Sattari Urban Co-operative Credit Society Limited, Sattari V. The Principal Commissioner of Income Tax, Panaji

ITA 216/PAN/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1442 (ITAT-PANAJI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: WT(D)
• Next Hearing Date: 24-06-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 13-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRANAV NAIK
• Keywords: Revision of order; Co-operative Credit Society
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI – VIRTUAL COURT BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.216/PAN/2023 नधा रण वष / Assessment Year : 2018-19 Sattari Urban Cooperative Credit Society Limited, APA Commercial & Residential Complex, Block 6, H.O. Valpol, Sattari – 403506, Goa PAN : AAAAS9125R Vs. The Pr.CIT, Panaji Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of the Pr. Commissioner of Income-Tax, Panaji (PCIT) dated 14.11.2023 for the assessment year 2018-19. 2. Briefly, the facts of the case are that the appellant is a Co-operative Credit Society engaged in the business of providing credit facilities. The appellant society filed the Return of Income for the assessment year 2018-19 on 06.10.2018 declaring income of Rs.97,510/- after claiming deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (‘the Act’) of Rs.2,70,76,512/-. Against the said return of income, the assessment was completed by the Assessing Officer’) vide order dated 21.04.2021 passed u/s 143(3) r.w.s.144B of the Act at a total income of Assessee by : Shri Pranav Naik Revenue by : Smt. Badrinath Yamaji Chavan Date of hearing : 25.06.2024 Date of pronouncement : 26.06.2024 ITA No.216/PAN/2023 2 Rs.29,33,250/-. While doing so, the Assessing Officer had disallowed the exemption u/s.80P(2)(a)(i) in respect of interest income earned out of the deposits made with Scheduled banks as well as Nationalised banks. 3. The ld. Pr.CIT vide the impugned order in exercise of his powers vested u/s.263 of the Act held the order of the AO as erroneous and prejudicial to the interest of the Revenue. The ld. Pr.CIT placing reliance on the decision of the Hon’ble Supreme Court in the case of Totgar’s Cooperative Sale Society Vs. ITO 322 ITR 283 (SC) and the decision of Hon’ble Karnataka High Court in Pr.CIT Vs. Totagars Cooperative Sales Society 395 ITR 611 and the decision in the case of Govinda Nayak Vs. Western Patent Press Company Limited AIR 1980 Kar 92 (FB) directed the AO to disallow the entire deduction claimed by the appellant society u/s.80P(2)(a)(i)/80P(2)(d), instead of partial disallowance made by the Assessing Officer in respect of interest income received from Cooperative banks/Nationalised banks. 4. Being aggrieved by the order of the ld. Pr.CIT, the appellant society is in appeal before the Tribunal in the present appeal. 5. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the validity of assumption of jurisdiction u/s 263 by the ld. PCIT. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s. 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is ITA No.216/PAN/2023 3 not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”. In the present case, we find that admittedly the interest income was earned from the cooperative banks, the cooperative bank is also a specie of cooperative society, therefore, the interest income earned by the cooperative society from the cooperative banks qualifies for deduction u/s.80(P)(2)(d) of the Act. Such interest also qualifies for exemption u/s.80P(2)(a)(i) as held by the Co-ordinate Bench of Pune Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited Vs. ITO in ITA No.1700/PUN/2017 wherein the Tribunal held as under :- “9. We heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act,1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as well as the CIT(A) were of the opinion that the interest earned from third parties or non- members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as ‘income from other sources’ There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon’ble Delhi High Court in the case of Mantola Co- operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon’ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon’ble Telangana and Hon’ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural ITA No.216/PAN/2023 4 Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) of the Act. The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12- 2018) has taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 & 2 stands allowed.” Thus we find the issue under consideration which is subject matter of revision is in favour of the appellant society by the above binding precedents, the exercise of power of revision by the ld. Pr.CIT is contrary to the settled position of law as discussed above. Thus, the assessment order cannot be said to be erroneous. Therefore, we are of the considered opinion that the order of revision passed by the ld. PCIT u/s.263 of the Act cannot be sustained in the eyes of law and accordingly vacate the same. Hence, the grounds of appeal raised by the assessee stand allowed. 6. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 26 th day of June, 2024. Sd/- Sd/- (S. S. GODARA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; दनांक / Dated : 26 th June 2024. Satish ITA No.216/PAN/2023 5 आदेश क ितिलिप अ ेिषत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. यथ / The Respondent. 3. The Pr.CIT Concerned 4. DR, ITAT, Panaji. 5. गाड फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.