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TMI Blog2022 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ooperative society and its main object is to accept deposits from the members and provide credit facilities to its members. Apart from this, the assessee also provide its premises to the members for various ceremonies like marriages, conferences, letting of rooms, etc. on cost to cost basis from which there is no surplus rather there is loss. The assessee filed its return on 05.10.2015 declaring nil income after claiming deduction U/s 80P(2) at Rs.12,98,599/-. The case was selected for limited scrutiny vide notice u/s 143(2) dt. 08.08.2016 to examine following issues:- (a) Sales turnover mismatch (b) Deduction under Chapter VI-A (c) Low income and high loans/ advances/ investments 3. It was submitted that the assessee vide reply dt. 03.08.2017, 17.08.2017 and 21.08.2017 explained that its income is eligible for deduction U/s 80P(2)(a)(i) and in support of the same, copy of CIT(A) order for AY 2012-13 and copy of assessment order for AY 2014-15 was filed where deduction U/s 80P(2)(a)(i) was allowed to the assessee. The AO after making necessary enquiry/ verification as also the order of Ld. CIT(A) and the order passed by his predecessor AO, allowed the claim of deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport, reliance was placed on the following decisions:- * CIT Vs. Kwality Steel Suppliers Complex (2017) 395 ITR 1 (SC) * CIT Vs. Max India 295 ITR 282 (SC) * Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC) 7. It was submitted that in the present case, the Ld. PCIT has referred to the decision of Supreme Court in case of Totgars Cooperative Sale Society Ltd. Vs. ITO 322 ITR 283 but this decision is not applicable on the assessee and has been distinguished by the Ld. CIT(A) in assessee's own case for AY 2012-13 and also by ITAT, Ahmedabad Bench and ITAT, Pune Bench. Therefore, for this reason the observation of Ld. CIT that the order passed by AO is erroneous is not as per settled principle of law stated above. 8. It was submitted that the Ld. PCIT has wrongly assumed that interest income earned on funds are required to be taxed u/s 56 and is not eligible for deduction u/s 80P(2)(a)(i). There is no basis for the same. Deduction u/s 80P is allowable from gross total income and not only from business income. Therefore, only because Ld. PCIT has perceived some wrong notion, order of AO cannot be said to be erroneous so far as it is prejudicial to the interest of revenue. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but not found to be acceptable. The assessee has submitted that during the assessment proceedings, the AO had examined the issue of interest on FDR received from Bank and allowed the same. However, the AO without making appropriate inquiries or verification and considering the CIT(A)'s order wherein the issue was decided in favour of the assessee, passed the assessment order without disallowing the deduction claimed u/s 80P(2)(a)(i) of the I.T. Act, 1961. Therefore, the AO failed to carry out necessary enquiries which should have been made during the assessment proceedings. Thus, the order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. 6.1 It has further been submitted that the assessee society is carrying on the business of banking as it accepts deposits from members and provides credit facility to members of the society and to meet the eventuality, the assessee is required to maintain some liquid funds hence it has deposited the amount in FDR. The assessee also relied upon the decision of the ITAT, Ahmadabad Bench in the case of ITO Vs. Jafari Momin Vikas Co-operative Credit Society Ltd. (in ITA No. 1491/Ahd/2012 and CO No. 138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the surplus funds not required immediately for business purpose or repayment of deposit to its members on maturity, were kept as FDR by the assessees. Thus, there is only difference of nomenclature and ultimately FDRs were generated by the assessees. 7. In view of the above discussion, the assessment order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, hence, set aside to the file of the AO to the aforesaid extent for making afresh order after carrying out enquiries in the manner as above and after giving opportunity of being heard to the assessee." 