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TMI Blog2022 (8) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment where such language is clear, or to exclude by implication what the main enactment clearly states - the ratio decidendi of Citizen Cooperative Society Ltd. [ 2017 (8) TMI 536 - SUPREME COURT] must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. The observation of the order of the assessing authority, it is clear that the particular issue related investment in cooperative bank nationalised bank was not discussed in the order shift even the Ld. assessing officer did not apply his mind to differentiate the nature of investment of the assessee. The earning of interest from this investment will be in question for attraction of tax or allowable deduction under section 80(P) of the Act for treating this income as business. Incorrect assumption of fact incorrect application of law will separately the requirement of order being erroneous. In the case of Malabar Industrial Company Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] The assessment order is itself erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad in law. 3. The proceedings u/s. 263 of the Act were initiated by Pr. Commissioner of Income Tax-1 by holding that assessee has indulged in banking business and as such not entitled to deduction claimed u/s. 80P(2) of the Act. Order u/s. 263 of the Act has been passed by holding that order passed by the Assessing Office is erroneous and prejudicial to interest of revenue since activities of the appellant are in violation of the cooperative society Act and the principle of mutuality is missing in the case. Initiating proceedings on one issue and passing order on an another issue for which no show cause notice has been issued, makes the order illegal and bad in law. 4. That order passed u/s. 263 of the Act by Pr. Commissioner of Income Tax-1 holding order passed by the Assessing Officer to be erroneous and prejudicial to interest of revenue since interest on funds with HDFC Bank is not exempt-u/s. 80P(2) of the Act is illegal and bad in law since there was no such show cause notice to the assessee. 5. That various written submissions filed during proceedings u/s. 263 of the Act and various case laws relied upon by the assessee have been ignored and brushed aside arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse, vide reply dated 01.12.2017 and in discussion during the course of hearing, the Ld. AR submitted that First That the society claimed deduction u/s. 80P(2) of the Act, as the society is purely a co-operative society registered under the Punjab Co-operative Societies Act, 1961 and fulfills all the requirements of Section 80P(2) of the IT Act. The assessment for A.Y. 2013-14 was completed by A.O. (Sh. Dinesh Gupta DCIT) by disallowing deduction u/s. 80P without any material or evidence on record. Your kind attention is invited to the Assessment Order for the Asstt. Year 2014-15 passed by the same Assessing Officer (Sh Dinesh Gupta DCIT) vide his order dated 23.12.2016 u/s. 143(3) of the I.T. Act 1961 in which after considering the submission of the assessee the Learned AO allowed deduction u/s. 80P(2) of the Act and passed the Assessment Order by accepting the returned income of the assessee. That the society provides credit facilities to its members only. It does not advance loans/credits to nominal members and non members. The society is getting rental income from shops, study centre, post office and utensils. Second, there are 567 regular members, 384 nominal members an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess (Co-operative Bank) and was also governed by the regulation under RBI Act, Banking Regulation Societies Act. The assessee is not a license holder for doing the banking business. The facts suggest that assessee is not engaged in the banking business. The assessee's claim that it was carrying on banking business on a limited basis is factually incorrect. The assessee is a co-operative society registered under the Punjab Cooperative Societies Act and it is not registered under the Banking Regulation Act, 1949. Although, one of the objects of the society also mentions the banking and credit business, but the facts of the case shows that the society was not engaged in the banking business. A society cannot open saving A/c, current A/c neither it can do business with cheque, DDs, pay orders and others. The interest income arose on the surplus fund invested in deposit with bank which was not required for the business purpose of the assessee. The co-operative society is not a co-operative bank. The profit and gains of a cooperative society from its business activity with its members only shall be entitled for deduction u/s. 80P. No other income which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It has also been held that the benefit of Section 80P is only admissible to the extent of business activity with members. Thus the assessee is not entitled to deduction under section 80P(2)(d) in respect of investment made in HDFC Bank. 7. In view of the above discussion and the judgment of the Hon'ble Supreme Court, the order of the assessing officer in case of M/s. Bains Cooperative Thrift Credit Society Ltd., A.Y. 2015-16 dated 21.12.2017 is erroneous and prejudicial to revenue Considering all these facts, the order passed by the A.O. is held to be erroneous and prejudicial to the interest of the revenue. 8. In view of the above facts and discussions, I am satisfied that the assessment order passed by the Assessing Officer on 21.12.2017 is erroneous in so far as it is prejudicial to the interests of the revenue. Therefore, the said order passed on 21.12.2017 is set aside to this extent to the file of the assessing officer to pass fresh order after making necessary enquiries/investigations in the light of the discussions made above and after giving due opportunity to the assessee of being heard. 6. In view of the above discussions, we can safely concl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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