AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1291
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....itrary and unjustified, which merits annulment. 2. Without prejudice to the above, the learned Principle Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set aside the assessment order dated 31.1.2015 passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interests of the Revenue and as such, the assumption of jurisdiction under section 263 of the Act is beyond his competence. That the order of revision has been passed by the Principle Commissioner of Income Tax ignoring the settled law on the deductions under section 80P(2)(d) of the Income Tax Act. 3. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted to by the Principle Commissioner of Income Tax is unwarranted and uncalled for. 4. That the reasons mentioned in the notice issued by the Principle Commissioner of Income Tax for initiation of proceedings under section 263 are based on suspicion, conjectures and surmises with no material whatsoever on record to substantiate the a....
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....copy of which was being enclosed, showed that the society had invested an amount of Rs. 72 lacs as FDR with CCB Mullanpur and Rs. 9,35,92,380/- with CCB Parol, that 'CCB' stood for SAS 'Central Cooperative Bank', that copies of the bank certificates regarding holding of the FDRs in these banks were also being appended, that according to the Reserve Bank of India Act, 1934, as amended by the Banking Laws (Applicable to Cooperative Societies) Act, 1965, 'Central Cooperative Bank' means the principle cooperative society in a district in a state, the primary object of which is the financing of other cooperative societies in that district, that there is no dispute to the fact that the assessee is a cooperative society and had deposited the amount with cooperative banks, that the only dispute was as to whether the cooperative banks qualify to be cooperative societies, that the expression 'cooperative society' is an expression with bigger connotations and 'cooperative bank' refers to a cooperative society doing a special kind of business only, that further, all cooperative banks are registered under the Cooperative Societies Act, 1912, or under any ....
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....is regard, reliance was placed on various case laws. Reference was also made to explanation 2(a) of section 263, inserted with effect from 01.06.2015. It was observed that the assessee is a cooperative society and the function of the society, since its inception, is to provide short and medium term loans to its members for agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs like fertilizers and insecticides to its members on a no profit no loss basis. It was observed that during the year under consideration, the society had shown income from business, rent, dividend and interest from FDRs with banks. It was observed that the society had claimed exemption under section 80P(2)(a)(i) under Chapter VIA of the Income Tax Act, as the activities of the society were to provide short term loans to its members for agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs like fertilizers and insecticides to the members on a no profit no loss basis, that the society was for the mutual benefit of the members and the profits, if any, were to be distributed amongst the members only, and that the functioning of the ....
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....the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. It was held that therefore, the interest income earned by the society on investment with banks was not eligible for deduction under section 80P(2)(a)(i) and it was to be charged to tax as income under section 56 of the Act. It was observed that it had been submitted on behalf of the assessee during the proceedings under section 263 of the Act, that deduction had been claimed under section 80P(2)(d), that by citing the provisions and terminology of various other Acts, it had been tried to be established that SAS Central Cooperative Bank is a cooperative society and hence, the income earned by the society is eligible for deduction under section 80P(2)(d), that this contention of the society was totally opposite to the plea taken during the assessment proceedings, where the society had claimed deduction under section 80P(2)(a)(i), and not under section 80P(2)(d). It was observed that further, without prejudice, even if the contention of the society was to be considered, the fact remained that a cooperative bank other than a primary agricultur....
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....ourt in the case of 'M/s Totagars Cooperative Sale Society Limited Versus ITO', 322 ITR 283 (SC). It was held that therefore, the Assessing Officer had failed to gather the complete facts of the case and to correctly apply the law while making the assessment, which had resulted in the framing of an erroneous order which was also prejudicial to the interests of the Revenue. 6. Challenging the impugned order, the learned Counsel for the assessee has contended that the learned PCIT has wrongly assumed jurisdiction under section 263 of the Income Tax Act to set aside the Assessment Order, whereas the Order is neither erroneous, nor prejudicial to the interests of the Revenue and as such, the assumption of jurisdiction under section 263 is beyond his competence. It has been contended that the Order of revision has been passed ignoring the settled law with regard to deductions under section 80P(2)(d) of the Income Tax Act. It has been contended that the Assessment Order was passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record. It is submitted that therefore, the action resorted to by the learned ....
