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TMI Blog2023 (1) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O under Sec. 143(3). We adopt the foregoing detailed reasoning mutatis mutandis to reverse the ld. Pr.CIT s impugned revision directions. The Assessing Officer s corresponding regular assessment stands restored - Assessee appeal allowed. - ITA No.416/PUN/2022 - - - Dated:- 5-1-2023 - Shri S.S.Godara, Judicial Member And Dr.Dipak P. Ripote, Accountant Member For the Assessee : Shri Kishor Phadke For the Revenue : Shri Rajeev Kumar ORDER PER S.S.GODARA, JM: This assessee s appeal for AY 2017-18 arises against the Principal Commissioner of Income-tax, Pune-4 s order dated 28.03.2022 passed in case No. ITBA/REV/F/REV5/2021- 22/1041788594(1) involving proceedings under 263 of the Income Tax Act, 1961 in short the Act . 2. It emerges during the course of hearing that the learned Pr.CIT s impugned revision directions term the Assessing Officer s regular assessment dated 30-11-2019 as an erroneous one causing prejudice to interest of the Revenue for having accepted the assessee s claim involving interest amount of Rs.1,07,27,570/- derived from parking of funds in various cooperative banks involving varying sums, as eligible for the section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as Income from Other sources and taxed accordingly. 3. Failure on the part of the Assessing Officer in examining the above issue (as discussed in preceding Para) has rendered the assessment order dated 30/11/2019 erroneous in so far as it is prejudicial to the interest of the revenue. 4. in view of the above, the assessment order dated 30.11.2019 was considered erroneous in so far as it is prejudicial to the interest of the revenue in as much as patent error as mentioned supra had crept in. Accordingly, a show-cause notice was issued to the assessee on 05.03.2022 u/s 263 of the Income-tax Act, 1961 calling upon the assessee to explain as to why the assessment order dated 30.11.2019 should not be set aside u/s 263 of the Income Tax Act, 1961. 5. The assessee has submitted its submission electronically on 22/03/2022. In the written submission, the assessee contended as under:- Assessee Sampada Nagari Sahakari Pathsanstha Maryadit having Pan Number AACAS7512A is in receipts of your honour notice no. ITBA/REV/F/REVI/2021 - 22/1040391348(1) dated 05/03/2022 where in your honour proposed to revise the assessment made by the AO for the Assessment Year 2017-18 in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is required to be treated as Income from Other Sources and taxed accordingly. In Keeping with the above notice in this connection assessee society have make the following Submission- Background of the assessee Assessee is the co- operative credit society registered under the Co Operative Society Act, 1912 read with Maharashtra Co Operative Society Act. 1960. The main object of the society is accepting various types of Deposits and providing Credit Facilities/ Advances / Loans to its members. Assesses had filed its Return of Income for the Assessment Year 2017-18 on 26.10.2017 declaring total income of Rs. 1,69,940/-, The case was selected for 'Scrutiny' and accordingly a notice under section 143(2) of the I. T. Act 1961 was issued online through ITBA System on 09.08.2018 which was duly served on the assesses along with questionnaire. The Assessing Officer completed the assessment Passed his Assessment Order under section 143(3) on 30th November, 2019 determining the total income of the Assesses at Rs. 1,69,940/-. For the reference purpose assesses society reproduce the section 80 Provision of Section SOP reads as under: Deduction in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business; 1. in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed ,- where such co-operative society is a consumers' co-operative society, one hundred thousand rupees; and in any other case, fifty thousand rupees. Explanation - In this clause, consumers' co-operative society means a society for the benefit of the consumers; 1. 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; 2. in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (i) in the case of a co-operative society, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of Assessment Proceedings before Assessing officer of ward 13(5) Pune had made submission that it has doing business of accepting deposit from members and lending loans or advances or credit facility to its members. The section 43 of The Maharashtra Co-Operative Society Act, 1960 and clause 5 of the Bye- laws of the assessee society as approved by the Assistant Registrar of Co-Operative Society, Shirur, Dist-Pune empower the assessee society to accept deposits or loans from members and other persons and section 44 of the said act and clause 53 of the byelaws of the assessee society not only empower but also restrict the society for lending credit facility to its members. The copy of the above sections of the act and byelaws of the society marked and attached In Annexure-2 The above fact elaborate as assessee society is not the co-operative bank but its nature of business was coupled with banking with its members as it accepts deposits from and lends the same to its members. To meet any eventuality the assessee was required to maintain some liquid fund as mentioned in clause 52 of the byelaws of the society i.e. 20% to 30% (approx.