TaxTMI 
TaxTMI 
2026 (2) TMI 312
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....tion should have been allowed to the assessee, if any, considering the interest income earned by the assessee on investment of Rs. 4,473,688/- as income from other sources u/s. 56 of the Act. 2. The assessee is aggrieved with the above revisionary order passed by the ld. PCIT raising the fact and grounds that the assessee is entitled to deduction u/s. 80P(2)(a)(i) of the Act and also u/s. 80P(2)(d) of the Act. 3. Briefly stated the fact shows that assessee is a credit cooperative society giving loan to its members, filed its return of income on 16.12.2020 at a total income of Rs. 2,26,970 after claiming deduction u/s. 80P(2)(a)(i) of the Act of Rs. 6,411,029. The assessee's case was selected for scrutiny under the limited scrutiny and deduction from total income was the issue. The assessee was issued several notices and also a show cause notice. The assessee was asked the eligibility of deduction under the provisions of section 80 P of the Act. The assessee replied on 1.9.2022 in response to notice u/s. 142 (1) of the Act and further show cause notice was issued to the assessee on 5.9.2022 which was also replied on 10.9.2022. The claim of the assessee was that interest in....
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....g a written submission stating that assessee has been carrying on the credit business of accepting deposits from members and lending to the members only in accordance with the provisions of the Karnataka State Cooperative Societies Act. The assessee also submitted that the decision of the Hon'ble Supreme Court and the Hon'ble Karnataka High Court is distinguishable and not applicable as the claim of the assessee is allowable u/s. 80P(2)(d) of the Act because it is a bonafide business investment done in the ordinary course of the business and the interest income earned from such cooperative banks/cooperative society is attributable to the business activities of the assessee. 6. The ld. PCIT rejected the contention of the assessee and held that the income should have been chargeable to tax u/s. 56 of the Act and assessee is not entitled to deduction of such income as it is not business income attributable to the business of the assessee but is income from other sources and further as the assessee has earned interest from cooperative banks, the deduction is also not available to the assessee u/s. 80P(2)(d) of the Act. Therefore it was held that the order of the ld.AO granting the a....
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.... has received interest income of Rs. 44 lakhs which was not shown to have been received and is attributable to the business of the assessee of providing credit facilities to its members. 9. We have carefully considered the rival contention and perused the orders of the learned lower authorities. We find that the ld.AO during the course of assessment proceedings has issued a specific show cause notice to the assessee on limited scrutiny that the deduction claimed by the assessee under chapter VIA of the Act is required to be examined. He specifically noted that the assessee has received interest income from cooperative banks as well as interest income from ICICI bank. On the basis of his examination and on the basis of the reply furnished by the assessee in response to show cause notice, he examined the claim of deduction under Chapter VIA of the Act. He found that assessee is eligible for deduction u/s. 80P of the Act with respect to the interest income earned by the assessee from cooperative societies/cooperative banks. However he was of the view that interest income earned by the assessee of Rs. 60,308/- is not eligible for deduction u/s. 80P, but is chargeable to tax u/s. 56 ....
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....erative societies: 80P (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely: (a) in the case of co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) to (vii) xx xx xx the whole of the amount of profits and gains of business attributable to any one or more of such activities." 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) as under: 'As regards the aspect emerging from the expression "attributable to" occurring in the phr....
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....the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee-Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court....
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....o possible views and allowed the claim of the assessee. When the ld.AO has followed one of the views, it cannot be said that the order of the ld.AO is erroneous and prejudicial to the interests of the Revenue. Such was the verdict of the Hon'ble Supreme Court in case of Commissioner of Income-tax (Central), Ludhiana vs. Max India Ltd. [2008] 166 Taxman 188 (SC)/[2007] 295 ITR 282 (SC)/[2007] 213 CTR 266 (SC)[01-11-2007]where in it was held as under :- "2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the revenue" under section 263 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when the Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be tre....