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....rative Society Limited Bengaluru Versus Department of Income Tax', reported as ITA Number 737/bang/2011 and 'ITO Versus Punjab State Cooperative Bank', reported as 300 ITR 24 (P&H). The income of the society, being for mutual benefits of its members, is also exempt from tax. Your kind attention is invited to the case of 'Bankipur Club Limited', 140 CTR 102 (SC) and 'Canara Bank Golden Jubilee Staff Welfare Fund Versus DCIT', 308 ITR 202 (Kerala) and 'Chemsford Club Limited', reported as 243 ITR 89." By way of Question Number 5, the Assessing Officer asked the assessee society to give complete details of all bank accounts, including FD accounts, maintained by the society, giving the name of the bank and branch with completed address, account number and type of account, that is, whether current account, OD, loan, FDR, term, etc. The assessee society was also asked to provide its monthly bank reconciliation statement. In response, the assessee society filed complete details of the bank accounts, as well as the FDRs maintained. 9. The Assessment Order states that the returned income of the society was accepted after discussion with the Counsel ....
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....Balance Sheet and copies of the bank certificates regarding holding of the FDRs in these banks are appended herewith. According to Reserve Bank of India 1934 as amended by Banking Laws (Applicable to Co- Operative Societies) Act, 1965 'Central Cooperative Bank' means the principle cooperative society in a district in a State, the primary object of which is the financing of other cooperative societies in that district. There is no dispute as to the fact that the assessee is a cooperative society and had deposited the amount with Cooperative Bank. The only point to be seen is as to whether the Cooperative Banks qualify to be Cooperative society. It may be mentioned that the word Cooperative society is a word with bigger connotation and the Cooperative Bank refers to the cooperative society doing special kind of business only. Further, all the cooperative banks are registered under Cooperative Societies Act, 1912 or under any other law for the time being in force in any state for the registration for cooperative societies. In short, the provisions of various Acts governing cooperative societies are applicable to co-operative banks since these banks are also cooperativ....
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....ection 80P(2)(d) of the Income Tax Act. Copies of both High Court and Supreme Court judgement are appended herewith. In view of the above submissions it is submitted that the condition that the order is prejudicial to the interest of the revenue is not fulfilled as the interest on FDRs with Cooperative Bank are qualified for exemption under section 80P(2)(d) of the Income Tax Act. You are requested to drop the proceedings under section 263 of the Income Tax Act and oblige..." 12. These submissions of the assessee society also stand reproduced in Para 2 of the Order under appeal. 13. The PCIT has observed that the contention of the assessee is totally opposite to the plea taken during the assessment proceedings where the assessee had claimed deduction under section 80P(2)(a)(i) and not under section 80P(2)(d); that any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank have been excluded from the scope as per section 80P(4) of the Act; and that the assessee had invested with a cooperative bank and not with a cooperative society and hence, it was not eligible for deduction under section 80P....
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....essment proceedings, the books of account were examined and no adverse inference was drawn, and that the exemption claimed by the assessee under section 80P was being allowed. As such, it has correctly been submitted on behalf of the assessee, that everything stands examined by the Assessing Officer in the assessment proceedings and that there is no new issue pointed out by the PCIT, due to which, the revision proceedings are unsustainable. 17. In this regard, in 'CIT Versus Anil Kumar Sharma', 335 ITR 83 (Delhi), it was held that it was apparent that the Tribunal had arrived at a conclusive finding that though the Assessment Order did not patently indicate that the issue in question had been considered by the AO, the record showed that the AO had applied his mind; that once application of mind by the AO was discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion; that their Lordships were of the view that the findings of fact arrived at by the Tribunal did not warrant any interference; that that being the position, the case would not be one of lack of enquiry and, even if the enquiry was term....
