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TMI Blog2021 (9) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... . ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This assessee s appeal for A.Y. 2014-15, arises from order of the Principal CIT-3, Vadodara dated 11-05-2020, in proceedings under section 263 of the Income Tax Act, 1961; in short the Act . 2. The assessee has raised following grounds of appeal:- 1. On the facts and circumstances of the case as well as law on the subject, the revision order passed by the learned Principal Commissioner of Income Tax u/s 263 of the Act for assessment year 2014-15 is erroneous, contrary to law, equity, facts and circumstances of the present case and the materials available on record. 2. On the facts and circumstances of the case as well as law on the subject, the learned Principal Commissioner of Income Tax erred in setting aside the assessment order of the Assessing Officer u/s 143(3) of the Act observing that the contentions raised by the assessee necessitate reverification of the matter without commenting anything on order being erroneous as well as prejudicial to the interest of revenue. 3. The fact in brief is that the assessee filed return of income on 28th Nov, 2014 declaring total income at Rs. n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return of income when the circumstances of the case are such as to provoke enquiry- If there is failure to make such enquiry, the order is erroneous and prejudicial to the interest of revenue, In this regard useful references may be made to the following cases: Gee Vee Enterprises Vs. Add/. CIT, 99 ITR 375(DEL) Rampyari Devi Saraogi Vs. Commissioner of Income-tax, 67 ITR 84(SC) Malabar Industrial Co. Ltd Vs. CIT, (2000) 243 ITR 83 (SC) Rajaiakshmi Mills Ltd Vs. /TO 2009, ITOL-317-ITAT-MAD-SB 5. It may further be stated that Explanation 2 has been inserted below subsection (1) of Section 263 wherein it has been declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner of Income-tax, the order is passed without making enquiries or verification which should have been made. 6. In view of the above facts, clear provisions of the Act and the authorities, you are hereby required to show cause as to why the assessment order passed by the Assessing Officer on 29.12.2017 should not be set aside for de novo consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required re-verification without contradicting detailed verification/examination already made by the Assessing Officer during the course of assessment proceedings. The ld. counsel also submitted that similar deduction u/s. 80P(2)(d) was also allowed in earlier assessment years to the assessee. The ld. counsel also referred page no. 18 of the paper book vide which the ld. Pr. CIT was informed that during the course of assessment made u/s. 143(3), the Assessing Officer has already made detailed verification and considered the submission and documentary evidences produced by the assessee in support of its claim of deduction u/s. 80P(2)(d) of the act. The assessee has also referred various judicial pronouncements in support of its claim of deduction u/s. 80P(2)(d) before the ld. Pr. CIT. On the other hand, the ld. Departmental Representative has supported the order of Pr. CIT. 5. Heard both the sides and perused the material on record. The case was subject to scrutiny assessment and order u/s. 143(3) of the act was finalized on 29th December, 2017 and Assessing Officer has allowed the claim of deduction u/s. 80P(2)(d) of the Act. Subsequently, the Ld. Pr. CIT held that assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his year also. Section 80P(2)(D) of the Act reads as under:- In respect of any income by way of interest or dividends deriyedj3y the co-operative society from its investments with any other co-operative society, the whole of such income We like to ring to your notice that as per section 2(19) of the Act a Cooperative Society means a Co-operative Society registered under the Co- operative Societies Act, 1912, or any other law for the time being in force in any State for the registration of the Co-operative Societies. Since the Co-operative banks are also registered under the Co-operative Societies Act hence as per the definition of co operative society as stated above Co-operative banks are also to be treated as Co-operative society. Further it should be noted that the Co-operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Cooperative Societies. Thus, the Co-operative Bank which is a species of the genus Co-operative societies would necessarily be covered by the word 'Co-operative Society' and since, clause 80P(2)(d) of the Act permits such 100% ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bank' is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co-operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus, the Co-operative Bank which is a species of the genus Co-operative societies would necessarily be covered by the word 'Co-operative Society'. Furthermore, section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-operative society bank as the meaning of Co-Operative Society. Therefore, a Cooperative Society Bank would be included in the words 'Cooperative Society'. Admittedly, the interest which the assessee-respondent had earned was from a Cooperative Society Bank. Therefore, according to section 80P(2)(d), the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. Copy of the Karnataka hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-operative bank means a co-operative society having a primary object or principal business of which is the transaction of banking business. So, other than the co-operative banks all other co-operative societies can claim deduction u/s SOP of the Act. Assessee had invested its surplus fund which is not required immediately in a cooperative bank. Out of that investment assessee had earned Interest income. Since the investment is not for the purpose of the business assessee had shown the interest income earned from co operative bank under the head income from other source u/s 56 of the Act and not under the head PGBP. As assessee had shown the interest income under the head other source accordingly dairy had claimed the deduction for the same under section 80P(2)(d) of the income tax act and not under section 80P(2)(a)(i) While the judgment passed by the Supreme Court in case at Sale Society Limited is mainly of such society which is providing credit to its members. As per section 80P(2)(a){i) a co-operative society which is engaged in the business of banking or providing credit facilities to its members is eligible to claim the income from carrying on banking bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank which is a species of the genus Co-operative societies would necessarily be covered by the word 'Co-operative Society and since, clause 80P(2)(d) of the Act permits such 100% deduction in respect of the income by way of interest or dividends derived by the Co- operative Society (Assessee) from its investments with any other Cooperative Society (including Co-operative Bank) and the whole of such interest income is eligible for 100% deduction. Gujarat high court in the case of Surat Vankar Sahakari Sangh Ltd. v. Assistant Commissioner of Income-tax where High court had held that In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P{2}(d) of the Income- tax Act, 1961 in respect of interest of ₹ 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the bank. Therefore, the reference is answered against the Revenue in the affirmative and in favor of the assessee/ Further High Court Of Gujarat Kaira District Co-op. M3k Producers Union Ltd. v. Deputy Commissioner of Income-tax held that The petitioner had earned interest income of ₹ 2.29 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest income earned by co-operative society from the other cooperative society is allowed as a deduction u/s 80P(2)(d) of the Act. Further it is worthwhile to note that to follow the consistency in the allowance of the deduction and as such there is no change is made in the Rule or Act, in A.Y. 2015-16 so, deduction u/s 80P(2)(d) which was also allowed earlier should be allowed in this year also. As per the above facts and the judgments it is requested to you to that the deduction of interest income from investment with co-operative society be allowed to us u/s80P{2](d) of the IT Act. 2. In the matter of interest subvention we had shown the Interest yearly and only after the asset put to use. Extract of the agreement in this matter is as under- GCMMF will pay the 80% interest subsidy cost of members union with maximum limit of ₹ 10 crore for the total loan period and maximum of 7 years. Copy of agreement as a supporting of this is attached herewith for your kind reference. 3. During the year under consideration total addition of ₹ 52,13,272/- was made and this whole addition is of crates only and no crans were purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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