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TMI Blog2025 (1) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that the assessment was not erroneous allowing deduction of section 80P (2) (d) of the Act which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. - Decided in favour of assessee. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE D.N. RAY Appearance : For the Appellant(s) No. 1: Karan G Sanghani (7945). For the Opponent(s) No. 1: Mr Manish J Shah (1320). ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. Heard learned Senior Standing Counsel Mr. Karan G. Sanghani for the appellant and learned advocate Mr. Manish J. Shah for the respondent. 2. This Tax Appeal is filed under section 260A of the Income Tax Act,1961 [for short the Act ] by the appellant-Revenue arising out of the Judgement and Order dated 10.07.2023 passed by the Income Tax Appellate Tribunal, Surat [for short the Tribunal ] in ITA No. 233/SRT/2023 for Assessment Year 2018-19 proposing following substantial questions of law: (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the order passed by Hon'ble ITAT is unsustainable in the eyes of law and perverse on facts and deserves to be quashed. (vi) Whether on the facts and in the circumstances of the case and in law, Hon'ble ITAT is right in holding that the AO has made full enquiry, he made up his mind, the notice of revision is not valid and when two views are possible on an issue and it is not the case of the commissioner that the view taken by the AO is not permissible in law, commissioner cannot invoke his jurisdiction u/s 263 of the Act even though section 80P (2) (d) clearly provided that the interest received from the Co-operative Society is eligible for deduction and Co-operative Bank has not been mentioned in the said section therefore the view taken by the Assessing officer is not permissible in law? (vii) Whether on the facts and in the circumstances of the case and in law, Hon'ble ITAT has committed an error in holding that the Assessing Officer has taken a reasonable and possible view which cannot be erroneous whereas interest received from the investment in Co-operative bank is not eligible for deduction u/s 80P (2) (d) of the Act and the therefore the view taken by Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to pass fresh assessment order. 9. Being aggrieved with the decision of learned PCIT, the assessee preferred an appeal before the Tribunal wherein the Tribunal vide impugned order dated 10.07.2023 allowed the appeal of the assessee. 10. Being aggrieved by the impugned order, the Revenue has preferred the present appeal. 11. Learned Senior Standing Counsel Mr. Karan Sanghani appearing for the appellant-Revenue candidly submitted that issue involved in this appeal is already decided by this Court in favourof the assesee in case of Principal Commissioner of Income Tax v. Ashwinkumar Arban Cooperative Society Limited reported in (2024) 168 taxmann.Com 314 (Gujarat) wherein this Court held as under: 28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P (2) (d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd . as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Bank Ltd. vs. Assessing Officer (supra) while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) of the Act would not be applicable to a cooperative bank which is not a bank as per the provisions of the BR Act,1949, as under: 5. Interpretation. In this Act, unless there is anything repugnant in the subject or context, X X X (b) banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) banking company means any company which transacts the business of banking in India. Explanation . Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; 32. After considering the above interpretation of various provisions and the Case laws, the Hon ble Apex Court has analyzed the provisions as under: 14.1. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub-section (2) of Section 80P must be given by way of deduction vide Citizen Co-operative Society. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in sub-sections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: i) Firstly, the marginal note to Section 80P which reads Deduction in respect of income of co-operative societies is significant as it indicates the general drift of the provision. ii) Secondly, for purposes of eligibility for deduction, the assessee must be a co-operative society . iii) Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by Reserve Bank of India. It was pointed out that as opposed to the above, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6. Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That sub-section (4) of Section 80P which is in the nature of a proviso specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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