AI Drafter 
TaxTMI 
TaxTMI 
2026 (2) TMI 694
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....arily objects and activities of the assessee society are duly eligible for the deduction u/s 80P(2)(b) of the Act. 2. That, the Ld. CIT(A) has grossly erred in law and on facts by wrongly confirmed disallowance of deduction u/s 80P(2)(b) amounting to Rs. 92,39,966/- of the I. T. Act, 1961 by observing that assessee is district level cooperative society and not eligible for deduction u/s 80P(2)(b) of the Act.. 3. That, the Ld. CIT(A) has wrongly confirmed the interest income of Rs. 34,79,487/- as part of net profit from "Business & Profession" and also assessed the same income as income under the head "Income from other sources" and therefore the said income has been taxed twice. 4. That, the Ld. CIT(A) has wrongly confirmed the disallowance of deduction of interest earned from Co-operative Bank Rs. 1,17,82,065/- u/s 80P(2)(d) of I.T. Act, 1961. 5. That, the Ld. CIT(A) has wrongly confirmed the disallowance of the deduction of Dividend Income of Rs. 47,70,000/- u/s 80P(2)(d) earned from the investment in Cooperative Society. 5. That, the Ld. CIT(A) has wrongly confirmed the initiation of penalty proceedings u/s 271(1)(c) of the I.T. Act, ....
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....y the assessee did not find favour with the Commissioner of Income Tax (Appeals), who confirmed the order of the Assessing Officer in this regard. Calling into question the said order, the assessee preferred appeal before this Tribunal. 7. Shri Kalpesh Doshi, Learned Counsel for the assessee, at the out set submitted that issue under consideration is squarely covered in favour of assessee, by the judgment of the Tribunal, as the assessee is a registered co-operative society and engaged in supply of milk produced by the various members and supplied the milk to the Federal Co-operative Society. The assessee, is a primary co-operative society registered under the Co-operative Societies Act, 1912 and member of Gujarat Milk Marketing Federation (GMMF). The Gujarat Milk Marketing Federation (GMMF) is the supreme body controlling supply of milk in the state of Gujarat. The assessee functions as per the directions and instructions given by the Gujarat Milk Marketing Federation (GMMF). The assessee is engaged in supply of milk to the Federal Cooperative Society and the assessee has shown income from such activities in the profit and loss account and claimed deduction u/s 80P(2)(b) of the....
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....owing the principle of consistency. Since assessee has been claiming the deduction u/s 80P(2)(b) of the Act, consistently for the last several assessment years and there was no disallowance even in the assessment framed under section 143(3) of the Act pertaining to the assessment years 2004-05, 2005-06, 2007-08 and 2009-10 and 2010-11. "6. We have heard the rival contentions of both the parties and perused materials available on record. The issue in the case on hand relates whether the assessee is eligible for deduction under section 80P(2)(b) of the Act in the given facts and circumstances. Admittedly, it appears that the assessee is not the primary co-operative society but its activities are depending upon the primary co-operative societies. As such the primary cooperative societies can also not operate without the assessee being a district level society. As such the activities of the assessee are interlinked with the activities of the primary co-operative societies. 6.1 Moreover, the primary co-operative societies will be eligible only when they supply milk to a federal co-operative society. To our mind, the assessee is not federal co-operative society to whom ....
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....ent year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." 6.....
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....g the total income has considered the total income as per Profit & Loss account and also further addition is made under the head "income from other sources" as interest income of Rs. 34,79,487/-.The interest income is already forming part of the business income and therefore while computing the total income, the interest income should be reduced from the net-profit item and then it should be shown under the head "income from other sources". The computation of income can be worked out as under: Particulars Amount Amount Net Profit as per Profit and Loss account 1,18,29,584 Add: Depreciation as per book 1,55,87,443 Less: Depreciation as per rule (1,81,76,441) Total 92,40,586 Less: Income from other sources (34,79,487) Gains of Income from Profits and Business and Profession 57,61,099 Interest Taxed under Income From Other Sources 34,79,487 Total Taxable Income 92,40,586 Therefore, as per the above revised computation of income the Income from Profits and Gains of Business and Profession amounts to Rs. 57,61,099/-, the Income from other sources am....
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....d the interest income from the various banks as under: Particulars Amount Interest earned from Nationalized and Private banks Union bank 97,32,007.00 ICICI bank 88,90,909.00 Dena Bank 1,41,58,407.00 G.S.P.C.GAS CO.LTD 6,658.00 SBI 24,76,544.00 BOB 1,97,618.00 HDFC 8,70,942.34 Total 3,63,33,085.34 Particulars Amount Interest earned from Co-operative Banks Surat District Co-operative Bank 30,52,981.00 Cosmos Bank 49,42,465.00 Rajkot N Bank 36,79,233.00 Society Loan Interest 1,07,386.90 Total 1,17,82,065.90 The learned Counsel clarified the Bench that the total interest income during the year under consideration comes to Rs. 4,81,15,151/-( Rs. 3,63,33,085 + Rs. 1,17,82,066), how to off that Rs. 1,17,82,066/- is eligible for deduction under section 80P (2) (d) of the Act. The learned Counsel further clarified the Bench that Ld.CIT(A) has wrongly confirmed the disallowance of the deduction of Dividend Income of Rs. 47,70,000/- u/s 80P(2)(d) earned from the investment in Co-operative Society, which is eligible for deduction under section 80P (2) (d) of the Act. 16. On the other....