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....under section 143(3) and that therefore, revision by the CIT was not sustainable. In the present case also, the assessee has given proper explanation on pertinent questions asked by the AO. Therefore, invocation of the provisions of section 263 was not proper. 20. In 'Shri Varinder Kumar Gupta Versus ITO', vide Order dated 06.05.2020, in ITA Number 754/CHD/2018, the Chandigarh Bench of the Tribunal has held that the PCIT did not even consider the reply and details furnished by the assessee and did not call for any enquiry; that the PCIT just repeated the contents of the show cause notice and set aside the assessment order on the ground that the AO should have made more enquiries; that he directed the AO to make further fishing and roving enquiries which were even not germain to the facts and issues involved; that the Supreme Court, in the case of 'CIT Versus GM Mittal Stainless Steel (P) Limited', (2003) 263 ITR 255 (SC), has observed that the satisfaction by the Commissioner must be one objectively justifiable and based on material either legal or factual, when available, it cannot be the mere ipse dixit of the Commissioner; that therefore, the Order of the Comm....
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....essee filed evidence before the AO and also before the Pr. CIT, which proved the identity of the creditors and genuineness of the transactions, alongwith sources. It was in these circumstances, that the Tribunal held that the order passed by the AO could not be said to have been passed without application of mind; that the Pr. CIT had tried to substitute the plausible view taken by the AO, with his own view; that this course of action is not permissible under the revisionary provisions u/s 263 of the Act; and that hence, the revisionary proceedings initiated u/s 263 were vitiated in law. While holding so, the decisions in 'CIT Vs Chandan Magrag Parmar', (2022) 445 ITR 674 (Bom), 'A.G.Mannesmann Demag Vs Dy. CIT' (1995) 53 ITD 533 (Del); and 'CIT Vs Sohana Woollen Mills' (2008) 296 ITR 238 (P&H) were relied on. 23.1 Further still, in 'Sh. Narain Singla Versus Principal Commissioner of Income Tax (Central) Ludhiana', 62 taxman.com 255, the Chandigarh Bench of the Tribunal has held that if there was an enquiry, even inadequate, that would not, by itself, give occasion to the Commissioner to pass an order under section 263 of the Act, merely because he has a different opinio....
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....ated that this decision has been followed by the Honorable Gujarat High Court in the case of 'Surat Vanker Sahakari Sangh Limited', 421 ITR 134 (Gujarat). 26. It has been contended that the learned PCIT has gone wrong in applying the provisions of Section 80P(4) of the Act, though the same are not applicable to the case; that this is so, because the assessee is not a cooperative bank licenced by the Reserve Bank of India to carry on banking business and so, Section 80P(4) is not at all applicable. In this regard, reliance has been sought to be placed on the following decisions: i 'Mavilayi Cooperative Bank Limited and Others Versus Commissioner of Income tax and Another', 431 ITR 1 (SC) ii 'Borivali Jankalyan Sahkari Patpedhi Limited Versus ITO', Order dated 3.3.2021, passed by the Mumbai Bench of the Tribunal, in ITA Number 5230/MUM/2019, for AY 2015-16 iii 'Vavveru Cooperative Rural Bank Limited', 396 ITR 371 (Telangana and Andhra Pradesh) iv 'Kaliandas Udyog Bhawan Premises Cooperative Society Limited Versus ITO', 94 taxmann.com 15 (Mumbai-Trib.) v. 'Rena Sahakari Sakhar Karkhana Limited ....
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...., but have been placed at the disposal of non-members, that is, banks, for a purely commercial activity of the non-member Banks, having nothing to do with the mutual benefit of the members of the society, or the society as such; that in its reply to the AO's Questionnaire, the assessee had itself submitted in Para 13, that it had claimed exemption under section 80P(2)(a)(i) of the Act; that the function of the society is, therefore, covered under the provisions of section 80P(2)(a)(i) of the Act; that the decision of the Karnataka High Court in the case of 'Totagars Cooperative Sale Society' is distinguishable; that the said decision is not applicable for allowing any claim of deduction under section 80P(2)(a)(i); that rather, the decision of the Honorable Supreme Court in the case of 'Totagars Cooperative Sale Society Limited Versus Income Tax Officer', 322 ITR 283 (SC) is in favour of the Department; that in that case, the Honorable Supreme Court has held that to say that the source of income is not relevant for deciding the applicability of section 80P of the Act would not be correct, because the words 'the whole of the amount of profits and gains of busi....
