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TMI Blog2022 (8) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. Principal Commissioner of Income Tax-1, Thane was not justified to set aside the assessment order passed by the Income tax Officer, Ward-2, Panvel dated 27-11-2019 and direct the Assessing Officer to examine applicability of provisions of section-80P9(2)(d) and section-269SS and to verify the applicability of deduction u/s. SOP of the Income Tax Act, 1961. 3. The Ld. PCIT has passed an unsustainable order based on the audit party observations that the interest earned by the assessee Society is out of surplus funds invested in Co-operative Banks though the Assessing Officer has not accepted the audit party objections in the report submitted to CIT (Audit) and without further application of mind and purely on assumptions and presumptions and consequently the order passed is perverse order on facts and circumstances of case. 4. The PCIT while passing the orders has wrongly observed that the appellant Society has invested idle funds in order to earn the interest income though the assessee Society has made investments as per the statutory requirements governing the Society. 5. The PCIT while passing the orders has wrongly relied on the Hon'ble Supreme Court decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reply in that regard before the ld. AO. The ld. AO gave a categorical finding that the cash deposited in the bank accounts are sourced out of amounts received by the assessee society from its members, which is evident from the list of members submitted by the assessee during the course of assessment proceedings. After verification of various details with evidences submitted by the assessee society, the ld. AO completed the assessment u/s 143(3) of the Act on 27.11.2019 accepting the Nil returned income of the assessee society. 6. Later, Internal Audit Party of Income Tax Department raised an objection that interest income earned by the assessee society out of deposits kept with Co-operative Banks at Rs 1,45,49,749/- for which assessee had claimed deduction u/s 80P(2)(d) of the Act, was not eligible to the assessee. Similarly in respect of Dividend income of Rs 16,78,490/- ; processing & other income of Rs 34,42,986/-, aggregating to Rs 51,21,476/-, the Internal Audit Party of Income Tax Department observed that assessee is not eligible for deduction u/s 80P of the Act and the same would have to be taxed as income from other sources. 7. With regard to the aforesaid objections of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 17.2.2022 did not accede to withdraw the objection of the AO. In the last para of this letter, the CIT(Audit) Pune had reported that the reply given by the PCIT on the objections raised is not acceptable and therefore requested the PCIT to take necessary remedial action as per law. 9. With reference to audit objection raised by the Internal Audit Party in various cases, directions were sought from Chief Commissioner of Income Tax (CCIT), Pune. The CCIT Pune vide letter dated 3.3.2022 directed the PCIT to take necessary remedial action as per law. 10. Based on this letter of CCIT Pune dated 3.3.2022, the ld. PCIT having jurisdiction over the assessee herein, proceeded to invoke his revision jurisdiction u/s 263 of the Act by treating the order passed by the ld. AO u/s 143(3) of the Act dated 27.11.2019 as erroneous and prejudicial to the interest of the revenue by holding as under:- a) Interest income from cooperative banks amounting to Rs 1,45,49,749/- is not eligible for deduction u/s 80P(2)(d) of the Act in view of provisions of section 80P(4) of the Act. b) Dividend income and Other income of Rs 51,21,476/- does not qualify for deduction u/s 80P of the Act as it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to interest income from co-operative banks and its consequential eligibility of deduction u/s 80P(2)(d) of the Act, the issue is squarely covered in favour of the assessee by various decisions of tribunals and also by the decision of Hon'ble Gujarat High Court in the case of State Bank of India reported vs CIT reported in 389 ITR 578 (Guj). The relevant operative portion of the said judgement is reproduced below:- 14. Thus, in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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