2022 (11) TMI 877 - AT - Income Tax

Deduction u/s 80P - interest income received from parking its surplus funds with Co-operative Bank - As per AO and CIT since SVC Co-operative Bank Ltd is no more a co-operative society as it has more than 105 branches in 7 states operating on the basis of licence issued by Reserve Bank of India and the interest income earned by assessee is clearly in the nature of Income from other sources it does not qualify for deduction under section 80P(2)(d) - HELD THAT - We have perused the findings returned by co-ordinate bench of Tribunal in case of Petit Towers Co-operative Housing Society Ltd 2021 (9) TMI 232 - ITAT MUMBAI , which is on identical issue, co-ordinate bench of Tribunal by distinguishing the case laws rendered by Hon ble Supreme Court in the case of Totagar s Co-operative Sale Society Ltd vs ITO 2010 (2) TMI 3 - SUPREME COURT and by following the decision of Pr. Commissioner of Income Tax and Anr. vs. Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT and State Bank Of India Vs. CIT 2016 (7) TMI 516 - GUJARAT HIGH COURT reached the conclusion that interest income earned by co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. Thus interest income earned by assessee society from parking its surplus funds with SVC Co-operative Bank Ltd would be eligible for claim of deduction under section 80P(2)(d) of the Act as the co-operative bank also falls in the category of society registered under the Co-operative Society Act, 1912 (20/1952) or under any other law for the time being in force in any state for the registration of co-operative society. Appeal of assessee allowed.

Issues Involved:
1. Opportunity to counter assertions by CIT(A) not granted.
2. Opportunity of being heard through virtual or personal mode not granted.
3. Order of CIT(A) not a speaking order.
4. CPC superseded power under Section 143(1)(a).
5. Disallowance of deduction under Section 80P(2)(d) without valid reason.
6. Addition made on account of disallowance of Section 80P(2)(d) deduction.
7. Determination of tax liability is bad in law.
8. Levying interest under Sections 234B and 234C is void ab initio.

Detailed Analysis:

1. Opportunity to Counter Assertions by CIT(A) Not Granted:
The assessee society argued that the CIT(A) did not provide an opportunity to counter the assertion that SVC Cooperative Bank Ltd is a bank and not a cooperative society, which was a key point in the CIT(A)'s decision. The Tribunal noted that the CIT(A) had made this assertion without allowing the assessee to present counterarguments or consider judicial pronouncements submitted by the assessee.

2. Opportunity of Being Heard Through Virtual or Personal Mode Not Granted:
The assessee contended that despite requesting a hearing through virtual or personal mode, the CIT(A) did not grant this opportunity, violating the Faceless Appeal Assessment Scheme. The Tribunal found this to be a procedural lapse, as the assessee's request for a hearing was ignored.

3. Order of CIT(A) Not a Speaking Order:
The assessee claimed that the CIT(A)'s order was not a speaking order, as it did not address the arguments, assertions, legal provisions, and case laws quoted in the written submission. The Tribunal agreed that the CIT(A)'s order lacked detailed reasoning and failed to consider the assessee's submissions.

4. CPC Superseded Power Under Section 143(1)(a):
The assessee argued that the Central Processing Centre (CPC) of the Income Tax Department erred in disallowing the deduction claimed under Section 80P(2)(d) without authority, as the adjustment did not fall within the six categorized situations under Section 143(1)(a). The Tribunal found merit in this argument, noting that the CPC's action was beyond its conferred powers.

5. Disallowance of Deduction Under Section 80P(2)(d) Without Valid Reason:
The assessee contended that the CPC disallowed the deduction under Section 80P(2)(d) without providing any valid reason, making the intimation order not a speaking order and violating natural justice. The Tribunal agreed, emphasizing the need for a reasoned order.

6. Addition Made on Account of Disallowance of Section 80P(2)(d) Deduction:
The primary issue was whether the assessee society was entitled to a deduction under Section 80P(2)(d) for interest income from fixed deposits with SVC Cooperative Bank Ltd. The Tribunal referred to previous decisions, including those of the Karnataka and Gujarat High Courts, which held that interest income from cooperative banks qualifies for the deduction. The Tribunal concluded that the assessee was entitled to the deduction as SVC Cooperative Bank Ltd is a cooperative society.

7. Determination of Tax Liability is Bad in Law:
The assessee argued that the determined tax liability of Rs. 5,45,267/- was incorrect and contrary to the facts and provisions of the Act. The Tribunal, considering the allowed deduction under Section 80P(2)(d), directed the Assessing Officer to reassess the tax liability.

8. Levying Interest Under Sections 234B and 234C is Void Ab Initio:
The assessee contended that the interest levied under Sections 234B and 234C was incorrect. The Tribunal, in light of the allowed deduction and reassessment of tax liability, found that the interest calculations needed to be revisited.

Conclusion:
The Tribunal set aside the impugned orders passed by the CIT(A) for the relevant assessment years and directed the Assessing Officer to grant the deductions claimed under Section 80P(2)(d) after verifying the facts. The appeals filed by the assessee were allowed, and the order was pronounced in open court on 01st November 2022.

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