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....s held by the Honorable Supreme Court in the case of 'CIT Versus Bangalore Club'; that in that case, interest income earned from Bank in respect of a person who was also a member of a club, was not found to be exempt income in the hands of the club; that in the present case, the issue is also not of adopting a possible view out of more than one possible views; that in fact, in the present case, the AO had failed to form a view and had merely passively accepted the contention of the assessee society, even not taking into consideration the applicability of the Supreme Court judgement in the case of 'Bangalore Club'; that the AO has also not considered the applicability of the judgement of the Honorable Supreme Court in the case of 'The Totgars Cooperative Sale Society Limited Versus Income Tax Officer, Karnataka', 322 ITR 283 (SC); and that the AO failed to gather the complete facts of the case and to correctly apply the law while framing the assessment, resulting in the framing of an erroneous order which was also prejudicial to the interests of the Revenue and which was rightly set aside by the PCIT. 28. Having considered the matter in the light of the ri....
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....agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs like fertilizers and insecticides to its members on a no profit no loss basis. The society is for the mutual benefit of the members and the profits if any are to be distributed amongst the members only. The functioning of the assessee society is covered under the provisions of section 80P(2)(a)(i) of the Income Tax Act. Reliance is placed on the cases of 'M/s Yashwant Credit Coop Society Limited Bengaluru Versus Department of Income Tax', reported as ITA Number 737/Bang/2011 and 'ITO Versus Punjab State Coop Bank', reported as 300 ITR 24 (P&H). The income of the society being for mutual benefits of its members, is also exempt from tax. Your kind attention is invited to the case of 'Bankipur Club Limited', 140 CTR 102 (SC) and 'Canara Bank Golden Jubilee Staff Welfare Fund Versus DCIT', 308 ITR 202 (Kerala) and 'Chemsford Club Limited', reported as 243 ITR 89". 32. It is, therefore, seen from the examination of the record, that indeed, as rightly stated by the society, the AO has examined the issue of its claim of deduction under section....
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....g to the Commissioner, more enquiries should have been made; and that the observations of the Commissioner were general in nature, namely, that there was lack of proper enquiry, or investigation, or cosmetic treatment was given by the ITOs. Likewise, here also, it is not a case where enquiries were not made by the AO, or the relevant material was not collected before framing the Assessment Order. The relevant material was collected by enquiry through Questionnaire. The material submitted i7jn response to the same was examined and it was only thereafter, that the Assessment Order was framed, allowing the claim made. The conclusion that the AO did not make enquiry was a subjective conclusion, rendering the invocation of the revisionary power to be unsustainable in law. 36. In 'CIT Versus Late Sh. Vijay Kumar Koganti', 195 DTR 428 (Madras HC), it was held that both the issues which were the basis of the exercise of power under section 263 were, in fact, the issues which were considered by the AO in the limited scrutiny, culminating in the order of assessment under section 143(3); that the assessee had given proper explanation which was taken note of by the AO; and that ther....
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....roducts and, accordingly, he had granted concession under section 80-IB; that the claim of the assessee had been found to be genuine; that the AO had also examined the various workers of the assessee and had then recorded the finding; that the AO was justified in granting the special deduction under section 80-IB; and that the order of revision disallowing the special deduction was not valid. In the present case, the AO had examined the material placed on record by the society in response to the Questionnaire issued. The claim of the society was found to be justified. It was thereupon that the claim was allowed. Therefore, invocation of revisionary power was uncalled for. 40. In 'Sh. Narain Singla Versus Principal Commissioner of Income Tax (Central), Ludhiana', 62 taxmann.com 255, the Chandigarh Bench of the Tribunal has held that if there was an enquiry, even inadequate, that would not, by itself, give occasion to the Commissioner to pass order under section 263 of the Act merely because he has a different opinion in the matter. In the present case, as seen, there has been an enquiry conducted by the AO. As such, there was no occasion for power under section 263 of the....