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....n the computation of total income, (vide assessee`s computation of total income on page No. 25 of the assessee`s paper book),and the amount of Rs. 18,41,436/- is show by the assessee, in the computation of total income, under the head income from other sources, and claimed the deduction u/s 80P(2)(d) of the Act, at Rs. 18,41,436/-. The assessee has also shown, under the head income from other sources, amount of Rs. 52,350/-, as dividend received from Co-operative Bank and claimed the deduction u/s 80P(2)(d) of the Act. 24. During the course of hearing, ld Counsel for the assessee, clarified the Bench that assessee, by mistake, wrongly submitted, in the written submission, before the ld. PCIT, as if, the assessee claimed deduction under section 80P(2) (a) (i) of the Act, in respect of amount ofRs.18,41,436/- and Rs. 52,350/-, in fact, the assessee has claimed the deduction u/s 80P(2)(d) of the Act, amounting to Rs. 18,41,436/- and amounting toRs.52,350/-, respectively, as stated above. Thus, we note that ld. PCIT has exercised his jurisdiction under section 263 of the Act, mainly on the amount of Rs. Rs.18,41,436/-and Rs. 52,350/-, as narrated above, and ld. PCIT directed t....
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....en called by the assessing officer during the assessment proceedings, and these details were examined by the assessing officer, pertaining to issue raised by the ld PCIT, relating to deduction under section80P (2) (d) of the Act, that is, the solitary issue raised by the ld PCIT, that interest received from Cooperative Banks are not allowed under section 80P(2)(d) of the Act. In this regard, the ld Counsel for the assessee submitted that since during the assessment proceedings, the assessing officer had examined the issue raised by the ld PCIT and has taken the plausible view, therefore, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of revenue, hence order passed by the ld PCIT, under section 263 of the Act, may be quashed. 27. However, we do not agree with the arguments advanced by the ld. Counsel for the assessee, to the effect that the assessing officer has examined the issue raised by the ld PCIT, by calling the details from the assessee, and has taken the plausible view. We note that just to call the details by issuing notice under section 142(1) of the Act and in response to that notice submission made by the assessee and....
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....aryana (Supra). 29. In order to find the answer of the question that plausible view taken by the assessing officer (AO) should be sustainable in the eye of law, we have to take guidance from the judgement of the Hon`ble Supreme Court, and for that, let us take the guidance of judicial precedents laid down by the Hon'ble SupremeCourt in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as err....
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....sdictional Gujarat High Court in the case of Katlary Karayana(supra),is applicable to the assessee's case under consideration or not. 31. We find that in section 80P(2)(d) of the Income Tax Act,1961, there is no special exclusion that interest received from co-operative bank is not eligible for deduction. We have noted that definition of "co-operative society" as mentioned in section 2(19) of the Income Tax Act, 1961 does not make any exclusion about co-operative bank. We note that in order to become a co-operative bank, the first condition is that it should be a cooperative society. Therefore, a co-operative society, later on decides to take license from the Reserve Bank of India to do banking business wherein the Co-operative society may lend the money and borrow the money, and for that purpose, the co-operative society has to take a license from the Reserve Bank of India and after taking license from the Reserve Bank of India said Co-operative society, becomes a co-operative bank also, which was first a co-operative society. We also find that the decision rendered by the Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra), is in the cont....
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....) Surat Vankar Sahakari Sangh Ltd. (supra). Therefore, ratio of these old judgments namely;(i) Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra) will still be applicable to the assessee under consideration as these judgements never distinguished and never overruled by constituting a larger Bench by the Hon'ble Jurisdictional Gujarat High Court. 33. We also find that the Hon'ble jurisdictional High Court in the case of State Bank of India v. CIT 2016 389 ITR 578 (Guj. HC) has also held that any income by way of interest derived by a Co-operative society from its investment with any other Co-operative bank would be deductible u/s. 80P(2)(d) of the Act. 34. We also find that Hon'ble Gujarat High Court has recently modified the judgement delivered by it in Katlary Karayana (supra) on 26th April, 2024 by removing error in the judgment of Katlary Karayana (supra). The ld DR for the Revenue, informed the Bench that Hon`ble High Court has only removed the word "co-operative" from the reproduction of reasons recorded by the assessing officer. Hence it does not impact on the ratio laid down by the Hon`ble C....
