2023 (8) TMI 85 - AT - Income Tax

Revision u/s 263 - deduction u/s 80P - claim made by the appellant against the interest income received from deposit with Delhi Cooperative Bank and also exemption against agricultural income and other income - HELD THAT - PCIT has not disputed the fact that the appellant is group housing society having status of AOP and was incorporated under the Multi-State Cooperative Act, 2002 on 27.02.2009 with the object to construct residential flats for its members. The assessee collected money from its members and deposited the same in Delhi State Cooperative Bank, New Delhi and HDFC Bank. The appellant society earned interest income from surplus of deposit lying with the said banks and interest earned was to be utilized for meeting the sole object of the assessee i.e. to construct the residential flat. These facts have not been controverted or disputed by the ld PCIT in any manner. Therefore, the assessee is a housing cooperative society and not cooperative bank. In the case of PCIT Vs. Totagars Co-operative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT held that for the purpose of section 80P(2)(d) a co-operative bank should be considered by a cooperative society and interest earned by cooperative society from cooperative bank would necessarily be deductible u/s 80P(1) of the Act. AO was right in allowing claim of assessee u/s 80P(2)(d) and therefore, the assessment order cannot be alleged as erroneous and prejudicial to the interest of revenue on merits. PCIT was not correct and justified in invoking revisionary provision of section 263 of the Act at the issue of allowance of exemption u/s 80P(2)(d) to the assessee on the interest earned from Delhi State Cooperative Bank. Decided in favour of assessee.

Summary

Issues:
The appeal against the order of the ld PCIT-12, Delhi for AY 2017-18.

Grounds of Appeal:
1. Challenge to the order passed by the learned Pr. CIT under section 263 of the Act.
2. Dispute over the applicability of Section 263 of the Income Tax Act, 1961.
3. Disallowance of exemption of interest income earned by the appellant from funds with Delhi State Co-operative Bank Ltd.
4. Allegations of arbitrariness, illegality, and violation of jurisprudential principles in the appellate order.

Assessee's Argument:
The impugned revisionary order under Section 263 is challenged as being legally unsound and inapplicable to the case. The appellant's counsel cited a relevant case to support the claim for deduction under Section 80P(2)(d) for interest income from the cooperative bank.

Revenue's Argument:
The Revenue relied on a case precedent to argue against the assessee's claim under Section 80P(2) for interest earned from deposits with the cooperative bank.

Final Decision:
After considering the submissions, it was noted that the appellant, a housing cooperative society, earned interest income from deposits with banks for constructing residential flats. The tribunal found that the appellant falls under the category of a cooperative society and not a cooperative bank, thus entitled to the deduction under Section 80P(2)(d). Citing relevant case law, it was concluded that the AO was correct in allowing the claim, and the revisionary order under Section 263 was set aside, restoring the original assessment order for AY 2017-18. The appeal was allowed on merits.