AI Insights
The case involves two appeals by The Peoples Co-Op Credit Society Ltd. and Shri Ambika Co-Op. Credit Society Ltd. against the revision orders of the PCIT, which denied their claims for deductions under section 80P(2)(d) of the Income Tax Act, 1961, for the Assessment Year 2018-19. The PCIT's revision orders were based on the grounds that the interest income from cooperative banks should be taxed as 'income from other sources' and not eligible for deduction under section 80P(2)(d). The Tribunal, referencing various judicial precedents, including decisions from the Gujarat High Court and the Supreme Court, held that the interest income from cooperative banks is indeed eligible for deduction under section 80P(2)(d). The Tribunal also noted that the Assessing Officer had made adequate inquiries during the original assessment proceedings and had allowed the deductions after considering the submissions and judicial decisions provided by the assessee.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 114108 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-09-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
09-08-2023
Assessment Year
2018-2019
Appeal Filed On
09-05-2023
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The Peoples Co-Op Credit Society Ltd., Ground Floor, Nr. Branch School, Deesa-385535 PAN: AAAAT1739J (Appellant) Vs The Pr.CIT, Ahmedabad-3, Ahmedabad (Respondent) Shri Ambika Co-Op. Credit Society Ltd., At & Post Pamol, TA: Vijapur, Dist: Mehsana-382820 Gujarat PAN: AAAJS3203R (Appellant) Vs The Pr.CIT, Ahmedabad-3, Ahmedabad (Respondent) Assessee Represented: Shri M.K. Patel, A.R. (ITA No.322/A/23) None (ITA No. 350/A/23) Revenue Represented: Shri Sanjeev Jain, CIT-DR Date of hearing : 10-08-2023 Date of pronouncement : 08-09-2023 ITA No. 322/Ahd/2023 Assessment Year 2018-19 ITA No. 350/Ahd/2023 Assessment Year 2018-19 I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 2 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These two appeals are filed by two different Assessees as against separate Revision orders both dated 16.03.2023 passed by the Principal Commissioner of Income Tax, Ahmedabad denying the claim of deduction under section 80P(2)(d) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2018-19. Since common issue is involved in both the cases, the same are disposed of by this common order. 2. ITA No. 322/Ahd/2023 is taken as the lead case. The brief facts of the case is that the assessee herein Co-operative Society providing credit facilities by way of loans and advances to its members. For the Assessment Year, 2018-19, the assesse filed its Return of Income declaring Nil income, after claiming deduction u/s. 80P of the Act. The assessment was taken up for scrutiny and assessment order u/s. 143(3) of the Act was passed on 08-02-2021 accepting the returned ‘Nil’ income. 3. On verification of records by PCIT, it was found that the assessee has shown Gross total income of Rs. 1,22,53,554/- on which deduction u/s. 80P of Rs. 1,22,53,554/- was claimed. On examination of records, it is noticed that the assessee had kept large amount of idle and surplus funds in Co-operative Bank and earned interest income of Rs. 1,22,53,554/- as follows: I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 3 Sr. No. Name of the bank Amount of interest earned (Rs) 1 Banas Bank FD Account Interest 64,33,521/- 2 Banas Bank Savings Account Interest 33,463/- 3 BDC Bank Cash CE Account Interest 17,55,803/- 4 BDC Bank Cash CE Account Interest 3,85,980/- 5 BDC Bank FD Account Interest S S Mark 36,44,787/- TOTAL INTEREST EARNED FROM COOPERATIVE BANKS 1,22,53,554/ - 3.1. The assessee was issued a show cause notice, why the amount of Rs. 1.22 crores being interest from Co-operative Bank should not be disallowed by passing appropriate revisional order u/s. 263 of the Act following Hon’ble Supreme Court Judgment in the case of Totagars Cooperative Sale Society Ltd. Vs. ITO [2010] 322 ITR 283 (SC). Further this issue was not verified by the Assessing Officer without inquiring into the claim made by the assessee, therefore as per Explanation 2 to section 263 (1) of the Act, why the assessment should not be revised. 