assessment order of the Assessing Officer u/s 143(3) of the Act observing that the contentions raised by the assessee necessitate reverification of the matter without commenting anything on order being erroneous as well as prejudicial to the interest of revenue." 3. The fact in brief is that the assessee filed return of income on 28th Nov, 2014 declaring total income at Rs. nil after claiming deduction of Rs. 98,69,898/- u/s. 80P(2) of the act. The case was subject to scrutiny assessment and assessment u/s. 143(3) of the act was completed on 29th December, 2017 and total income was assessed at Rs. 4,08,470/-. Subsequently, the Pr. CIT issued a show cause notice u/s. 263 of the act on 19th March, 2020 that Assessing Officer has failed to carry out enquiries as warranted by the facts and circumstances of the case in respect of claim of deduction u/s. 80P(2)(d) of the Act. The relevant part of the notice is reproduced as under:- "2. In your case, the case records for the A. Y. 2014-15 were called for and examined. The return of income for the A. Y. 2014-15 was filed by you on 20.11.2014, declaring total income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if, in the opinion of the Principal Commissioner or Commissioner of Income-tax, the order is passed without making enquiries or verification which should have been made. 6. In view of the above facts, clear provisions of the Act and the authorities, you are hereby required to show cause as to why the assessment order passed by the Assessing Officer on 29.12.2017 should not be set aside for de novo consideration as per the provisions of the section 263 of the Act." In response to the show cause notice, the assessee has explained as under:- "We bring to your notice that as per section 2(19) of the Act a "Co-operative Society" means a Cooperative Society registered under the Co-operative Societies Act, 1912, or any other law for the time being in force in any state for the registration of the Co-operative Societies. Since the Co-operative banks are also registered under the Co-operative /Societies Act hence as per the definition of co-operative society as stated above co-operative banks are also to be treated as co-operative society-Further it should be noted that the Co-operative Society can be of different nature, and can be involved in different activi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re the ld. Pr. CIT. On the other hand, the ld. Departmental Representative has supported the order of Pr. CIT. 5. Heard both the sides and perused the material on record. The case was subject to scrutiny assessment and order u/s. 143(3) of the act was finalized on 29th December, 2017 and Assessing Officer has allowed the claim of deduction u/s. 80P(2)(d) of the Act. Subsequently, the Ld. Pr. CIT held that assessment order passed was erroneous and prejudicial to the interest of revenue since the Assessing Officer has failed to carry out enquiries/verification in respect of claim of deduction made u/s. 80P(2)(d) of the Act. In this regard, we have perused the copy of notice u/s. 142(1) dated 10th October, 2017 issued by the Assessing Officer during the course of assessment proceedings u/s. 143(3) of the act as per annexure of questionnaire enclosed with the above referred notice. It is observed that at serial no. 15 of the questionnaire the Assessing Officer has asked the assessee to furnish details in justification of the claim of deduction u/s. 80P. Vide letter dated 18th December, 2017 the assessee has made detailed submission in respect of claim of deduction u/s. 80P of the Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Further it should be noted that the Co-operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Cooperative Societies. Thus, the Co-operative Bank which is a species of the genus Co-operative societies would necessarily be covered by the word 'Co-operative Society' and since, clause 80P(2)(d) of the Act permits such 100% deduction in respect of the income by way of interest or dividends derived by the Co- operative Society (Assessee) from its investments with any other Co operative Society (including Co-operative Bank) and the whole of such interest income is eligible for 100% deduction. Regarding the above matter Gujarat high court in the case of Surat Vankar Sahakari Sangh Ltd. v. Assistant Commissioner of Income-tax held that- "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 cooperative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest which the assessee-respondent had earned was from a Cooperative Society Bank. Therefore, according to section 80P(2)(d), the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent." Copy of the Karnataka high court judgment is attached herewith for your reference. Punjab & Hariyana high court in case of C1T v. Doaba Cooperative Sugar Mills Ltd. [1998] 96 Taxman 509/230 ITR 774 held that - "Interest derived by the assessee co-operative sugar mill from its investment in cooperative bank would qualify for deduction in its entirety under Section 80P(2)(d), without adjustment of interest paid by the assessee to the co-operative bank." So, as per the above various judgments of high courts and mainly based on the Gujarat High court decision it can be inferred that Interest income earned by co-operative society from the cooperative bank is allowed as a deduction u/s 80P(2)(d) of the Act." During the course of original assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion for the same under section 80P(2)(d) of the income tax act and not under section 80P(2)(a)(i) While the judgment passed by the Supreme Court in case at Sale Society Limited is mainly of such society which is providing credit to its members. As per section 80P(2)(a){i) a co-operative society which is engaged in the business of banking or providing credit facilities to its members is eligible to claim the income from carrying on banking business to its member or income from providing credit facilities to its member as deduction under section 80P(2)(a)(i). While our society is not engaged in the business of the providing credit to its members so this judgment is not applicable to us. In the judgment Supreme Court had held that "In the in case, the interest held not eligible for deduction under section 80P(2)(a)(i) was not the interest received from the members for providing credit facilities to them. What was sought to be taxed under section 56 was the interest income arising on the surplus invested in short-term deposits and securities which surplus was not required for business purposes. The head note to section SOP indicates that the said section dea....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 1961 in respect of interest of Rs. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the bank. Therefore, the reference is answered against the Revenue in the affirmative and in favor of the assessee/ Further High Court Of Gujarat Kaira District Co-op. M3k Producers Union Ltd. v. Deputy Commissioner of Income-tax held that "The petitioner had earned interest income of Rs. 2.29 crores which was earned out of investment of amount received on sale of milk, milk products from GCMMFL. It was pointed out that since the interest was received from the cooperative bank, society and earned out of investment made from its own fund, the assessee was entitled to full deduction under section 80P(2)(d) of the Act. It was further clarified that such interest was earned on short term deposits with the cooperative banks or from Cooperative societies. It was stated that no expenditure in the farm <rf interest was incurred for earning such interest. According to Allahabad High court in case of CIT Vs. U.P. Co operative sugar factories "Net income from interest received from cooperative societies ;'co operat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o use. Extract of the agreement in this matter is as under- "GCMMF will pay the 80% interest subsidy cost of members union with maximum limit of Rs. 10 crore for the total loan period and maximum of 7 years." Copy of agreement as a supporting of this is attached herewith for your kind reference. 3. During the year under consideration total addition of Rs. 52,13,272/- was made and this whole addition is of crates only and no crans were purchased during the year under consideration. Details of the addition were already submitted to you in the point no. 2 of our earlier submission dated 24.11.2017. Further with regards to the depreciation of the crates we would like to state that crates are made of plastic materials and are used for the purpose of the transportation of the goods produced by dairy from one place to another place. Since the crates are going in various hands it is used very roughly and becomes useless for us in the same year itself. So, it does not have a life of more than a year for us. Due to this it becomes a consumable item for us and so we had depreciated the same at the rate of 100% i.e. in the same year itself. ....