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2024 (5) TMI 1291 - AT - Income TaxRevision u/s 263 - interest income earned on long term fixed deposits with banks - revision on the ground that the same is taxable u/Section 56 as 'income from other sources' and not deductible u/s 80P - HELD THAT - We find the assessee to be correct in contending that as available from the record, the AO had duly applied his mind to the issue of the assessee's claim of deduction under section 80P of the Income Tax Act and he had only thereafter allowed it while passing the Assessment Order; and that therefore, PCIT has erred in invoking powers under section 263 of the Act and setting aside the Assessment Order. This grievance of the assessee society is accepted. Deduction claimed u/s 80P(2)(d) - In 'Shiksha Vibhag Karmacharigan Sahakari Samiti Limited, Kota 2019 (6) TMI 1703 - ITAT JAIPUR following the decision of 'Shree Keshorai Patan Sahakari Sugar Mill, Bundi 2018 (2) TMI 499 - ITAT JAIPUR decided the issue in favour of the assessee and allowed the deduction under section 80P/80P(2)(d) in respect of interest earned on deposits made with the banks/cooperative banks. In 'Shahpura Gram Seva Sahakari Samiti Limited, Shahpura 2020 (10) TMI 715 - ITAT JAIPUR held that a cooperative bank would be considered as a cooperative society for the purposes of Section 80P(2)(d) of the Act; and that accordingly, in view of the fact that the Jaipur Central Cooperative Bank is a cooperative society registered under the Cooperative Societies Act, interest received by the assessee from the said Cooperative Bank is eligible for deduction under section 80P(2)(d) of the Act. Thus the assessee society, being a cooperative society, is entitled to the exemption claimed under section 80P(2)(d) of the Income Tax Act, in respect of income by way of interest derived by it from its investments with the cooperative banks. Accordingly, the revisionary order passed by the learned Principle Commissioner of Income Tax is set aside and cancelled and the assessment order is revived. - Decided in favour of assessee.
Issues Involved:
1. Legality of invoking jurisdiction u/s 263 based on audit objection. 2. Validity of the assumption of jurisdiction u/s 263 by the PCIT. 3. Examination of the assessment order by the AO. 4. Eligibility for deduction u/s 80P(2)(d) for interest income from cooperative banks. Summary: 1. Legality of invoking jurisdiction u/s 263 based on audit objection: The learned Counsel for the assessee stated that Ground Number 1 was not pressed. Consequently, it was rejected as not pressed. 2. Validity of the assumption of jurisdiction u/s 263 by the PCIT: The PCIT issued a show cause notice stating that the interest income earned on long-term fixed deposits with banks, claimed as deduction u/s 80P, was taxable under Section 56 as 'income from other sources'. The PCIT held that the AO failed to disallow this deduction and did not examine the issue, rendering the assessment order erroneous and prejudicial to the interests of the Revenue. However, the Tribunal found that the AO had applied his mind, as evidenced by the detailed questionnaire and the examination of the assessee's responses. The Tribunal cited several precedents to assert that the AO's application of mind was discernible from the record, and the PCIT's invocation of jurisdiction u/s 263 was based on a mere difference in opinion, which is not permissible. 3. Examination of the assessment order by the AO: The Tribunal noted that the AO had issued a detailed questionnaire and examined the assessee's responses, including the specifics of the deduction claimed u/s 80P. The AO's assessment order indicated that the AO had discussed the matter with the assessee's counsel and examined the books of account before allowing the deduction. The Tribunal emphasized that the AO's enquiry and examination were adequate, and the PCIT's assertion of inadequate enquiry was subjective and unjustified. 4. Eligibility for deduction u/s 80P(2)(d) for interest income from cooperative banks: The Tribunal held that the interest income earned by the assessee from investments with cooperative banks is eligible for deduction u/s 80P(2)(d). The Tribunal referred to several judicial precedents, including the decisions of the Honorable Karnataka High Court and the Honorable Gujarat High Court, which supported the view that cooperative banks are considered cooperative societies for the purposes of Section 80P(2)(d). The Tribunal rejected the PCIT's reliance on the Supreme Court's decision in the case of 'Totgar's Cooperative Sale Society Limited', stating that it was not applicable to the facts of the present case, as it dealt with Section 80P(2)(a)(i) and not Section 80P(2)(d). Conclusion: The Tribunal set aside the revisionary order passed by the PCIT and revived the assessment order, allowing the assessee's appeal for the assessment year 2012-13. The Tribunal also applied the same findings to the assessee's appeal for the assessment year 2013-14. The appeal arising out of the AO's consequential order was dismissed as infructuous. Thus, the assessee's appeals in ITA No. 515/CHD/2017 and ITA No. 569/CHD/2018 were partly allowed, and the appeal in ITA No. 645/CHD/2019 was dismissed as infructuous.
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