4. In reply, the assessee submitted, during the assessment proceedings the Assessing Officer asked for explanation/details for deduction under Chapter-VIA and vide assessee replies dated 08- 10-2019, 09-12-2020 and 18-12-2020, the assessee has elaborately explained with judicial decisions on the facts and figures thereby the Assessing Officer accepted the explanation and allowed the claim of deduction u/s. 80P(2)(d) of the Act. Therefore the question of invoking explanation (2) to section 263(1) does not arise and the claim of deduction u/s. 80P(2)(d) is well within the provisions of law. Further the assessee brought to the attentions, assessee’s own case for the Assessment Years 2011-12 & 2012-13 in ITA Nos. 1891/Ahd/2014 & 2987/Ahd/2015 wherein, the I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 4 Hon’ble ITAT allowed the claim of deduction u/s. 80P(2) of the Act. The assessee also relied upon various case laws in support of its claim. However the above submissions of the assessee were rejected and Ld. PCIT held that the interest income earned from FDs, Savings Account and Dividend Income from Cooperative Banks are assessable as “income from other sources” and thereby set aside the assessment order dated 22-02-2021 passed by the Assessing Officer with a direction to the Assessing Officer to treat the same as “income from other sources” and thereby denied the claim of deduction u/s. 80P(2)(d) of the Act. 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeals: (1) That on facts, and in law, the learned PCIT has grievously erred in exercising jurisdiction u/s 263 of the Act. (2) That the learned PCIT has grievously erred in law, and on facts, in holding that dividend/ interest received from Co-operative Bank is to be taxed as Income from Other Sources, and in further directing the AO to deny the claim of deduction made u/s 80P(2) (d) of the Act in respect of such dividend/ interest received from Co-operative Bank. (3) That on facts and in law, the entire claim ought to be allowed as prayed for. (4) The appellant craves leave to add, alter, amend any ground of appeal. 6. Per contra, the Ld. CIT-DR Shri Sanjeev Jain appearing for the Revenue supported the order passed by Ld. PCIT and submitted the Jurisdictional High Court in the case of State Bank of India vs CIT held that interest income on deposit placed with commercial bank is not exempt u/s. 80P(2)(a)(i) of the Act. Further Jurisdictional High Court in the case of Katlay Kariyana Merchant Sahkari Sarafl Mandli Ltd. Vs. ACIT held that co-operative banks are not specie of I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 5 genus co-operative society, which would be entitled to exemption or deduction under the special provisions of Chapter VI-A in the form of section 80P of the Act. Therefore the Revision order passed by the PCIT does not require any interference and the assessee appeal is liable to be dismissed. 7. Per Contra, the Ld. Counsel Shri M.K. Patel appearing for the assessee submitted that the issue regarding claim of deduction under section 80P was duly enquired by the Assessing Officer during the course of assessment proceedings. He further submitted that in response to the notices issued by the AO, the assessee filed submission dated 08-10-2019, 09-12-2020 and 18-12-2020 wherein, the assessee submitted reasons as to why it is eligible for deduction under section 80P of the Act. Therefore, after making requisite verification, the AO allowed the assessee’s claim for deduction under section 80P(2)(d) of the Act, and therefore it is not a case, where due enquiries were not made by the AO or there was non-application of mind on the part of the AO before allowing assessee’s claim for deduction under section 80P(2)(d) of the Act. Without prejudice the above, the assessee submitted that the issue has been decided in favour of the assessee in the case of State Bank of India v. CIT 389 ITR 578 (Gujarat), in which the Gujarat High Court held that “if the assessee wants to avail of the benefit of deduction of such interest income, it was always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act”. Therefore, since the issue has been decided in favour of the assessee by the jurisdictional High Court, coupled with the fact that the AO had I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 6 also enquired into this aspect during the course of assessment proceedings, and after due application of mind had decided the issue in favour of the assessee, this is not a fit case for initiation of proceedings under section 263 of the Act and thereby requested to quash the Revision order and allow the assessee appeal. 8. We have considered the rival submission and perused materials available on record and various case laws relied by the Ld. A.R. during his submission. We have also gone through the various documentary evidences filed in the form of paper book (PB) by learned AR of the assessee. We have noted that during the assessment proceeding the Assessing Officer vide notice under section 143(2)/142(1) of the Act dated 31-8-2015 and 13-4-2016. The assessee filed its reply furnished required details and after examining the issue allowed the deductions under section 80P(2)(d) as discussed in Page 2 of the assessment order dated 08-02-2021, thus the question no inquiry by the A.O. does not arise. 