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TMI Blog2024 (3) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Mavilayi Service Co-operative Bank Ltd and others Vs CIT without appreciating the fact that the AO has disallowed the claim of deduction u/s 80P of the Act in respect of interest earned on investments and not in respect of interest earned from members. 3. The CIT(A)/ NFAC ignored the findings of the AO wherein it has been clearly mentioned that the assessee society has earned interest on investments placed with Bagalkot District Central Co-op Bank Ltd and not from members of the society. 4. The CIT(A)/NFAC has erred in not considering the decision of Hon'ble High Court of Karnataka in the case of PCIT, Hubballi V/s Totgars Co-Op sales society (2017) 83 taxmann.com 140 (Karnataka) has held that "The words 'Co-operative Banks' are missing in clause (d) of sub section (2) of section 80P. Even though a cooperative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949'. Accordingly, the disallowance of claim of deduction u/s 80P of the Act in respect of interest earned investment from Bagalkot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80P of the Income Tax Act, 1961 ('the Act'). Against the said return of income, the assessment was completed by the Assessing Officer accepting the returned income vide order dated 19.11.2019 passed u/s 143(3) of the Act. 4. Subsequently, on examination of the assessment order, the ld. PCIT formed an opinion that failure the Assessing Officer to examine the taxability of interest earned on the investments made with the cooperative banks, as the same constitutes business income, rendered the assessment order erroneous. Accordingly, the ld. PCIT issued a show cause notice dated 08.03.2022 u/s 263 calling upon the appellant society to explain as to why the assessment order dated 19.11.2019 should not be treated as erroneous and prejudicial to the interests of the revenue. In response to the show cause notice, the appellant filed a detailed submission stating that the interest income earned by the cooperative bank on the investments made with the other cooperative bank is eligible for deduction under the provisions of section 80P(2)(a)(i) as well as under the provisions of section 80P(2)(d) placing reliance on the following decisions : (i) Gurumauli Nagari Sahkari Pat Sanst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to examine the taxable income earned on the investments from cooperative bank rendered assessment order erroneous and prejudicial to the interests of the revenue. Therefore, he submits that the ld. PCIT was justified in exercising the power of revision u/s 263 of the Act. 10. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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. Thus, we find that the issue which is subject matter of revision is covered in favour of the assessee by judicial precedents. Therefore, it cannot be said that the assessment order is erroneous or prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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