TMI Blog2022 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciated the decision of the Hon ble Supreme Court in case of Totjars Co-operative Sales Society Ltd vs ITO (supra) and reasoning so adopted by the Coordinate Benches are not acceptable to him. It is therefore a case where the Coordinate Benches have taken a view in the matter taking into consideration the decision of the Hon ble Supreme Court and which has been followed in case of the assessee by the ld CIT(A) in assessee s own case for A.Y 2012-13 and for the year under consideration, the AO follows the same however, the ld PCIT on identical set of facts reaches a different conclusion on appreciating the same set of decisions/authorities on the subject. AO has taken a plausible view in the matter and it may be that the ld PCIT holds a different point of view, thus, a view taken by the AO, being a plausible view taken by a quasi-judicial authority cannot be held as erroneous in nature unless it is unsustainable in eyes of law. Appeal of assessee allowed. - ITA. No. 13/JP/2021 - - - Dated:- 9-11-2021 - SHRI SANDEEP GOSAIN, JM AND SHRI VIKRAM SINGH YADAV, AM Assessee by : Shri P.C. Parwal (C.A.) Revenue by : Shri B.K. Gupta (Pr.CIT) ORDER PER: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, deduction of Rs.12,98,599/- U/s 80P(2)(a)(i) has been erroneously allowed. Against this notice, assessee filed detailed reply as reproduced at Pg 2-11 of the order. The Ld. PCIT, however, held that AO without making appropriate enquiry or verification and considering the CIT(A) order where this issue was decided in favour of the assessee, passed the assessment order without disallowing the deduction claimed U/s 80P(2)(a)(i). Therefore, AO failed to carry out necessary enquiries which should have been made and thus, order passed by him is erroneous so far as it is prejudicial to the interest of revenue. Accordingly, order passed by AO was set aside for making fresh order. 5. The ld. AR submitted that from the undisputed facts stated above, it can be noted that the case of assessee was selected for limited scrutiny to examine the deduction claimed under Chapter VI-A. To verify the claim of deduction u/s 80P(2)(a)(i), AO caused necessary enquiry. The same was explained vide letter dt. 03.08.2017, 17.08.2017 and 21.08.2017. In support of the claim, copy of CIT(A) order dt. 19.12.2016 for AY 2012-13 and assessment order for AY 2014-15 dt. 17.11.2016 was filed. In the order of Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected of a of a prudent, judicious and responsible AO in normal course of his assessment work. The Ld. PCIT has not specified as to what type of enquiry ought to have been made by AO which would have resulted into income or disallowance or any other adverse action. Hence, the order passed by AO can t be branded as erroneous and prejudicial to the interest of revenue. 9. It was also submitted that as per clause (c) of Explanation 1 to Section 263(1) where any order referred in this sub-section and passed by the AO has been subject matter of any appeal after the 01.06.1988, the powers of Principal Commissioner under this subsection shall extent and shall be deemed always to have extended to such matters as has not been considered and decided in such appeal. In the present case, the issue of deduction U/s 80P(2)(a)(i) has been considered and decided by the Ld. CIT(A) in AY 2012-13 and therefore, the CIT has no power u/s 263 to pass an order under this section in respect of any matter which has been considered and decided in the appeal. In view of above, order passed by Ld. CIT u/s 263 is illegal bad in law and the same be quashed. 10. Per contra, the ld. PCIT/DR relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Totgars Cooperative Sales Society Ltd. Vs ITO - 322 ITR 233 (SC). In this case, on the issue of interest income taxed under the head Income from other sources , the Hon'ble Supreme Court 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 section 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 section 56 of the Act is the interest income arising on the surplus invested in shortterm deposits and securities which surplus was not required for business purposes. Assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with the tax treatment of such amount. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. The question, before us, is - whether interest on such deposits/securities, which strictly speaking accrues to the members' account, could be taxed as business income under section 28 of the Act? In our view, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction U/s 80P(2)(a)(i) has been considered and decided by the ld. CIT(A) in A.Y 2012-13 and therefore, the CIT has no power u/s 263 to pass an order under this section for the impugned assessment year i.e, A.Y 2015-16 in terms of explanation 1(c) in respect of any matter which has been considered and decided in the appeal. 