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TMI Blog2023 (9) TMI 1687X X X X Extracts X X X X X X X X Extracts X X X X ..... nue and allowed the deduction under section 80P (2) (a) (i) of Income Tax Act 1961 being a credit cooperative society for the Assessment Year 2010-11, (Hon'ble ITAT order was placed on record during the course of hearing with PCIT). 3) Learned PCIT given the direction deduction allowed 80P(2)(a)(i)/80P(2)(d) amounting to Rs. 4,19,19,263/- is erroneous and prejudicial to the interests of the Revenue within the meaning of Sec. 263 of the Income-tax Act, 1961 and, as the Assessing Officer failed to conduct proper inquiries, investigation and examination, the assessment order is set aside. 4) The assessee, as per grounds of appeal, essentially challenges the foundation of jurisdiction assumed by the Pr.CIT under s. 263 of the Act and contends that the subject assessment order framed under s. 143(3) of the Act passed by the AO cannot be termed as erroneous and prejudicial to the interest of the Revenue which is a condition precedent for usurpation of revisional jurisdiction. 5) The learned PCIT had not consider/or continently ignored orderof jurisdictional high court in the case of the Pr. Commissioner of Income Tax vs Quepem Urban Co-operative Credit Society and The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given to non-Members and claimed exempt u/s. 80P (2) (d) of the Act. 4. We have carefully gone through the order of AO, order of Ld. PCIT u/s. 263 of the Act and submissions of the assessee. We observed that Ld. PCIT has relied on the decision of Citizen Cooperative Society vs. ACIT, Hyderabad, wherein, the Hon'ble Apex Court, had dealt with section 80P (2) (a) (i) of the Act vis a vis section 80P (4). For the sake of better understanding and ready reference, the provisions of section 80P are reproduced herein below: - Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely: - (a) In the case of a co-operative society engaged in- (i) Carrying on the business of banking or providing credit facilities to its members, or (ii) A cottage industry, or (iii) The marketing of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumers' co-operative society" means a society for the benefit of the consumers; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. Explanation. -For the purposes of this section, an "urban consumers' co-operative society" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. In view above discussion, in our considered opinion, assessee is fully entitled for deduction u/s. 80P (2) (a)(i) on the transaction entered into with the members of the society. As far as transactions and consequent earnings with non-members are concerned that has already been taxed by the AO in his assessment order amounting to Rs. 12,45,924/- so to this extent as far as applicability /charging of section 80P(2)(a)(i) is concerned, we do not find any perversity in the order of AO. 8. As far as assessee's claim u/s. 80P(2)(d) is concerned as discussed (supra), assessee is entitled for the same as assessee is not falling in section 80P(4) which is applicable only in the case of cooperative banks /cooperative societies having licences from RBI to do banking business. The whole foundation as laid down by the Ld. PCIT is on wrong appreciation of the facts and misinterpretation of relevant sections. To further substantiate our findings, we are reproducing and discussing the judicial pronouncements of Hon'ble Apex Court on both the issues i.e., section 80P (2) (a)(i), 80P(2)(d) and 80P(4) of the Act as under: - [2023] 150 taxmann.com 173 (SC) PCIT v. Annasaheb Patil MathadiKamg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed and is accordingly dismissed, answering the question against the Revenue and in favour of the Assessee." [2021] 123 taxmann.com 161 (SC) Mavilayi Service Co-operative Bank Ltd. v. CIT, Calicut "Section 80P being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the revenue in the present case by adding the word 'agriculture' into section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e., engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Clearly, therefore, once section 80P (4) is out of harm's way, the assessee is entitled to the benefit of the deduction contained in section 80P (2)(a)(i), notwithstanding that they may also be giving loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , when it speaks of sub-clauses (vi) and (vii), further restricts the type of society which can avail of the deductions contained in those two sub-clauses, unlike any such restrictive language in section 80P(2)(a)(i). Once it is clear that the co-operative society in question is providing credit facilities to its members, the fact that it is providing credit facilities to non-members do not disentitle the society in question from availing of the deduction. The distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. [Para 33]."
9. In view of the above factual and legal discussion, we are not in agreement with the order of Ld. PCIT. Accordingly, the grounds raised by the assessee are allowed and order of Ld. PCIT find to be unsustainable, hence set-aside
10. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 28th September, 2023. X X X X Extracts X X X X X X X X Extracts X X X X
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