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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 ..... ed 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 society from deposits placed in Scheduled Co.op. Bank is not eligible for deduction under s.80P(2) of the Act. 5. The learned AR for the assessee contended that the assessee is eligible to claim deduction on interest earned from FDs with co operative banks and the societies under s.80P(2)(d) of the Act. It was pointed out that the issue has been examined threadbare in a recent decision rendered in Uttar Gujarat Uma Co-op Credit Society Ltd. vs. ITO ITA Nos. 1670 & 1671/Ahd/2018 order dated 28.02.2019 by the Ahmedabad Tribunal. 6. The learned DR, on the other hand, submitted that the issue has been adjudicated against the assessee by the decision of the Hon'ble Karnataka High Court in Pr.CIT vs. The Totagars Co-Operative Sale Society ITA No. 100066/2016 & Ors. (Karnataka). It was also pointed out that after the insertion of the provisions of Section 80P(4) of the Act by the Finance Act, 2006 w.e.f. AY 2007-08, the benefits of deduction under s.80P of the Act is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 one view as legally plausible has been adopted by the AO then existence of other possible view alone would not be sufficient to exercise powers under s.263 of the Act by the Pr.CIT / CIT concerned. Hence, there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when an order is erroneous and causing prejudice, that the Section will be attracted. An incorrect assumption of facts or incorrect application of law will satisfy the requirements of the order being erroneous. 7.2 In the instant case, it is demonstrated on behalf of the assessee that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench in Uttar Gujarat Uma Co-op Credit Society Ltd. vs. ITO (2019) 70 ITR (Trib) 49 (Ahmedabad), wherein the decision rendered by the Hon'ble Karnataka High Court in The Totagars Co-Operative Sale Society (supra) relied upon by Revenue has also been considered and all other fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-operative bank is not covered in the fold of Section 80P(2) of the Act. It is further case of the assessee that exclusion of co-op banks for eligibility of deduction under S. 80P owing to insertion of S. 80P(4) does not, in any manner, take away the benefit available under S. 80P(2)(d) to an investor society (excluding co-op bank) in a co-op bank which is a co-op society for all intent and purposes while carrying on the functions of a bank. It is thus paddled that while a co-op society functioning as a coop bank is not entitled to benefit of 80P owing to exclusions made, a co-op society not being a co-op bank remains unaffected by S. 80(4) and can enjoy the benefits of S. 80P(2)(d) conferred on the societies on fulfillment of pre-requisites. 9.2 Before we proceed to deal with the issue in hand, it would be apt to quote the relevant provisions governing the controversy in hand. 9.2.1 Section 2(19) defines the meaning of expression 'Co-op Society' as under: "co-operative society" means a co-operative s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state co-operative bank, a central co-operative bank and a primary co-operative bank; 9.2.5 A 'primary co-operative bank' as per Sectionn 5(ccv) of Part V of Banking Regulation Act, 1949 reads to mean: "(ccv) "primary co-operative bank" means a co-operative society, other than a primary agricultural credit society,............................... 9.2.6 As per clause (ccvii) of Section 5, however, 'Central Co-op Bank' and 'State Co-op Bank' shall have the same meanings respectively assigned to them in the National Bank for Agriculture and Rural Development (NABARD) Act, 1981. NABARD, in turn defines these two terms as under: Section 2(d) of NABARD defines 'central co-operative bank' means the "d. "central co-operative bank" means the principal co- operative society in a district in a State, the primary object of which is the financing of other co-operative societies in that district:.........." u. "State co-operative bank" means the principal co- operative society in a State, the primary object of which is the financing of other co-operative societies in the State:.................." 9.3 Having noted the relevant provisions in earlier para, it would be expedient to firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? 9.5 At this juncture, we also take simultaneous note of such Section 80P(4) of the Act inserted by Finance Act, 2006 whereby a co-operative bank has been deprived of deduction under s.80P of the Act. To put it slightly differently, with advent of section 80P(4), co-op banks have been brought to tax by denying them the benefit of Section 80P of the Act. 9.6 The insertion of Section 80P(4) of the Act has purportedly also obfuscated and cast aspersion on the deductibility of income derived by a co-operative society from investments placed with co-operative bank under S. 80P(2)(d) of the Act. In this context, it would be interesting to note that the aforesaid clause 80P(4) itself holds that a co-operative bank may also possibly include 'a credit society'; for instance, a primary agricultural credit society. Therefore, on an incisive reading of Section 80P(4) of the Act, it appears that co-operative banks can also be co-operative society for the purposes of Section 80P(2)(d) of the Act. Thus, on a conjoint reading of Section 80P(2)(d) and 80P(4), it would appear that while the co-operative banks in certain cases [as specified in Section 80P(4)] may not qualify for deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... longer serve as strict guiding principle to test the relief eligible under S. 80P(2)(d) of the Act. Therefore, the plea raised on behalf of the Revenue towards absence of principle of mutuality in such deposits with co-operative banks is a damp squib. Thus, the assessee being a co-operative society as contemplated under s. 80P(1) of the Act, cannot be deprived of benefit of S.80P(2) (d) despite purported absence of mutuality in investment with a co-op bank. We, thus, concur with plea of assessee for allowability of deduction on interest income derived from cooperative society in the form of Co-operative bank on first principles. The issue is accordingly resolved in favour of the assessee and against the Revenue. 9.10 We are conscious of the decision of the Hon'ble Karnatka High Court in Pr.CIT vs. Totagars Co.operative Sales Society (2018) 395 ITR 611 (Karn) wherein it was held that interest income not arising from business operations is not eligible for deduction under s.80P of the Act. A reading of the judgment of the Hon'ble High Court shows that it was guided by nature of activity to determine the character of income for the purposes of Section 80P(2)(d) of the Act. Placin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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