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2015 (4) TMI 94 - ITAT AHMEDABAD

2015 (4) TMI 94 - ITAT AHMEDABAD - TMI - Revision u/s 263 - AO has overlooked the provisions of s. 80P(2)(d) and has also failed to conduct any enquiry in respect to interest received by Assessee from SBI and thus there was no application of mind by the AO and thus AO has erred in treating interest received from SBI as deductible u/s 80P(2) of the Act which has resulted in loss to Revenue - Held that:- Here it will be relevant to note that Section 80P(2)(d) provides that interest and dividend re .....

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credit facility to its members but it cannot be said that there is such nexus between the interests earned on deposits made with the SBI. It may be true that deposits are made in banks so that the funds are not kept idle but we are of the view that the motive for making deposits with SBI cannot change the character of interest income earned on deposit made from SBI to be one arising from business of providing credit facility to its member - We are not in agreement with the submission of the .....

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974 (10) TMI 29 - DELHI High Court) wherein observed that the 1TO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in s. 263 emerges out of this context. It is because it is incumbent on the ITO to .....

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263 by ld. CIT was justified. - Decided against Assessee. - I.T. A. No.492 & 900/AHD/2014 - Dated:- 26-3-2015 - Shri Mukul Kr. Shrawat And Shri Anil Chaturvedi JJ For the Appellant : Shri S.N. Divetia, A.R. For the Respondent : Shri Subhash Bains, CIT/D.R ORDER Per Shri Anil Chaturvedi,A.M. 1. These 2 appeals filed by the Assessee are against the order passed u/s 263 of the Act by CIT, Ahmedabad dated 19.02.2014 and 28.11.2013 for A.Ys. 2009-10 and 2010-11 respectively. 2. Before it was submitte .....

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Ld AR submitted both the appeals are against the order passed u/s 263 and though they pertain to different assessment year but the issue involved in both the years are identical except for the amount and therefore he has common submission to make for both the assessment years and therefore both the appeals can be disposed of together. Ld DR did not object to the aforesaid submission of ld. AR and therefore we proceed to dispose of both the appeals together for the sake of convenience and procee .....

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Nil after claiming the entire amount of ₹ 29,69,444/- as deduction u/s 80P of the Act. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 24.5.2011 and the total income as filed by the Assessee at Rs Nil was accepted by the AO. Subsequently, on examination of records of assessment, ld. CIT noticed that Assessee had earned interest of ₹ 16,14,579/- from SBI which was claimed as deductible u/s 80P. CIT was of the view that .....

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and on merits submitted that the AO has rightly allowed the deduction u/s 80P. The submission of the Assessee was not found acceptable to the ld. CIT. He was of the view that the AO has overlooked the provisions of s. 80P(2)(d) and has also failed to conduct any enquiry in respect to interest received by Assessee from SBI and thus there was no application of mind by the AO and thus AO has erred in treating interest received from SBI as deductible u/s 80P(2) of the Act which has resulted in loss .....

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conditions specified u/s 263 were not satisfied and therefore the proceedings u/s 263 lacks jurisdiction and are bad in law. He submitted that u/s 263, the CIT can revise an order passed by the AO only on the satisfaction of twin conditions namely (i) the order is erroneous and (ii) it is prejudicial to the interest of Revenue. If one of them is absent i.e. if either the order of the Revenue is erroneous but is not prejudicial to the interest of the Revenue or if it is not erroneous but is prej .....

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unsustainable in law and for the aforesaid proposition he relied on the decision in the case of Malabar Ind. Co Vs CIT (2000) 243 ITR 83 (SC). He also relied on the decision of Hon'ble Apex Court in the case of CIT vs Max India Ltd (2007) 295 ITR 282 (SC) for the proposition that where two views are possible and the ITO has taken one view with which the CIT does not agree, the order of the ITO cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the vie .....

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ed at page 34 & 35 of the paper book). The Id. A.R. therefore submitted that after considering the submissions of the Assessee and on being satisfied by the replies given by Assessee, the Assessee was allowed the deduction u/s 80P. 8. On the merits of the case ld. AR submitted that Assessee is a cooperative society formed by the employees of SBI Gujarat Circle under the Gujarat Co-operative Societies Act 1961 in the category of Employees Co-op. Credit society for the purpose of encouragement .....