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....ond the privity of the mutuality; that therefore, the principle of mutuality is not applicable on this interest income; that the interest income earned from a bank is, as such, not exempt under the principle of mutuality, as held by the Honorable Supreme Court in the case of 'Bangalore Club'. 44. It is seen that section 80P(2)(d) provides for deduction in respect of income by way of interest or dividend derived by the assessee from its investments with any other cooperative society. The assessee is a cooperative society. It had invested amounts with the Central Cooperative Bank, Mullanpur and the Central Cooperative Bank, Parol. Both these Banks are members of the SAS Central Cooperative Bank. It remains undisputed that as per the Reserve Bank of India Act, 1934, as amended by the Banking Laws (Applicable to Cooperative Societies) Act, 1965, 'Central Cooperative Bank' means the principle cooperative society in a district in a state, the primary object of which is the financing of other cooperative societies in the district. This being so, the investment made by the assessee society is nothing other than investment with another cooperative society and, therefore, ....
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.... or bank would be deductible. It was held that the decision of the Honorable Supreme Court in the case of 'The Totgar's Cooperative Sale Society Limited Versus Income Tax Officer, Karnataka', 322 ITR 283 (SC) was not applicable, since that case dealt with the interpretation and the deduction which would be applicable under section 80P(2)(a)(i) of the Income Tax Act, whereas in the case before the Honorable High Court, the interpretation required was of section 80P(2)(d) of the Income Tax Act and not of section 80P(2)(a)(i) of the Income Tax Act. It was held that therefore, neither the substantial question of law, as to whether the Tribunal was justified in deleting the additions made by the assessing authority, being the disallowed deduction claimed under section 80P(2)(d) of the Income Tax Act, and in the light of the decision of the Supreme Court with regard to the same exact assesse, namely, the Totgar's Cooperative Sale Society Limited, in Civil Appeal Numbers 1622 to 1629 of 2010, decided by the Apex Court on 8.2.2010, reported as 322 ITR 283 (SC), nor the substantial question of law as to whether the Tribunal was justified in not following the said decision re....
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....rest income from cooperative banks and it is this income for which deduction is being sought under the section. Therefore, section 80P(4) is not applicable to the income of the society. The learned PCIT, hence, has wrongly applied it to the present case. 53. In this regard, The Honorable Supreme Court, in 'Mavilayi Service Cooperative Bank Limited and Others Versus Commissioner of Income Tax and Another', 431 ITR 1 (SC), has held that the limited object of section 80P(4) is to exclude cooperative banks that function at par with other commercial banks, that is, which lend money to members of the public. 54. In 'Borivali Jankalyan Sahakari Patpedhi Limited Versus ITO' (supra), the Mumbai Bench of the Tribunal held that the bone of contention therein was the interest income earned from investment of surplus funds with cooperative banks, as to whether such income was not eligible for deduction under section 80P(2)(d) or 80P(2)(a)(i) of the Income Tax Act. It was observed that in 'CIT Versus Kalpadi Cooperative Township Limited', (2016) 74 taxmann.com 226 (Madras), the Honorable Madras High Court had held that a cooperative credit society providing credit f....
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....Karnataka High Court had held that for the purposes of section 80P(2)(d), a cooperative bank should be considered as a cooperative society. It was observed that in 'Mavilayi Service Cooperative Bank Limited Versus CIT', (2021) 123 taxmann.com 161 (SC), it has been held that the material would clearly indicate that the limited object of Section 80P(4) is to exclude cooperative banks that function at par with other commercial banks, that is, which lend money to members of the public; that therefore, if the Banking Regulation Act, 1949 is to be seen, what is clear from section 3 read with section 56 is that a primary cooperative bank cannot be a primary agricultural credit society, as such a cooperative bank must be engaged in the business of banking as defined by Section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment, of deposits of money from the public; that likewise, under section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to cooperative societies, no cooperative society shall carry on banking business in India unless it is a cooperative bank and holds a licence issued in that behalf by the RBI;....
