2023 (2) TMI 458 - AT - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 80P(2)(a)(i) - interest on FD with the SK Dist Co. Op. Bank and other Nationalized Banks - HELD THAT - Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited 2021 (1) TMI 488 - SUPREME COURT has considered the investments and the income derived from the interest income in respect of Co-operative Banks as well as other Banks. As regards to reopening, the Assessing Officer, after taking proper approval has reopened the issue because the Assessing Officer has not taken the cognisance of the decisions of the Hon ble Apex Court. Therefore, the reopening is justifiable and the contentions of the assessee is rejected. As regards the decision of Mavilayi Service Co-operative Bank Limited (supra), the Hon ble Apex Court has clearly mentioned that deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding word agriculture into Section 80P(2)(a)(i) of the Act when it is not there. In the present case, the assessee society has invested business income with S.K. District Central Co-operative Bank Limited which is member of Co-operative Society and such investments and interest earned thereon is coming under the purview of deduction under Section 80P of the Act in consonance with the decision of Hon ble Apex Court in the case of Totgar s Co-operative Sales Society Limited 2010 (2) TMI 3 - SUPREME COURT - Thus, the Assessing Officer as well as the CIT(A) has not taken cognisance of the decisions of Hon ble Apex Court in respect of Totgar s Co-operative Sales Society Limited as well as Mavilayi Service Co-operative Bank Limited. Assesse appeal allowed.

Summary

Issues:
Appeals against CIT(A) orders for AYs 2015-16, 2017-18 & 2018-19 - Reopening of assessment under Section 147 - Disallowance of interest under Section 80P(2)(a)(i) and 80P(2)(d) - Interpretation of relevant case laws - Eligibility of society for deduction under Section 80P - Justifiability of reopening - Admissibility of deduction for interest income earned on investments in Co-operative Banks.

Analysis:
The appeals were filed against three CIT(A) orders for different assessment years. The primary issue revolved around the reopening of assessments under Section 147 and the disallowance of interest under Section 80P(2)(a)(i) and 80P(2)(d). The assessee contended that the reopening was unjustified, citing that the AO had already verified the deduction under Section 80P in the original assessment. However, the Tribunal found the reopening justifiable as the AO had not considered relevant Supreme Court decisions. The key argument focused on the eligibility of the society for deduction under Section 80P, particularly concerning interest income from investments in Co-operative Banks.

In the case of AY 2015-16, the assessee society's income tax return declared total income of nil after claiming a deduction under Section 80P. The AO disallowed the deduction for interest income received from Co-operative Banks and Nationalised Banks, leading to the reopening of the assessment. The CIT(A) upheld the disallowance, prompting the appeal. The Tribunal analyzed various case laws, including the Supreme Court decisions in Mavilayi Service Co-operative Bank Limited and Totgar's Co-operative Sales Society Limited. It emphasized that the society's investments and interest income from Co-operative Banks fell within the purview of Section 80P, contrary to the AO and CIT(A) decisions. Consequently, the Tribunal allowed the appeal for AY 2015-16.

The arguments presented by both parties centered on the interpretation of relevant case laws and the eligibility of the society for the deduction under Section 80P. While the Ld. AR relied on specific Supreme Court decisions to support the assessee's position, the Ld. DR highlighted the precedents set by Totgar's Co-operative Sales Society Limited regarding the admissibility of deductions for interest income earned on investments in Co-operative Banks. The Tribunal ultimately sided with the assessee, emphasizing that the AO and CIT(A) had not adequately considered the Supreme Court decisions that favored the assessee's claim for deduction under Section 80P.

In conclusion, the Tribunal allowed all the appeals of the assessee against the CIT(A) orders for the respective assessment years, emphasizing the importance of adhering to relevant judicial precedents in determining the eligibility of societies for deductions under Section 80P. The detailed analysis of case laws and the justifiability of the assessment reopening played a crucial role in the Tribunal's decision in favor of the assessee.