8.1. The Ld. PCIT before passing under section 263 of the Act, identified the issue regarding the claim of deduction under section 80P(2)(d) in its show cause notice dated 20-2-2023. The assessee in its reply dated 27-02-2023 & 15-03-2023 clearly explained that the issue was examined by Assessing Officer and that the assessment order is not erroneous. The assessee also explained that similar disallowances/issues was subject matter of appeal filed by the Revenue before Tribunal in ITA Nos. 1891/Ahd/2014 & 2987/Ahd/2015 relating to the Assessment Years 2011-12 and 2012-13 and the assessee was allowed similar deductions. I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 7 9. Further the Hon'ble Jurisdictional High Court in Aryos Arcade Ltd. v. Pr. CIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it is further held that when Assessing Officer made full enquiry, he made up his mind, which is one of the plausible view and therefore the revision is not valid. Further, Hon'ble Madras High Court in CT v. Mepco Industries Ltd. (2007) 163 Taxman 648/294 ITR 121 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in law, Commissioner cannot invoke his jurisdiction under section 263 of the Act. 9.1 As we have noted above the assessing officer has made enquiries on the allowability of deduction under section 80(P)(2)(d) and passed the assessment order, thus, the Assessing Officer has taken a reasonable and possible view which cannot be held as erroneous. 10. Moreover, we have seen that in assessee's own case for A.Ys. 2011-12 and 2012-13, the similar disallowance under section 80P(2)(d) was made by the Assessing Officer while passing assessment order under section 143(3), however, on appeal before the Co-ordinate Benches of this Tribunal in ITA No. 1891/Ahd/2014 (cited supra) held as follows: “......15. We now advert to the lead issue of Section 80(P)(2) disallowance of Rs.27,97,019/- in respect of assessee's interest income derived from its deposits with the Banas Co-operative Bank. Both the lower authorities quote the legislative amendment vide Finance Act, 2006 w.e.f. 01.04.2007 inserting I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 8 subsection 4 in Section 80P as well as CBDT's explanatory notes to the above Finance Act dated 28.122006 in holding that the impugned interest income derived from co-operative bank is not eligible for deduction. Learned Departmental Representative vehemently contends that hon'ble Karnataka high court's recent decision in (2017) 83 taxmann.com 140 (Karnataka) PCIT vs. Totagars Co-operative Sale Society has settled the law that such an income is not allowable as Section 80P deduction in view of the legislative amendment hereinabove. Mr. Kabra thereafter files hon'ble apex court's judgment in (2017) 397 ITR 1 (SC). The Citizen Co-operative Society Ltd. vs. ACIT settling Section 80P deduction issue in respect of ordinary and nominal members. We however find that the above former decision goes contrary to hon'ble jurisdictional high court's judgment in Tax Appeal No. 473 of 2014 CIT vs. Sabarkantha District Cooperative Milk Producers Union Ltd. declining Revenue's identical question of law challenging tribunal's decision allowing Section 80P deduction in respect of interest earned on fixed deposits with a cooperative bank in assessment year 2009-10 i.e. post Section 80P(4) amendment w.e.f. 01.04.2007. Their lordships' reasoning to this effect reads as under: "4.0. Now, so far as proposed question no. B i.e. whether the Appellate Tribunal has substantially erred in upholding the order of the CIT(A) in deleting the disallowances of Rs.1,42,19,515/- under Section 80(P)(2)(d) of the Act is concerned, it is required to be noted that the assessee claimed deduction under Section 80(P)(2)(d) of the Act on the interest earned on the fixed deposit with Cooperative Bank and the Societies and it has been found that as such the income was received from the investment in Cooperative Societies and Cooperative Bank Considering Section 80(P)(2)(d) of the Act when the only requirement was that the income should be received from investment in Cooperative Societies and the Cooperative Bank which in the present case has been fulfilled, it cannot be said that the learned Tribunal has committed any error in deleting disallowance of Rs.1,42,19,515/- under section 80(P)(2)(d) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, proposed question B is also answered against the revenue." We therefore follow hon'ble jurisdictional high court's judgment than hon'ble Karnataka high court's decision. Coming to hon'ble apex court's decision in the Citizen Co-operative Society Ltd. (supra), we find that there is