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....o the profits and gains of business attributable to any one or more of such activities; that but, if the same cooperative society has an income not attributable to any one or more of the activities listed in sub-clauses (i) to (vii) of clause (a), it may go out of the purview of clause (a), but still, the cooperative society may claim the benefit of clause (d) or (e) of section 80P(2) of the Act, either by investing the income in another cooperative society, or investing the income in the construction of a godown or warehouse and letting it out; that the assessee was an agricultural cooperative credit society engaged in the sale of fertilizers to its members; that a portion of the income derived therefrom was deposited in nationalized banks; that the income derived by way of interest on fixed deposits made by the assessee with banks was treated by the assessee as income attributable to the profits and gains of business eligible for deduction under section 80P(2)(a) of the Act; that the Assessing Officer had treated the income as income from other sources not eligible for deduction; that the investment made by the assessee in fixed deposits in nationalised banks was of its own monie....
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....ment with a cooperative bank; that the decision of the Mumbai Tribunal in the case of 'Vaibhav Cooperative Credit Society' was also distinguishable on facts; that the order in that case was in the context of adjudication of the entitlement of the assessee cooperative bank towards claim of deduction under section 80P(2)(a)(i) of the Act; that it was in the background of the said facts that the Tribunal, after carrying out a conjoint reading of section 80P(2)(a)(i) and Section 80P(4), had decided the issue before them; that still further, the order of the Mumbai Bench of the Tribunal in the case of 'Sri Sai Datta Cooperative Credit Society Limited' was also not of any help, since in that case, the Tribunal had set aside the issue to the file of the AO for fresh examination; that in the case of 'Totagars Cooperative Sale Society', the Honorable Karnataka High Court had concluded that a cooperative society would not be entitled to the claim of deduction under section 80P(2)(d); that however, as held by the Honorable Bombay High Court in the case of 'K Subramanian Versus Siemens India Limited', (1985) 156 ITR 11 Bombay, where there is a conflict between d....
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....d that interest income derived by an assessee cooperative society from its investments held with any other cooperative society shall be deducted in computing its total income; that what is relevant for a claim of deduction under section 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee cooperative society with any other cooperative society; that the PCIT was correct in holding that with the insertion of subsection 4 in section 80P of the Act, vide the Finance Act, 2006, with effect from 1. 4.2007, the provisions of section 80P would no more be applicable in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank; that however, at the same time, the PCIT was not correct in holding that the aforesaid amendment would jeopardize the claim of deduction of a cooperative society under section 80P(2)(d) in respect of its interest income on investments or deposits parked with a cooperative bank; that as long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other cooperative socie....
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....igh Court of Karnataka, in that case, and the Honorable High Court of Gujarat, in 'State Bank of India' head observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act; that as held by the Honorable High Court of Bombay in the case of 'K Subramanian Versus Siemens India Limited' (1983) 156 ITR 11 (Bombay), where there is a conflict between the decisions of non jurisdictional High Courts, the view in favour of the assessee is to be preferred as against that taken against them; that accordingly, following the view taken by the Honorable High Court of Karnataka in the case of 'Totagars Cooperative Sale Society' and that of the Honorable High Court of Gujarat in the case of 'State Bank of India', wherein, it was observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for the claim of deduction under 80P(2)(d) of the Act; and that be that as it may, as the Assessing Officer, while framing the assessment, had taken a possible view and had allowed the as....
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.... 2017-18, it was held that 'cooperative bank is also a specie of 'cooperative society' and therefore, the interest income earned by the cooperative society from the cooperative bank qualifies for deduction under section 80P(2)(d) of the Act; that such interest also qualifies for exemption under section 80P(2)(a)(i), as held by the Pune Bench of the Tribunal in the case of 'Nashik Road Nagari Sahakari Pat Sanstha Limited', Order dated 27.12.2021 passed in ITA Number 1700/Pune/2017, observing that admittedly, the assessee was a cooperative society formed under the provisions of the Maharashtra Cooperative Societies Act, 1960 with the objective of accepting deposits and lending money to its members; that the money which was not immediately required for the purpose of lending to the members, was deposited with the Bank of Baroda in the form of fixed deposit; that the question was as to whether the interest so earned qualified for exemption under section 80P(2)(a)(i) of the Act; that the AO, as well as the CIT(A) were of the opinion that the interest earned from third parties or non-members did not qualify for exemption under section 80P; that it was an admitted posi....