} of the deposits accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 6} There are plethora of judgements of Pune ITAT on this issue in favour of the assesse. Some of the judgements are enlisted below as attached in annexure-5 i] ITO Vs. Niphad Nagari Sahakari Pathsanstha Ltd. - ITA No.l336/Pn/2011 ii) ITO Vs. Ambad Taluka Prathmik Shikshak Sahakari Pathsanstha Maryadit- ITA No. 1459/PN/2015 B) For explanation purpose assessee society reproduce Para 3.2 of the notice as below- Para 3.2 - It is seen that assessee has made investments with Co-operative banks. Further it is Further it is to be mentioned here that the interest income earned by the assessee society in the instant case, cannot be held eligible for deduction u/s 80P (2)(d) as the provisions of section 80P(2)(d) specifies that the interest earned by the co-operative society from its investment with any other co -operative society would be eligible for deduction under the said section. Interest income epmbiijrom1 investment with co-operative banks do not qualify for deduction u/s 80P (2)(d) of the Income Tax Act, 1961. In view of the elaborate discussion made above it is clear that the interest income earned by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined the submission made by the assessee and issues involved. I have also gone through various case laws filed and relied upon by the assessee in support of claim u/s 80P(2)(a)(i) or 80P(2)(d) of the Act. It is found that Assessing officer has arrived at decision without properly examining the eligibility of assessee to claim deduction u/s 80P of the Act. As per provisions of section 80P(2)(a)(i), the Society is required to substantiate the principle of mutuality with respect to the loans taken from members to loan advanced/ investment made by it. To come to a conclusive discussion, the AO should have verified whether the loans/ deposit taken are given back to the members as loans/ advances or not. The assessment order does not indicate whether this exercise has been done or not. The non-verification of principle of mutuality by the Assessing Officer has rendered the view taken by him regarding allowability of deduction u/s 80P of the Act is legally unsustainable. Since the view taken by the Assessing Officer is unsustainable, the assessment order passed by the Assessing Officer is liable for revision u/s 263 of the Act. 7. As per the Balance Sheet, assessee has received de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). Hence, allowing of the deduction by the Assessing Officer under section 80P for the above amount is not as per the provisions of the Income Tax Act, 1961. In Para 10 of the Hon ble Karnataka High Court decision in the case of Tumkur Merchants Souharda Credit Co-op Society Ltd V CIT (2017) 396 ITR, the Hon ble Court has held that the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In the case of the present assessee, it was stated that the society accepts deposits only from its members which means deposits in banks are made out of deposits made by members. These deposits are liable to be returned back to the members and hence, are to be shown as liability in the balance sheet. These deposits from members are invested in the fixed deposits and interest income is earned from them. As mentioned in Para 7, the assessee received deposits from members of Rs, 38.87 Cr, Share Capital Rs. 2.42 Cr, Reserve Fund Rs. 5.41 Cr and provisions including interest payable to members of Rs. 2.76 Cr.. Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above directions. 10. The Assessment is set aside u/s 263 in terms of para 9 Supra. 5. We have given our thoughtful consideration to vehement rival stands and find no merit in the Revenue s arguments. We make it clear that the sole reason what has made the ld. Pr.CIT to exercise his section 263 revision jurisdiction is that the assessee is not eligible for claiming 80P deduction regarding its interest income derived from cooperative banks etc. We note in this factual backdrop that this tribunal s recent coordinate bench order in ITA No.1249/PUN/2018 in Rena Sahakari Sakhar Karkhana Ltd., vs. Pr. CIT-2, Aurangabad dated 07-01-2022 has declined the Revenue s identical stand as follows : 3. After culmination of the assessment proceedings, the Pr. CIT called for the assessment records of the assessee. It was observed by the Pr. CIT that the assessee had during the year shown interest income from FDs with Co-operative Banks amounting to Rs.75,38,534/- , against which it had claimed deduction under Sec.80P(2)(d) of the Act. It was observed by the Pr. CIT, that the A.O while framing the assessment had allowed the aforesaid claim of deduction raised by the assessee. Observin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec.263 of the Act. It was submitted by the ld. A.R, that the issue as regards the eligibility of the assessee for claim of deduction under Sec.80P(2)(d) on interest income derived from investments/deposits lying with co-operative banks was squarely covered by the various orders of the coordinate benches of the Tribunal viz., (i). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated 29.11.2019 ( ITAT G Bench, Mumbai); Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO-21(2)(1), Mumbai, ITA No. 6547/Mum/2017 (ITAT Mumbai); and (iii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune). On the basis of his aforesaid contentions, it was averred by the ld. A.R that as the Pr. CIT had exceeded his jurisdiction and had not only sought to review the plausible view that was taken by the A.O after necessary deliberations which was in conformity with the order of the jurisdictional bench of the Tribunal, therefore, his order may be vacated and that of the A.O be restored. 6. Per contra, the ld. Departmental Representative (for short D.R ) relied on the order passed by the Pr. CIT under Sec.263 of the Act. It was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the same would have a strong bearing on the adjudication of the issue before us. 80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely :- (a)............................................................................................ (b)............................................................................................ (c)............................................................................................ (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income; On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated 29.11.2019 ( ITAT G Bench, Mumbai); (ii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune) (iiii). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006 also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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