11. In support of the aforesaid findings and contentions so advanced, ld PCIT/DR placed reliance on the following decisions: * Chitradurga City Multi Purpose Co-operative Society vs. ITO 82 taxmann.com 314, * CIT vs. Sought Eastern Railway Employees Co-operative Ltd 73 taxmann.com, * ITO vs. Kundalika Nagari Sahakari Patsanstha Maryadit 83 taxmann.com 67, * Punjab State Cooperative Federation of House Building societies vs. CIT 76 taxmann.com 98 and * State Bank of India vs. CIT 72 taxmann.com. It was accordingly submitted that there is no infirmity in the findings of the ld PC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) being the subject matter of appeal before the ld CIT(A) doesn't arise for consideration and hence, the explanation 1(c) to section 263 doesn't come to the rescue of the assessee. There is thus nothing under explanation 1(C) to section 263 that where a particular matter has been considered and decided by the ld CIT(A) for a particular assessment year, the ld PCIT/CIT cannot assume jurisdiction on the said matter for subsequent assessment year. 14. On merits, however, one may consider where a particular matter has been decided in a particular assessment year by the ld CIT(A) and where the AO has followed the same for the subsequent year, whether the ld PCIT/CIT by exercising his jurisdiction u/s 263 can hold such an order as erroneous in so far as prejudicial to the interest of the Revenue. 15. In the instant case, it has been contended that issue of deduction U/s 80P(2)(a)(i) has been considered and decided by the ld. CIT(A) in A.Y 2012-13 and therefore, ld PCIT cannot assume jurisdiction u/s 263 on the same issue for A.Y 2015-16. In A.Y 2012- 13, the Assessing officer has recorded a finding that deduction u/s 80P(2)(a)(i) is available where the society is engaged solely in prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Supreme Court was in respect of the interest earned on surplus funds invested in bank and government securities. In the case under consideration, it is seen from the income and expenditure account of the assessee that out of the total gross income of Rs. 49,19,225/-, the gross income from the activity of providing the premises of the society to its members for various ceremonies was only Rs.5,92,409/- (Rs. 4,62,800 + Rs. 17,609 + 46,000 + 66,000). The appellant has filed the computation of income from this activity which shows that there was loss of Rs. (-) 2,01,779/- from this activity under the provisions of I.T. Act. Thus, there was no surplus from the activity of providing the premises of society for various ceremonies. Hence, I am of the view that the facts of the case relied upon by the AO are different from the facts of the case under consideration. The appellant has relied upon the decision of ITAT, Ahmedabad in the case of ITO vs. M/s Jafari Momin Vikas Co-op. Credit Society Ltd. and decision of ITAT Pune in the case of ITO vs. Niphad Nagari Sahakari Pat Sanstha Limited. In both the decisions, the ITATs after discussing the decision of Hon'ble Supreme Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws 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. Similarly, we find that in case of Chitradurga City Multipurpose Co-operative society (supra), the Coordinate Bangalore Benches following the decision of Hon'ble Karnataka High Court in case of Tumkur Merchants Souharda Credit Co-operative Ltd has held as under:- "7. I have perused the orders and heard the rival contentions. There is no doubt that assessment order is very cryptic. Nothing whatsoever is mentioned with regard to the claim of the assessee for deduction U/s 80P(2)(a)(i) or 80P(2)(d) in the order. Assessee has also not been able to place on record any correspondence that might have been there between it and the AO during the course of assessment proceedings. Lack of enquiry into the aspect of the claim made by assessee for deduction U/s 80P(2)(a)(i) is therefore glaring on record. However, what we find is that assessee had claimed deduction u/s 80P(2)(a)(i) of the Act for interest on bank deposit and also for rental from building. Vis-à-vis interest from bank deposits, claim of the assessee is that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht and which was invested in short-term deposits/securities; and the interest derived from the surplus funds that the assessee therein invested in short-term deposits with the Government securities. This is further clear when one peruses the decision of the Karnataka High Court from which the matter travelled to the Supreme Court wherein it was the case of the assessee that it was carrying on the business of providing credit facilities to its members and therefore, the appellant-society being an assessee engaged in providing credit facilities to its members, the interest received on deposits in business and securities is attributable to the business of the assessee as its job is to provide credit facilities to its members and marketing the agricultural products of its members. This court is, therefore, of the view that the above decision is not restricted only to the investments made by the assessee therein from the retained amount which was payable to its members but also in respect of funds not immediately required for business purposes. The Supreme Court has held that interest on such investments, cannot fall within the meaning of the expression "profits and gains of business" a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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