SHREE RAMKRISHNA URBAN SAHAKARI CREDIT SOCIETY LIMITED, Ahmednagar V. Principal Commissioner of Income Tax, Pune, Pune

ITA 85/PUN/2023

AI Insights

The case involves Shree Ramkrishna Urban Sahakari Credit Society Limited, a cooperative society engaged in accepting deposits and providing credit facilities to its members, which appealed against the order of the Principal Commissioner of Income Tax-1, Pune. The dispute centered on the eligibility of interest income earned from deposits made with other cooperative banks for deduction under section 80P of the Income Tax Act, 1961. The Principal Commissioner had set aside the original assessment order, which had allowed the deduction, deeming it erroneous and prejudicial to the interests of the revenue. The Tribunal, however, found that the issue was debatable and supported by various High Court decisions, thus reversing the Principal Commissioner's order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137455 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-03-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 22-01-2023
• Other Referred Cases: Pragati Gramin Bigarsheti Sahakari Patsanstha Maryadit vs. PCIT, Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO, Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO, Chennai Central Co-operative Bank Ltd. vs. ITO, PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order
• Section: 68; 263; 143(3); 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.85/PUN/2023 िनधाᭅरण वषᭅ / Assessment Year : 2018-19 Shree Ramkrishna Urban Sahakari Credit Society Limited, First Floor, Ramkrishna Bhavan, Maliwada, Ahmednagar- 414001. PAN : AAAAS6973R Vs. PCIT-1, Pune. Appellant Respondent आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM: This is an appeal filed by the assessee against the order of ld. Pr. Commissioner of Income Tax-1, Pune [‘PCIT’] dated 16.01.2023 for the assessment year 2018-19. 2. Briefly, the facts of the case are that the appellant is a co- operative society engaged in the business of accepting deposits from its members and providing credit facilities to its members. It is registered under Maharashtra Co-operative Societies Act, 1960. The Return of Income for the assessment year 2018-19 was filed on 07.08.2018 declaring total income of Rs.62,710/- after claiming Assessee by : Shri Prasad Bhandari Revenue by : Shri Sardar Singh Meena Date of hearing : 29.03.2023 Date of pronouncement : 30.03.2023 ITA No.85/PUN/2023 2 deduction u/s 80P of the Income Tax Act, 1961 (‘the Act’) of Rs.3,03,94,739/-. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 19.02.2021 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) accepting the returned income allowing the deduction u/s 80P as claimed by the appellant. 3. Subsequently, on review of the assessment record, the ld. PCIT had observed that during the previous year relevant to the assessment year under consideration, the appellant society had earned interest income of Rs.4,51,00,088/- and dividend income of Rs.22,500/- on deposits made out of the surplus with other co- operative society or co-operative banks. The ld. PCIT was of the opinion that the said income is liable to tax under head “Income from other sources” under the provisions of section 68 of the Act and does not qualify for deduction u/s 80P of the act. The ld. PCIT also observed that the Assessing Officer had allowed the claim made by the appellant society u/s 80P without verification of the claim. In view of the above observations, ld. PCIT formed an opinion that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Accordingly, issued show-cause notice u/s 263 on 23.11.2022 calling upon the appellant to explain as to why the assessment order ITA No.85/PUN/2023 3 dated 19.02.2021 should not be set-aside in exercise of power vested with him u/s 263 of the Act. 4. In response to the said show-cause notice, the appellant society filed a detailed submission on 03.12.2022 wherein it was submitted that the claim of the assessee for deduction u/s 80P was examined by the Assessing Officer during the course of assessment proceedings and the Assessing Officer took a plausible view that the claim is allowable for deduction u/s 80P of the Act. It is further contended that the interest income earned on deposits, investments made out of the surplus funds generated by the co-operative society qualifies for deduction u/s 80P(2)(a)(i) or section 80P(2)(d) of the Act. 5. However, on due consideration of the submission made by the appellant, the ld. PCIT was of the opinion that since the interest income earned by the co-operative banks are not exempt u/s 80P of the Act and the co-operative banks does not fall under the category of co-operative society referred to section 80P of the Act. Accordingly, ld. PCIT set-aside the assessment order to the file of the Assessing Officer for proper verification and examination of the claim u/s 80P after giving reasonable opportunity of bearing heard to the assessee. ITA No.85/PUN/2023 4 6. Being aggrieved by the above order of revision passed by the ld. PCIT u/s 263, the appellant is in appeal before us in the present appeal. 