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.... the revision was covered in favour of the assessee by the said judicial presidents; that therefore, it could not be said that the Assessment Order was erroneous or prejudicial to the interests of the Revenue; and that therefore, the order of revision passed under section 263 of the Act could not be sustained in the eye of the law. 60. In 'Bardoli Vibhag Gram Vikas Cooperative Credit Society Limited Versus Principal Commissioner of Income Tax-2, Surat', (2021) 189 ITD 601 (Surat-Trib.), it was held that where the assessee was a cooperative society in the business of providing credit facility to its members by accepting deposits from them and lending money to them too, and it claimed deduction under section 80P of the Act, and where the Assessing Officer noted that the assessee derived interest income from savings bank accounts with HDFC Bank and UTI Bank, and held that since as per section 80P(2)(a)(d), interest earned out of investments or deposits with cooperative societies or cooperative banks are only eligible for deduction, interest income earned from other banks was not eligible for deduction under section 80P and the Commissioner opined that the interest income di....
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....ness of banking or providing credit facilities to its members, if the said income is accessible as income from business, whereas the later provides for deduction in respect of income by way of interest or dividend derived by the assessee from its investments with any other cooperative society; that therefore, it was amply clear that a cooperative society can only avail deduction under section 80P(2)(a)(i) in respect of its income accessible as business income, and not as income from other sources, if it carries on the business of banking or providing credit facility to its members and has income assessable under the head of business, whereas for claiming deduction under section 80P(2)(d), it must have income of interest or dividend on investments with any other cooperative society which may or may not be engaged in the business of banking or providing credit facilities to its members, and the head under which the income is assessable is not material for the claim of deduction under this section; that the Honorable Supreme Court, in the case of 'Totagars Cooperative Sale Society Limited', held that if a society has surplus funds which are invested in short term deposits wher....
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.... that a cooperative bank shall be treated as a cooperative society for the purpose of the interest income on investment in such cooperative bank, under section 80P(2)(d), the Mumbai Bench of the Tribunal, in the case of 'Lands End Cooperative Housing Society Limited Versus ITO', after considering the decision of the Honorable Supreme Court in the case of 'Totagars Cooperative Sale Society Limited Versus ITO', had held that the provisions of section 80P(2)(d) provide for deduction in respect of income by way of interest or dividend on investments made with any other cooperative society, if such income is included in the gross total income of such cooperative society; that therefore, the assessee was entitled to deduction in respect of interest received or derived by it on deposits with cooperative banks. 63. It was held that in the case of 'CIT Versus Rajasthan Rajya Sahakari Kray Vikray Sangh Limited', the Honorable jurisdictional Rajasthan High Court, vide order dated 1.9.2016, passed in DB ITA Numbers 139 of 2002, 20 of 2004 24 of 2004 and 27 of 2004, following the decision of the Honorable Gujarat High Court in the case of 'Surat Vankar Sahakari Sa....
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....e of us, the V.P.), vide order dated 12.01.2024, passed in ITA No.210/CHD/2023, for the assessment year 2018-19, the issue was as to whether the ld. PCIT had failed to appreciate that the issue in respect of deduction claimed u/s 80P of the Income Tax Act, on interest income, had been discussed threadbare by the AO, at the time of assessment proceedings, or not, and as such, assumption of jurisdiction u/s 263 of the Act, whereby the ld. PCIT had only allegedly substituted her opinion over the plausible opinion taken by the AO, was uncalled for. 68.1 It was held as follows : "16. As per the provisions of section 80P(1) of the Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an assessee being a Co-operative Society. Further, Section 80P(2)(d) of the Act provides for deduction 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. Thus, for the purpose of Section 80P(2)(d) of the Act, there are only two conditions which are required to be cumulatively satisfied, i.e, the income should be by way of interest or dividend earned by a C....
