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TMI Blog2020 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... a, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri Biren Shah, A.R. For the Respondent : Shri Samir Tekriwal, Sr. D.R. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeals have been filed at the instance of the assessee against the respective orders of the Commissioner of Income Tax, Gandhinagar ( CIT in short), both dated 23.03.2018 arising in the respective assessment orders dated 28.08.2015 26.07.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AYs. 2013-14 2014-15. 2. The grievances raised being common, both cases were heard together and disposed of by way of the common order. 3. As per grounds of appeal, the assessee has challenged the revisional jurisdiction usurped by the Commissioner of Income Tax under s.263 of the Act in both appeals. 4. In the instant appeals, the CIT in exercise of revisional power vested under s.263 of the Act has held the respective orders of the AO passed under s.143(3) of the Act to be erroneous and prejudicial to the interest of the Revenue on the ground that the interest earned by the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act to the assessee society in contravention of the provision of the Act. The ground for impugned action under s.263 of the Act is that the AO has failed to make requisite inquiry into the claim of deduction of the assessee under the ambit of s.80P of the Act and in the absence of proper inquiry on the eligibility of deduction involved, the order of the AO is erroneous in so far as prejudicial to the interest of the Revenue. 7.1 As pointed out on behalf of the assessee, two pre-requisites must co-exist before the designated authority to enable him to exercise the revisional jurisdiction conferred on him namely; the order should be (i) erroneous (ii) the error must be such that it is prejudicial to the interests of the Revenue. However, an erroneous order does not necessarily mean an order with which the Pr.CIT is unable to agree. The AO while passing an order of assessment, performs judicial functions. An order of assessment passed by the AO cannot be interfered only because an another view is also possible on the issue as held in CIT vs. Greenworld Corporation (2009) 181 Taxman 111 (SC). If in given facts and circumstances of the case, two views are possible and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us term, the co-operative banks are species thereto. Therefore, such co-operative banks are essentially cooperative societies notwithstanding their engagement in banking business. Consequently, it is claimed that the investment in cooperative banks are to be treated at par with investment in co-operative societies for the purposes of eligibility of deduction under s.80P(2)(d) of the Act. The Revenue, on the other hand, has contended that in view of definition provided for co-operative societies under Section 2(19); deduction provided under Section 80P(2)(d) r.w.s. 80P(4) of the Act is not available to investment in a co-operative bank as such investment cannot be treated at par with the investment in co-operative society. It is also contended on behalf of the Revenue that the provisions of Section 80P of the Act are founded on principles of mutuality i.e. common identity between the contributors and participators. The deposit in the co-operative bank lacks the degree of proximity between the members of the society with that of co-operative bank and thus offends this sacrosanct principle of mutuality. It was thus contended that interest income by a co-operative society from a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any one or more of such activities : (b) ----------- (c) ----------- (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) ----------- (f) (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.-For the purposes of this sub-section,- (a) co-operative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities. 9.2.4 Part V of Banking Regulation Act, 1949 defines co-operative bank in Section 5(cci) as under: Co-operative bank means a state co-operative bank, a cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... departure, provides for deduction of whole of such income [without any distinction on nature of income] as derived by a co-operative society from its investment with any other co-operative society. Needless to say, in a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment and one has to look fairly at the language used. Thus, scope of benefit under s.80P(2)(d) is not restricted to business income alone but also extends to income derived from investments ordinarily falling under the head income from other sources as well ; secondly doctrine of mutuality is not necessarily a pre-condition in appropriate circumstances, for instance 80P(2)(a(ii); and thirdly and quite significantly ; the investment by a co-op society in a co-op society should result in interest or dividend income from its investment. Thus what is pertinent is that the investment by the assessee society should be parked in another co-op society for the purposes of sub-clause 2(d) of S. 80P. The moot question thus naturally emerges is; whether the investment in a co-op bank is to be regarded as investment in-effect in a co-op society or not? 9.5 At this jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s be entitled to benefit of section 80P(2)(d) on interest income from investment in co-op bank. As noticed from the definition of co-op bank with reference to Banking Regulation Act, 1949; read with NABARD Act, it is ostensible that the co-op banks of various types are essentially coop. societies. Hence, the claim of deduction made under S. 80P(2)(d) by a co-op society in such co-op banks can not be denied notwithstanding that some these co-op banks are not eligible for 80P benefits despite being co-op societies. 9.8 Coupled with this, certain observations made by the Hon ble Gujarat High court in State Bank of India (supra) and in Sabarkantha District (supra) also reinforces that interest earned on fixed deposit with co-operative bank can be said to be qualified for deduction under s.80P of the Act notwithstanding that such observations appear to be in the nature of an obiter in the context of those cases. 9.9 At this stage, it would also be pertinent to again restate that for the purposes of Section 80P of the Act, the principle of mutuality has been obliterated in view of insertion of Section 2(24) (viia) of the Act by Finance Act, 2006 and such principles thus n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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