7. It is submitted that the interest income earned by a co- operative society and investments made with other co-operative banks qualifies for deduction u/s 80P(2)(a)(i) as well as section 80P(2)(d) of the Act placing reliance on the decision of Co-ordinate bench of this Tribunal in the case of Pragati Gramin Bigarsheti Sahakari Patsanstha Maryadit vs. PCIT in ITA No.303/PUN2022 and others dated 20.12.20222 and, therefore, the ld. PCIT ought not to have exercised the power of revision u/s 263 of the Act. 8. On the other hand, ld. CIT-DR submits that the issue of eligibility of interest income earned on the investments made with other co-operative banks does not qualify for deduction u/s 80P of the Act. During the course of assessment proceedings, the Assessing Officer had not examined the same, therefore, the ld. PCIT rightly exercised the power of revision u/s 263 and no interference is called for. 9. 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 ITA No.85/PUN/2023 5 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 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”. 10. Now, we proceed to examine the facts of the present case whether the issue of eligibility of interest income earned on investments made with other co-operative banks qualifies for exemption u/s 80P(2)(a)(i) or section 80P(2)(d) of the Act. The Co- ordinate Bench of this Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO in ITA No.1700/PUN/2017 for A.Y. 2013-14 dated 27.12.2021 had dealt with the identical issue wherein the Tribunal held as follows :- “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 ITA No.85/PUN/2023 6 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 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.” 11. Recently, the Hon’ble Madras High Court in the case of Chennai Central Co-operative Bank Ltd. vs. ITO, 148 taxmann.com 17 (Mad.) also held that the benefit of provisions of section 80P(2)(a)(i) is available even in respect of interest income earned from both SLR and non-SLR investments. Even the Hon’ble ITA No.85/PUN/2023 7 Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd., 147 taxmann.com 518 (Cal.) held that interest earned on the surplus funds invested in deposits with banks and Government securities, since neither said amount of deposit was due to its members nor it was liability to its members, same would qualify for deduction under section 80P(2)(a)(i) of the Act. 12. The principle enunciated in the above decision is that even income earned on the investments made out of the surplus funds with other co-operative banks or even commercial bank qualifies for deduction u/s 80P(2)(a)(i) of the Act. Furthermore, the co-operative banks are also another specie of a co-operative society and, therefore, interest income earned on investments and deposits made with other co-operative banks qualifies for deduction u/s 80P(2)(d) of the Act. The fact that income earned by the co-operative banks are not exempt from tax cannot act as bar to treat a co-operative bank as a cooperative society. 13. Therefore, the position that emerges from the above discussion is that the interest income earned by the co-operative society from investments made out of the surplus fund with other co-operative banks qualifies for deduction u/s 80P(2)(a)(i) or section 80P(2)(d) is not free from the debate, as the very fact there is cleavage of judicial opinion amongst various High Courts clearly establishes that the ITA No.85/PUN/2023 8 existence of debate cannot be ruled out. Thus, it is a purely legal debateable issue, which is not amenable to jurisdiction u/s 263 of the Act in view of the discussion made by us supra. Therefore, we are of the considered opinion that the ld. PCIT was not justified in exercising the power of revision u/s 263 in the facts of the present case. Accordingly, the appeal filed by the assessee stands allowed. 14. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 30 th day of March, 2023. Sd/- Sd/- (INTURI RAMA RAO) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 30 th March, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT-1, Pune. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.