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ions received from the members and Assessee does not deal in any way with any other person other than its members. He further submitted that SBI deducts the contribution from the salary of the employees and the collective contribution received on account of members is remitted to the Assessee generally on the 1st of every month. The amount of loan is given to the employees on the fixed day of the month (around 15th of month) and not every day. During the intervening period, the idle money collec .....

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R 331 (Guj). He further submitted that the decision of Apex Court in the case of The Totgars Co- Operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 is not applicable to the present case. The Id. D.R. on the other hand supported the order of CIT. He further submitted that when A.O has allowed the claim without any discussion, the order was erroneous and prejudicial to the interest of the Revenue and for which he placed reliance on the decision in the case of CIT vs. Infosys Technologies Ltd. .....

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ng of provisions of Section 263 by CIT. 10. S. 263(1) of the Act, the powers under which CIT has assumed power for revision reads as under: "The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems n .....

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ise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous prejudice has been caused to the interests of the Revenue. 12. Hon'ble Apex Court in the case of Malabar Industrial Co Ltd Vs CIT (2000) 243 ITR 83 (SC) has held that CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the ITO is erroneo .....

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order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. 13. In the present case , it is an undisputed fact that the Assessee is a cooperative society registered under the Gujarat Cooperative Societies Act 1961 which is formed by the members of the employees of SBI, Gujarat Circle. The main object of the Assessee is to receive the contributions from the members from their salaries received from SBI on monthly basis. Out of the corpus received by .....

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(2)(a)(i) of the Act, the profits and gains of a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is exempt. What is exempt is the business income attributable to the activities of banking or providing credit facilities to the members which is included in the gross total income of the society. Section 80P(2) provides that the deduction would only be available to the whole of the amount of profits and gains attributable to its activ .....

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l be relevant to note that Section 80P(2)(d) provides that interest and dividend received by a cooperative society from investments with other cooperative society is exempt from tax. It is also an undisputed fact that SBI is not a cooperative society and therefore the interest received from SBI cannot be considered to be exempt u/s 80P(2)(d) of the Act. In the present case, the interest income earned on extending credit facilities by the Assessee to its members will be business income as there e .....

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it facility to its member. We also find support to our view by the decision of Hon'ble Apex Court in the case of Totgars CCS Ltd (supra) where at Para 10 has held as under: "10. At the outset, an important circumstance needs to be highlighted. In the present case, the interest held not eligible for deduction under s. 80P(2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them. What is sought to be taxed under s. 56 of the Act is the inte .....

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/securities, which strictly speaking accrues to the members' account, could be taxed as business income under s. 28 of the Act? In our view, such interest income would come in the category of "income from other sources", hence, such interest income would be taxable under s. 56 of the Act, as rightly held by the AO. In this connection, we may analyze s. 80P of the Act. This section comes in Chapter VI-A, which, in turn, deals with "Deductions in respect of certain incomes" .....

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ld be eligible for deduction. The word "income" has been defined under s. 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically "business profits" into the definition of the word "income". Therefore, we are required to give a precise meaning to the words "profits and gains of business" mentioned in s. 80P(2) of the Act. In the present case, as stated above, assessee-society re .....

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, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under s. 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as "investment". Further, as stated above, assessee(s) markets the agricultural produce of its members. It retain .....

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the Act. Therefore, looking to the facts and circumstances of this case, we are of the view that the AO was right in taxing the interest income, indicated above, under s. 56 of the Act." 15. Before us, Ld AR has relied on the decision of Hon'ble Gujarat High Court in the case of Jafri Momin Vikas Coop Society (supra) but we find that the aforesaid decision is not applicable to the present facts because in that case the issue before the Hon'ble High Court was as to whether the Hon&# .....

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laim was allowed and in such circumstance the exercise of jurisdiction u/s 263 is not permissible. We are not in agreement with the submission of the Ld AR for the reason that though we find that AO had raised a query with respect to claim with respect to deduction u/s 80P but neither there was any query of the AO, with respect to the claim of deduction 80P(2)(d) and therefore no submission of the Assessee, with respect to interest earned from SBI and therefore it cannot be said that there was a .....

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