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....the judgement of Hon'ble Gujarat High Court in the case of Katlary Karayana (supra) and adjudicate the issue in favour of the assessee. In this context, we state that the decision of the Co-ordinate Bench of Rajkot in the case of Lodhika Seva Sahakari Mandali (supra), no doubt, it is against the assessee and in favour of the Revenue, however, we note that it is not a speaking order. We find that the Coordinate Bench, in Lodhika Seva Sahakari Mandali (supra) did not narrate the facts properly and the facts narrated in Lodhika Seva Sahakari Mandali (supra) are not similar to the facts as that of the assessee under consideration. We also find that in the decision of the Co-ordinate Bench in case of Lodhika Seva Sahakari Mandali (supra), there was no assistance from the A.R. of the assessee, as this order was heard by the Co-ordinate Bench ex parte and there is no representation by the A.R. of the assessee, therefore, the Bench was not informed about the correct ratio laid down by the Hon'ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra). The adjudication was done by the Co-ordinate Bench, based on written submission of assessee. Therefore, the judgment o....
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....rs Co-operative Sale Society Ltd., 108 Taxman 282 (SC) which clearly states that co-operative banks are not species of genus of co-operative society. In this context, we note that the judgment of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd(supra) is in the context of where the assessee retained sale proceeds of members whose produce was marketed by it and since funds created by such retention were not required immediately for business purpose, it invested same in specified securities and earned interest thereon. Therefore, interest earned by assessee would come in category of 'Income from other sources' and taxable under section 56 of the Act and would not qualify for deduction as business income under section 80P(2)(a)(i) of the Act. Therefore, the above judgement, of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd (supra) does not relate to section 80P (2) (d) of the Act, rather it relates to section 80P(2)(a)(i) of the Act, hence, does not apply to the assessee under consideration. Therefore, we find that the above decision in the case of Totgars Cooperative Sale Society Ltd(supra) is in the context of Section 80P....
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....Gujarat High Court, in the case of Katlary Karayana (supra) is in the context of section 194A of the Act and section 147 of the Act, wherein the Hon'ble High Court has examined whether income has escaped assessment or not. Therefore, we note that above decisions of the Co-ordinate Bench, are speaking and reasoned decisions and hence, do not require rectification under section 254(2) of the Act, as judicial discipline has been observed in these above decisions, by following the old jurisdictional, Gujarat High Court judgements(supra), which are direct on the issue under consideration, hence we reject the plea taken by ld DR for the revenue. 37. We also state that the Co-ordinate Bench of ITAT, Banglore and Co-ordinate Bench of ITAT, Jaipur, have also followed the old judgments of the Hon'ble Gujarat High Court, as noted above, and held that interest received from Cooperative Banks are allowable deduction under section 80P(2) (d) of the Act: (i) Totagars Co-operative Sale Society Ltd., in ITA No.376 to 379/Bang/2023, dated 18.07.2023 (ii) Jhunjhunu KaryaVikryaSahakari Samiti Ltd., ITA No.150/Jp/2022 We also note that the other Hon'ble High Courts, ....
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....has taken the plausible view, which is sustainable in the eyes of law, as we have explained above. The Ld. PCIT while exercising the jurisdiction u/s 263 of the Act, also referred Clause (d) of Explanation - 2 of Section 263 of the Act wherein it is stated that if the order has not been passed by the Assessing Officer in accordance with any decision which is prejudicial to the assessee and rendered by the jurisdictional High Court or Supreme Court in the case of assessee or any other person. However, as we have explained above that the said judgment delivered by the Hon'ble jurisdictional Gujarat High Court in the case of Katlery Karayana (supra), does not apply to the assessee under consideration, hence Clause (d) of Explanation - 2 of Section 263 of the Act, does not apply to the assessee. Therefore, considering these facts, the Assessing Officer has taken a plausible view which is sustainable in the eye of law, as per the ratio laid down by the Hon'ble Apex Court in the case of Malabar Industries (supra).Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances, narrated above, th....
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....0 2,25,020.00 4,23,927.00 Less: Income from Other Head (-)18,93,786.00 Interest Income Dividend Income 18,41,436.00 52,350.00 B Section 80P(2)(d) - Interest or dividend from its investment with any other co-operative society 18,93,786.00 Interest Income from other Co-operative Bank/ Co-operative Society 18,41,436.00 Dividend Income from other Co-operative Bank/ Co-operative Society 52,350.00 Total Amount of Deduction under various sub sections of section 80P of the Act 43,36,723.00 हेड पोसà¥à¤Ÿ मोडà¥à¤¸ सामे, अमरेली-३९५९०१. ३० : ०२à¥à¥®à¥¨-२२à¥à¥¨à¥®à¥® wisla qof 'en' 20. Gi. el. 21. 3564? 201.cll.22-2-2010 ii. Note on eligibility criteria of deductions under different sections of Chapter VI-A is as under: > The Co-operative Society "Shri Avadh Nagrik Sarafi Sahkari Mandali Limited" engaged into the above mentioned (Mentioned in Answer No.1) Activities during the year under consideration; Thus, The Co-operative Society "Shri Avadh Nagrik Sarafi S....