no dispute about the category of members as it was before their lordships. We thus conclude in view of all these facts and circumstances that hon'ble jurisdictional high court's judgment is binding on us. We accordingly delete the impugned disallowance of Rs.27,97,019/- in question. This lead appeal ITA No. 1891/Ahd/2014 is partly accepted.” I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 9 10.1. The Hon'ble Karnataka High Court in Totagars Cooperative Sales Society (supra) held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and interest earned by Co-operative Society from Cooperative Bank would necessarily be deductible under section 80P(1) of the Act. Further, the Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. (supra) held that assessee co-operative society is eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank 10.2. Further the Co-ordinate Bench of Rajkot Tribunal in Surendarnagar District Co-operative Milk Producer Union Ltd. v. Dy. CIT [2019] 111 taxmann.com 69/179 ITD 690 (Rajkot Tribunal) also held the assessee co-operative society could not claim benefit under section 80P(2)(d) in respect of interest earned by it from deposits made with nationalized/private banks, however, the said benefit was available in respect of interest earned and on deposits made with co-operative bank. Thus, in view of the aforesaid legal discussion we are of the considered view that order passed by Assessing Officer is not erroneous, though it may be prejudicial to the interest of the Revenue. Therefore, the twin conditions that the assessment order is erroneous and so far as prejudicial to the interest of revenue, as prescribed under section 263 is not fulfilled in the present case. I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 10 10.3. The Hon’ble Gujarat High Court in the case of CIT Vs. Sabarkantha District Co-Op. Milk Producers Union Ltd. in Tax Appeal No. 473 of 2014 held as follows: 4.0. Now, so far as proposed question no. B i.e. whether the Appellate Tribunal has substantially erred in upholding the order of the CIT(A) in deleting the disallowances of Rs.1,42,19,515/- under Section 80(P)(2)(d) of the Act is concerned, it is required to be noted that the assessee claimed deduction under Section 80(P)(2)(d) of the Act on the interest earned on the fixed deposit with Cooperative Bank and the Societies and it has been found that as such the income was received from the investment in Cooperative Societies and Cooperative Bank. Considering Section 80(P)(2) (d) of the Act when the only requirement was that the income should be received from investment in Cooperative Societies and the Cooperative Bank which in the present case has been fulfilled, it cannot be said that the learned Tribunal has committed any error in deleting disallowance of Rs. 1,42,19,515/- under Section 80(P(2)(d) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, proposed question B is also answered against the revenue. 11. Respectfully following the above judicial precedents, in our considered view, the Ld. PCIT erred in holding that the order passed by A.O. as erroneous and prejudicial to the interest of the Revenue on account of allowability of interest earned by the assessee from cooperative banks, coupled with the fact when the Ld. Assessing Officer had made due enquiries on this issue, during the course of original assessment proceedings. 12. In the result, the appeal filed by the Assessee is hereby allowed. ITA No. 350/Ahd/2023 (Shri Ambika Co-Op. Credit Society Ltd.) 13. In this appeal, Ld. PCIT by the Revision order u/s. 263 denied the benefit of deduction u/s. 80P(2)(d) of Rs. 16,84,431/- being received from Cooperative Banks. Since the issue herein also identical with the decision rendered in ITA No. 322/Ahd/2023 I.T.A Nos. 322 & 350/Ahd/2023 A.Y. 2018-19 Page No The Peoples Co.Op. Credit Society Ltd. & Ors. vs. Pr.CIT 11 applying the same ratio, this appeal filed by the Assessee is hereby allowed. Order pronounced in the open court on 08-09-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 08/09/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद
Other Referred Cases
Totagars Cooperative Sale Society Ltd. Vs. ITO [2010] 322 ITR 283 (SC), State Bank of India vs CIT, Katlay Kariyana Merchant Sahkari Sarafl Mandli Ltd. Vs. ACIT, Aryos Arcade Ltd. v. Pr. CIT (2019) 412 ITR 277 (Gujarat), CT v. Mepco Industries Ltd. (2007) 163 Taxman 648/294 ITR 121 (Madras), Surendarnagar District Co-operative Milk Producer Union Ltd. v. Dy. CIT [2019] 111 taxmann.com 69/179 ITD 690 (Rajkot Tribunal), CIT Vs. Sabarkantha District Co-Op. Milk Producers Union Ltd. in Tax Appeal No. 473 of 2014
Laws Referred To
Income Tax Act, 1961
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