TaxTMI 
TaxTMI 
2022 (8) TMI 1020
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....'s revision directions under challenge reading as under: "7. I have examined the submission made by the assessee and issues involved therein. I have also gone through various case laws filed and relied upon by the assessee in support of claim of Rs.1,78,32,346/- u/s 80P. It is the submission of the assessee that the allowability of deductions has been examined by the Assessing Officer and he has taken a view. Therefore, invoking provisions of section 263 of the Act for revising the assessment order is not proper. The contention raised by the assessee are examined with reference to assessment record and it is found that Assessing officer has arrived at decision without properly examining the eligibility of assessee to claim deduction u/s 80P of the Act. As per provisions of section 80P(2)(a)(i), the Society is required to substantiate the principle of mutuality with respect to the loans taken from members to loan advanced / investment made by it. To come to a conclusive discussion, the AO should have verified whether the loans / deposit taken are given back to the members as loans / advances or not. The assessment order does not indicate whether this exercise has been done or no....
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....ither before the Assessing Officer or during the present proceedings. The Assessing Officer also has not verified this aspect. 9. It is seen from the Profit and Loss account that the assessee has received interest & dividend income of Rs. 3.22 Cr. on fixed deposits investments with various co-operative banks. It is not clear whether these co-operative banks are registered with the RBI or not. If it is registered with the RBI then the interest received from the bank is not entitled for deduction u/s 80P(2)(d). The Assessing Officer has not caused any verification of this issue. 10. Since the assessee's large claim of deduction under chapter VI-A was the reason of selection of its case for scrutiny; the Assessing Officer was required to conduct in-depth verification of the assessee's claim. Since the above mentioned bank is not a cooperative society, the interest earned is not eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). Hence, allowing of the deduction by the Assessing Officer under section 80P for the above amount is not as per the provisions of the Income Tax Act, 1961. In Para 10 of the Hon'ble Karnataka High Court decision in the case of Tumk....
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....eceived from the members which are returnable to the members or from out of the surplus funds arising from profits and gains. b. Whether the deposits are made with institutions which are registered with RBI for carrying out business of Banking. c. Whether the Principle of Mutuality is satisfied to allow deduction u/s 80P in respect of income earned from deposits made with Co-op Banks. d. Based on the evidence, decide the allowability of deduction u/s 80P. The Assessing Officer shall, accordingly, re-frame the assessment in the assessee's case in due compliance with the above directions." 4. Mr. Meena further quoted PCIT vs. The Totagars Co-operative Sale Society (2017) 392 ITR 74 (Kar) that such an interest income deserves to be treated as 'income from other sources' than under regular head of business u/s 80P of the Act. 5. We have given our thoughtful consideration to the Revenue's foregoing arguments supporting the learned PCIT's revision directions and find no merit therein as this tribunal's recent co-ordinate bench's order in Rena Sahakari Sakhar Karkhana Ltd. vs. PCIT ITA No.1249/PUN/2018, 07.01.2022: "7. We have heard the ld. authorised representatives for b....
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............... (c)............................................................................................ (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 society, the whole of such income;" On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. 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 co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) to Sec. 80P of the Act, 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. However, at the same time, we are unable ....
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.... India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006 also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), as had been relied upon by the ld. D.R before us, had held, that a co-operative society would not be entitled to claim deduction under Sec. 80P(2)(d); but then, the Hon'ble High Court in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a ....