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TMI Blog2023 (12) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case the learned Pr.C.I.T. erred in not considering the facts that the societies registered before enactment of Income Tax Act 1961, having special relief as per SRO 998 and SRO 1800 with exemption from Income Tax. 4) On the facts and in the circumstances of the case, the learned Pr.C.I.T. erred in directing Assessing Officer to assess the income under section SOP. 5) On the facts and in the circumstances of the case, the learned Pr.C.I.T. erred in not considering the facts that the Government had made the Part B States (Taxation Concessions) Order, 1950 vide SRO 998 dated 2nd December, 1960, which is still continue in force and not withdrawn by Government. 3. As transpires from the order of the ld.Pr.CIT, he assumed jurisdiction for revision of the assessment order passed in the present case under section 143(3) of the Act, noting error therein that the AO had allowed the assessee's claim of deduction under section 80P(2)(c)/(d) of the Act of interest income and rental income without making proper verification. He noted that the rental income was not computed as per the law and deduction on account of the same as also interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. Therefore, only the expenditure specified in section 24 can be allowed as deduction from the annual value while computing income from house property. This issue has been specifically considered by the Hon'ble Delhi High Court in the case of H. G. Gupta & Sons in which the Hon'ble High Court held that Legislature had used the word 'namely' in section 24 of the IT Act, 1961 and this showed that the heads of expenditure whereof deduction could be claimed in the computation of income from house property were exhaustive. Therefore, the expenditure made by the assesses are of capital expenditure/repairing expenditure and not allowable against the taxable income under the head income from house property. 3. Beside the above the assessee has also claimed deduction of Rs. 50,000/- u/s. 80P(2)(c) of the IT Act and deduction of Rs. 70,02,837/- u/s. 80P(2)(d) of the IT Act. 3.1 In respect of claim of deduction u/s. 80P(2)(c) of the IT Act, it is seen from the assessment record that the assessee has let out the building/wadi/hording. It is nobody's that the commercial asset was exploited in the course of its banking activity or providing credit facility to its membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided by the Hon'ble Supreme Court in the case of Totgars' Co-operative Sale Society Ltd. v/s. ITO [2010] 322ITR 283/188 Taxman 282, wherein it was held that the assesses being co-operative society is engaged in providing credit facilities to its members of marketing agricultural products of its members, interest earned by it by investing surplus funds in short term deposits would fall under the head "income from other sources" taxable u/s. 56 of the I.T.Act and it cannot be said to be attributable to the activities of the Society and therefore, the interest did not qualify for deduction u/s. 80P(2)(a)(i) of the I.T.Act. Though the aforesaid mistake was existing, the AO had accepted your submission and allowed the deduction claimed u/s. BOP of the Act, without making any verification of investment of surplus funds. 4. The AO has made assessment in the manner as discussed above without making investigation and verification of rental income and investment of surplus funds and interest income against which deduction u/s.8OP claimed. Lack of verification and inquiry in respect of deduction u/s. BOP resulted in assessment on lower side as well as charging of lesser tax. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue in favour of the Revenue and issuing directions to the ITO to decide the case under section 80P(2) of the Act. His finding in this regard at para-6 of the order is as under: "6. It is seen that on a similar issue, the Hon'ble High Court of Gujarat vide IT Reference No. 16 of 2003 in the case of CIT Vs Shri Gopal Gram Seva SahakariMandii Ltd, answered in favour of the Department and issued directions to the Income-Tax Officer to decide the case under section 80 P of the I.T.Act. 1961. The Question of Law before the Hon'ble High Court is as under: "2. Whether, the appellate tribunal is right in law in holding that Notification No. SRO/992 dated 22.12.1950 of the old Act, 1922 was not withdrawn and, therefore, it provided a good basis to the Cooperative Society to seek exemption of its income from business. The Hon'ble High Court answered the above question in favour of the Department and against the assessee." 6. Accordingly after rejecting the contention of the assessee, the Ld.PCIT noted that the AO having not examined the issue of claim of deduction to rental and interest income earned by the assessee under section 80P(2) of the Act, which otherwise was not al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 Act. He pointed out that as per section 297(2)(l) any concession granted in 1922 Act by way of order or notification would continue in 1961 Act until rescinded by a notification, and thereafter he stated that since there is no separate order or notification issued rescinding the earlier order granting exemption to the income of the assessee, the assessee would continue to enjoy the exemption vide the earlier order issued under the 1922 Act. 8. In response to the decision cited by the ld.Pr.CIT of the Hon'ble Gujarat High Court, he pointed out that the Hon'ble Supreme Court in a subsequent decision in the case of Maharao Bhim Singh of Kota Vs. CIT, 2016 111 SCR 193 in Civil Appeal No.2812 of 2015 dated 5.12.2016 has held that the order granting exemption to income of entities in Part-B States, was still in force and is not to be treated as withdrawn. His submission in this regard made in writing before us, are as under: "Further, the issue has been answered by Hon'ble Apex Court very recently in the case of Maharao Bhim Singh of Kota vs Commissioner of Income tax, Jaipur [2016 11 SCR 193] in Civil Appeal No. 2812 of 2015 decided on December 05, 2016. (Copy of the said order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld like to submit most humbly that, being issued on the same Notification and Sr (iii) of Paragraph 15 is still in existence, then Sr (iv) would also to be in existence, where Sr (iii) deals with annual value of the palace of ruler while Sr (iv) provides exemption to cooperative societies. 9. The ld.DR however countered by stating that the decision of the Hon'ble Apex Court did not lay down any such proposition and that it was rendered in completely different set of facts. That therefore the said decision was of no assistance to the assessee. 10. We have heard the rival contentions. The brief issue for adjudication before us is whether the ld.Pr.CIT had correctly exercised his power for revision of assessment order. More specifically, whether the ld.Pr.CIT had rightly held the assessment order as being erroneous causing prejudice to the Revenue on account of allowing deduction to the interest income and rental income of the assessee under section 80P(2) of the Act without making any inquiry. The ld.counsel for the assessee before us has not challenged the order of the ld.Pr.CIT finding the assessment order to be erroneous in allowing claim of deduction on the aforestated two in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly distinguishable on facts, and the Hon'ble Apex Court has not laid down any such proposition that the order issued under the 1922 Act granting exemption to incomes earned in Part-B States would continue to subsist even under the 1961 Act. In the case before the Hon'ble Apex Court, the Issue for consideration was the interpretation of section 10(19A) of the Act which provided for exemption of annual value of any one palace in the occupation of a Ruler. The dispute arose in the factual background that the palace was partly self occupied by the Ruler and partly let out earning rental income. The claim of the Revenue was that the entitlement to exemption u/s 10(19A) of the Act was to be confined only to the portion of the palace in the occupation of the Ruler. The Hon'ble apex court interpreted the provisions of section 10(19A) of the Act to state that it granted exemption to the annual value of any one palace which fulfilled the following conditions, viz. (i) which in the occupation of the ruler, and (ii) whose annual value was exempt from income tax before the commencement of the Constitution (Twenty-sixth Amendment) by virtue of the provisions of the Merged States (Taxation co ..... 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