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....ase, has returned a finding that such interest income has not been earned from any other Cooperative society but from Scheduled commercial banks and the deduction so claimed from Scheduled commercial banks was denied and while doing so, the AO has allowed the claim of deduction in respect of Yamuna Nagar Central Co-operative Bank Ltd, being the deduction in respect of interest income on deposits with any other Co-operative Society. We therefore find that the AO has duly examined the facts of the present case and has allowed the deduction in respect of interest income received from the Yamuna Nagar Central Co-op Bank Ltd. as being in compliance with the provisions of Section 80P(2)(d) of the Act. Where the facts in the present case and legal position is not in dispute, we therefore don't understand how the ld PCIT in the same breath hold that the assessee shall not be eligible for claim of deduction under section 80P(2)(d) of the Act. 20. Now, coming to the decision of the Hon'ble Punjab and Haryana High Court in case of CIT Vs. Punjab State Cooperative Federation of Housing Building Societies Ltd (Supra), the question for consideration before the Hon'ble High Court was whe....
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....earned counsel appearing for the revenue, is that the Tribunal was wrong in allowing deduction under section 80P(2)(d) because it is not established that the assessee had derived interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has 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). For facility of reference, it is reproduced as under: "(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;" 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 Capce Brandy Syndicate v. IRC [1921] 1 KB 64 : "... In a taxing Act, one has to look merely at what is clearly said. There is no....
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....nvestments and the Revenue is not required to look to the nature of investment whether it was from its surplus funds or otherwise. The Hon'ble High Court thus held that the nature and source of investment is not relevant for claiming deduction under Section 80P(2)(d) of the Act, and what is relevant to examine is whether there is any income derived by a cooperative society from any investment with another co-operative society. In the instant case, we therefore find that it is not relevant to examine whether interest income is earned from any specified co-operative activity or it is a case of deployment of surplus funds by the assessee society so long as the interest income is earned from deposits placed with a co-operative society. Where the AO has allowed the claim of the assessee under section 80P(2)(d) of the Act after due examination of the facts of the case, he has rightly followed the dicta laid down by the Hon'ble Jurisdictional High Court and therefore, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of Revenue. 23. Now, coming to the decisions of the Hon'ble Karnataka High Court, we find that there are two decisio....
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....f the Act which is not the facts of the present case. Therefore the said decision of the Hon'ble Karnataka High Court is distinguishable and in any case, the later decision of Hon'ble Supreme Court in case of Mavilayi Service Co-operative Bank Ltd. Vs. CIT (Supra) wherein the correct legal preposition has been laid down by the Hon'ble Supreme Court has to be followed. Interestingly, as per the ld PCIT own findings, section 80P(4) does not jeopardise the claim of deduction of a co-operative society under Section 80P(2)(d) in respect of its interest income on investments/deposits parked with a cooperative bank and at the same time, she has placed reliance on the said decision of Hon'ble Karnataka High Court. As against that, we find that the AO has referred to the said decision in case of Mavilayi Service Co-operative Bank Ltd. Vs. CIT (Supra) and has thus followed the dicta laid down by the Hon'ble Supreme Court and thus, the order so passed cannot be held as erroneous in so far as prejudicial to the interest of Revenue. 25. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, we find that there is no legal and justifiable basis to in....
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....sioner of Income Tax is unwarranted and uncalled for. 4. That the order of Commissioner of Income tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law. 75. As the issues, facts and circumstances of ITA No. 569/CHD/2018 are identical to ITA No. 515/CHD/2017, therefore, our findings given in ITA No. 515/CHD/2017 would apply mutatis-mutandis to ITA No.569/CHD/2018. Accordingly, the appeal of the assessee in ITA No.569/CHD/2018 is also partly allowed. ITA No. 645/CHD/2019 76. This is assessee's appeal for the assessment year 2012-13 against the order dated 06.02.2019, passed by the ld.CIT(A)-II, Chandigarh. 77. The assessee has raised the following grounds of appeal : i) That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the disallowance of deduction claimed u/s 80P(2)(d Resulting in an addition of Rs. 82,13,316/- which is arbitrary and unjustified. ii) That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding the contention of the Assessing Officer that the interest income is to be taxed as "Income from Other Sources" u/s 50 which is a....