TaxTMI 
TaxTMI 
2025 (6) TMI 1757
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....mpugned assessment year on 07.10.2020 declaring total income at Nil after claiming the deduction of Rs. 62,76,965/- u/s 80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The case of the assessee was selected for limited scrutiny to verify the following issues: (i) High liabilities as compared to low income / receipts (ii) Deduction from Total income (Chapter VI-A) (Business ITR) (iii) High value cash withdrawals reported in SFT or u/s. 194N (Business Return) 4. Accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the AR of the assessee filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 08.09.2022 accepting the returned income. 5. Subsequently, the Ld. PCIT on perusal of the assessment record noted that the assessee has made investments with Co-operative Banks and has earned interest income of Rs. 62,76,965/- on these investments which has been claimed as deduction u/s 80P(2)(a)(i) of the Act. The Assessing Officer in the assessment order has allowed such deduction. Accord....
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....as erroneous in so far as it is prejudicial to the interest of revenue by observing as under: "7. I have carefully gone through the facts of the case as well the written submission filed by the assessee. During the assessment proceedings, the AO has not asked any specific question to the effect whether the income in question is business income or not. The provision of Sec. 80P(2)(a) of the Act provides for deduction to a cooperative society in respect of income derived by it from the business of banking or providing credit facilities to its members. Thus, what is sought to be given under the said provision is only the profit attributable to the core business of banking or providing credit facilities to its members. When the assessee gets deposits from its members and provides credit facilities again to its members, then what is left with it for investment is surely the surplus which is not required. Investing such surplus money, which is not immediately required for the business purposes and earning of interest on such investments cannot be said to be attributable to the core business of 'banking or providing credit facilities to its members'. The Hon'ble Supre....
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....beneficial provisions of exemption or deduction under section 80P of the Act, by bringing on the statute book sub-section (4) in section BOP. The Court noted that the words used in section 80P(4) are significant which says that 'The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society...... „The words 'in relation to' can include within its ambit and scope even the interest income earned by the assessee, a co-operative society from a Co-operative Bank. This exclusion by section 80P(4) even though without any amendment in section 80P(2)(d) is sufficient to deny the claim of the assessee for deduction under section 80P(2)(d). 9. The assessee has also argued that if interest income is to be treated as income from other sources then deduction u/s 57 should also be given. However, this argument is not acceptable as what is claimed as deduction is the net amount of interest income which has been arrived after taking into consideration all incidental expenses. 10. During the assessment proceedings, the AO has not asked any specific question to the effect whether the income in qu....
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....a in the case of Totgars Co-operative Sales Society Ltd. (supra). Therefore, assessment order has been passed in violation of sub-clause (b) and sub-clause (d) of Explanation 2 to Section 263 of the I.T. Act, 1961. 13. In the light of the above facts, I am satisfied that the assessment order dated 08/09/2022 passed for the Assessment Year 2020-21 is erroneous in so far as it is prejudicial to the interest of the Revenue. Consequently, the said assessment order dated 08/09/2022 for the A.Y.2020-21 is hereby partly set aside to the file of the A.O for the limited purpose of examining the following issues and passing fresh assessment order in the light of enquiries made: i) The A.O shall examine the eligibility of deduction available to the assessee u/s 80P(2)(a) of the Act in the light of decision of the Hon'ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. Vs. ITO, (SC) (322 ITR 283)(2010) ii) The A.O shall also examine whether the interest income received by the assessee is related to its core business or is a residual income which is required to be taxed under the head "Other Sources". iii) The AO shall examine whether....
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....e Assessing Officer, during the course of assessment proceedings, has not asked any specific question to the effect as to whether the interest income in question is business income or not. Further, according to him, a cooperative bank cannot be treated as cooperative society for the purpose of allowability of deduction u/s 80P(2)(d) of the Act. We find the Assessing Officer during the course of assessment proceedings has examined the issue and has asked the queries to the assessee to which the assessee has responded, the details of which are as under: "3. During the course of assessment proceedings, the assessee has filed the following submissions: 3.2.1. The assessee has filed its reply on 22.01.2022, 31.01.2022 in response to the notice issued u/s. 143(2) & 142(1) of Income tax, 1961, dated: 29.06.2021, 16.11 2021 & 15.02.2022 and stated as under: i. Our society has registered under Maharashtra Co-Operative Society Act 1960. Society's object is taking the deposit from members and giving the loans and advances to the members only. Society earns the income in the form of interest from members against loans and advances given to the members and from co....
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....ew that the assessee is entitled to the deduction of surplus of Rs. 62,76,965/- in respect of interest received/derived by it on deposits with cooperative banks& societies In view of the forgoing explanation, it is strongly emphasized that the Society has entitled to & eligible for the deduction u/s. 80P(2)(a)(i) of IT Act, 1961 for the AY under consideration. Therefore, considering the decision given by Hon. ITAT, Mumbai, we are requested to the honour to kindly accept my submission of documents, do the needful at your earliest and allow deduction u/s 80P(2)(a)(i) & 80P(2)(d) of the Income Tax Act, 1961. Therefore, please accept the above Submission. 4. On perusal of the explanation furnished by the assessee in respect of deduction claimed u/s 80(P)(2)(a)(i), it is noticed that the assessee has received interest income of Rs. 62,76,965/- from Co-operative Banks. The assessee society has filed CIT(A) order in the case of KUNABI VIKAS SAHAKARI PATHSANSTHA LTD, RATNAGIRI, Maharashtra for the AY 2018-19. As seen from the same, it is noticed that the CIT(A) has relied upon the judgment of Hon'ble ITAT, "B" BENCH, PUNE in the case of Rena Sahakari Sakhar K....