13. The explanation 1(c) to section 263 provides that where any order referred to in this sub-section and passed by the AO had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Pr. CIT/CIT under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. The said explanation is in respect of an order passed by the Assessing officer which has been subject matter of any appeal and it has been stated that the powers of the ld PCIT/CIT shall extend to such matters as had not been considered and decided in such appeal and where we read the said explanation along with main body of the section, it provides that the ld PCIT/CIT where it founds such an order passed by the Assessing officer as erroneous and prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has earned interest income on such fixed deposits apart from interest received from its members on credit facilities. The Assessing officer has also relied upon the decision of the Hon ble Supreme Court in case of Totjars Co-operative Sales Society Ltd vs ITO 322 ITR 283 and held that the assessee society is not eligible for deduction u/s 80P(2)(a)(i) and on appeal, the ld CIT(A) has allowed relief to the assessee society and his findings read as under: 4.3 I have gone through the assessment order, statement of facts, grounds of appeal, written submission, remand report and rejoinder carefully. It is seen that the assessee is Cooperative Credit Society. The object of the assessee society is to accept deposits from its members and provide loans to needy members of the society. The assessee has shown gross total income of Rs. 7,48,193/- which has been claimed as deductible u/s 80P(2)(a)(i)/ 80P(2)(d). The AO allowed the deduction of Rs. 97,724/- u/s 80P(2)(d) in respect of the interest earned by the appellant on the deposits made with Cooperative Banks. The remaining amount of Rs.6,50,469/- (Rs. 7,48,193 - Rs. 97,724) was not allowed as deduction u/s 80P(2)(a)(i), as according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT, the AO is directed to allow deduction of Rs.6,50,469/- claimed by the appellant u/s 80P(2)(a)(i). 16. The ld CIT(A) held that there is no surplus from the activity of providing the premises of the society for various ceremonies and has thus distinguished the decision of the Hon ble Supreme Court in case of Totjars Co-operative Sales Society Ltd vs ITO (supra) on facts and further, has relied upon two Coordinate Bench decisions which have considered the aforesaid decision of the Hon ble Supreme Court in support of his findings that interest earned on deposits with banks is eligible for deduction u/s 80P(2)(a)(i) of the Act. 17. In the year under consideration, it is noted that the facts under consideration are pari-materia with that of A.Y 2012-13 where there is no surplus from the activity of providing premises on hire and assessee has reported a loss of Rs 105,899/- under the mandap keeper s head and which has been reduced from income in respect of which deduction has been claimed u/s 80P(2)(a)(i) of the Act and in effect, no deduction has been claimed in respect of such activity of providing premises on hire. It is an admitted and undisputed fact that the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers would not be hit by the restrictions placed by Hon ble Apex Court in Totgars Cooperative Sale Society Ltd. (Supra). Relevant para 10 of the judgment dt. 20.09.2014 is reproduced hereunder: 10. In the instant case the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME-TAX Ill, HYDERABAD vs. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., reported in (2011) 200 TAXMAN 220/12 In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities to its members, it earns interest income. The interest which accrues on funds not immediately required by the assessee for its business purposes and which has been invested in specified securities as investment are ineligible for deduction under section 80P(2)(a)(i) of the Act. For the above reasons, this court respectfully does not agree with the view taken by the Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. (supra) that the decision of the Supreme Court in Totgars Co-operative Sale Society (supra) is restricted to the sale consideration received from marketing agricultural produce of its members which was retained in many cases and invested in short term deposit/security and that the said decision was confined to the facts of the said case and did not lay down any law. 20. We therefore find that even among the Hon ble High Courts, there are divergent views in terms of ratio decidendi of the decision rendered by the Hon ble Supreme Court in case of Totgar Cooperative Sale Society (supra). No decision has been brought to our notice which has been rendered by the Hon ble Rajasthan High Court and it is therefore not a case where the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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