AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 287
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....utiny under CASS. The assessee claimed deduction u/s. 80P(2) at Rs. 67,04,047/-. Accordingly, the assessment was completed and the deduction u/s. 80P(2) of the Act was allowed u/s. 263. The proceeding was initiated for setting aside the order of the Ld. AO in the ground that the amount was invested to the nominal member and in the Schedule Bank not in the Cooperative Bank. The Ld. PCIT relied on the order of the Totagarh Cooperative Sales Society v. ITO 322 ITR 283 (SC) and disallowed the deduction of 80P(2) and return back the order to Ld. AO for reassessment. Aggrieved, the assessee filed an appeal before us against the order of the PCIT. 3. The assessee has raised the following grounds of appeal: "1. That order u/s. 263 of the Act, passed by Learned Commissioner of Income Tax, Jalandhar-l ('Ld. CIT'), is illegal & without jurisdiction. 2. That Learned Commissioner of Income Tax, Jalandhar-l ('Ld. CIT') has grossly erred in holding that assessment order passed by the Assessing Officer ('AO') was erroneous and prejudicial to the interest of revenue. Action of the Learned Commissioner of Income Tax, Jalandhar-l ('Ld. CIT') in inv....
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....d. counsel of the assessee vehemently argued and placed the submission which is containing from page Nos. 12 to 29 which is kept in the record. As per the Ld. counsel, the assessee was allowed deduction u/s. 80P(2) of the Act for assessment year 2014-15 so the assessee is also eligible for deduction for assessment year 2015-16. The Ld. counsel further mentioned that the Ld. AO made the proper scrutiny and verification related to deduction under chapter VIAS r.w.s. 80P, the extract of the assessment order para 2.1 is reproduced as below: "2.1 One of the reasons for selection of case in scrutiny was verification of large deduction claimed under Chapter-VIA of the Act. As per the return of income the assessee had claimed deduction u/s. 80P of the Act at Rs. 66,55,094/- being income from business as a Cooperative Credit Society/Trust and dividend for other Cooperative Societies and Rs. 49,953/- on the income from other activities. In the notice u/s. 142(1) of the Act issued on 24.11.2017, the assessee was asked, vide question No. 1 to justify its claim for deduction u/s. 80P of the Act or to show cause AS TO WHY the deduction u/s. 80P should not be disallowed in view of findin....
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....terest from the investment in Cooperative Bank is accepted. The interests from other Schedule Bank are not accepted during the assessment. He relied on the order of Pr. CIT. The Ld. CIT-DR relied on the order of the Ld. PCIT page 16 paragraph 5.3 which is extracted as follows:- "5.3. Thus in view of the above judgment of the Hon'ble Supreme Court it is apparent that the order of the assessing officer in case of M/s. Bains Cooperative Thrift & Credit Society Ltd., A.Y. 2015-16 dated 21.12.2017 holding that the assessee is entitled to benefits of Section 80P of the Act is erroneous and prejudicial to interest of the revenue. 6. Further, as discussed above the assessee was not subjected to the regulation under the Reserve Bank of India Act and Banking Regulation Act as the assessee was not having license under the Banking Regulation Act for doing the business of banking. * The assessee has received interest from the Scheduled Banks and other commercial banks which were not member of the assessee cooperative society. As per the income and expenditure statement the interest that assessee has received from HDFC Bank is Rs. 17696/-. * The case of CI....
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....ax Act, 1961. * Such interest cannot be said to be attributable to the activities of the society, viz., carrying on the business of providing credit facilities to its members or marketing of agricultural produce of its members. Interest income of such society from amounts retained by it cannot be said to be attributable either to the activity mentioned in section 80P(2)(a)(i) of the Act. * The Supreme Court held further, that the question whether interest on deposits was chargeable to tax without allowing any deduction in respect of cost of funds and proportionate administrative charges and other expenses under section 57 was a question of law involving the applicability of sections 56 and 57 to this case, which was raised by the assessee before the authorities but had remained unanswered and had to be answered and remitted the matter to the High Court for consideration of that question. * The decision of Hon'ble' ITAT in the case of Mantola Cooperative Thrift and credit Society also covers all the aspects and grounds raised by the assessee. It has been held that the fact of case of Totgar's Co-operative Sale Society Ltd. are similar to the as....
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....dit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. As a matter of fact, some primary agricultural credit societies applied for a banking license to the RBI, as their bye-laws also contain as one of the objects of the Society the carrying on of the business of banking. This was turned down by the RBI in a letter dated 25.10.2013. A number of judgments have held that a proviso cannot be used to cut down the language of the main enactment where such language is clear, or to exclude by implication what the main enactment clearly states. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd., 397 ITR 1 (SC), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. The observation of the order of the assessing authority, it is clear that the particular issue related investment in cooperative bank nationalise....