Income Tax Appellate Tribunal - Rajkot
Shree Raghuvanshi Sarafi Sahkari Manli ... vs The Pcit, Rajkot-1, Rajkot, Rajkot on 21 December, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
[CONDUCTED THROUGH VIRTUAL COURT ]
Before: Shri Waseem Ahmed, Accountant Member
And Shri Siddhartha Nautiyal, Judicial Member
ITA No. 83/Rjt/2022
Assessment Year 2017-18
Shree Raghuvanshi Sarafi Pr. CIT,
Sahkari Mandli Ltd. Jetpur Rajkot-1
PAN: AABAS4684A Vs (Respondent)
(Appellant)
Assessee by: Shri Mehul Ranpura, A.R.
Revenue by: Shri Shramdeep Sinha, CIT-D.R.
Date of hearing : 28-09-2022
Date of pronouncement : 21-12-2022
आदे श/ORDER
PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee's appeal for A.Y. 2017-18, arises from order of the Principal Commissioner of Income Tax, PCIT, Rajkot-1 dated 01-02-2022, in proceedings under section 143(3) of the Income Tax Act, 1961; in short "the Act".
2. The assessee has taken the following grounds of appeal:-
I.T.A No. 83/Rjt/2022 A.Y. 2017-18 Page No 2Shree Raghuvanshi Sarafi Sahkari Mandli vs. PCIT Grounds of appeal 1 The grounds of appeal mentioned hereunder are N.A. without prejudice to one another. As appeal is against the validity of revisional jurisdiction of Pr. CIT.
2 The order passed by Pr. Commissioner of Income- N.A. tax, Rajkot-1 [hereinafter referred as to the As appeal is against the "PCIT"] is bad in law, invalid and requires to be validity of revisional quashed, the same may kindly be quashed. jurisdiction of Pr. CIT. 3 The ld. PCIT erred in law and on facts in arriving N.A. at a conclusion to the effect that the assessment As appeal is against the order passed by the A.O. was erroneous as well as validity of revisional prejudicial to the interest of the revenue on the jurisdiction of Pr. CIT.
ground that such order was passed without verifying the allowability of deduction u/s.
80P(2)(d) of the Income-tax Act, 1961 [hereinafter referred as to the "Act] in respect of interest on FDRs held with other co-operative hank.
Therefore, the order passed by PCIT is required to be quashed and may kindly be quashed.
4 The learned Pr. CIT erred on facts as also in law in setting aside the assessment order dated 27-12- 2019 passed u/s. 143(3) of the I.T. Act, directing the A.O. to pass a fresh assessment order. The order passed u/s. 263 of the Act by the learned Pr.
CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed.
5 Your Honour's appellant craves leave to add, to N.A. amend, alter, or withdraw any or more grounds of As appeal is against the appeal on or before the hearing of appeal. validity of revisional jurisdiction of Pr. CIT.
3. The brief facts related to the case are that the Principal CIT initiated proceedings under section 263 of the Act on the ground that during the year, the assessee earned interest income from FDR's amounting to 11,14,257/- from co-operative bank and claimed deduction under section 80P(2)(a)(i)/ 80P(2)(d) of the Act on the same. The Principal CIT was of the view that the interest/dividend received by the assessee has been earned from other co- operative bank only and the same is not eligible for deduction under section I.T.A No. 83/Rjt/2022 A.Y. 2017-18 Page No 3 Shree Raghuvanshi Sarafi Sahkari Mandli vs. PCIT 80P(2)(a)(i)/ 80P(2)(d) of the Act. During the course of assessment, the AO erred in granting deduction to the assessee under the aforesaid sections. The Principal CIT was of the view that in light of the case of Principal CIT v. Totagars Cooperative Sale Society 83 Taxman.com 140 (Karnataka), the assessee is not eligible for deduction under section 80P(2)(a)(i)/ 80P(2)(d) of the Act on interest/dividend from other co-operative banks. The Principal CIT further observed that the ITAT Ahmedabad in the case of Shriram Cooperative Credit Society Ltd v. ITO in ITA number 98/Ahmedabad/2017 dated 30-01-2020 has decided the issue in favour of the Revenue by disallowing the claim of deduction under section 80P(2)(d) of the Act on the interest received from the cooperative banks. Accordingly, after taking the submissions of the assessee on record, the Principal CIT set aside the assessment order by holding that the same is erroneous and prejudicial to the interests of the revenue.
4. The assessee is in appeal before us against the aforesaid order passed by Principal CIT holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Before us, the counsel for the assessee submitted that the issue regarding claim of deduction under section 80P was duly enquired by the ITO/assessing officer during the course of assessment proceedings. He further submitted that in response to the notice issued by the AO, the assessee filed submission dated 11-06-2019 wherein, the assessee submitted reasons as to why it is eligible for deduction under section 80P of the Act. Therefore, after making requisite verification, the AO allowed the assessee's claim for deduction under section 80P(2)(d) of the Act, and therefore it is not a case where due I.T.A No. 83/Rjt/2022 A.Y. 2017-18 Page No 4 Shree Raghuvanshi Sarafi Sahkari Mandli vs. PCIT enquiries were not made by the AO or there was non-application of mind on the part of the AO before allowing assessee's claim for deduction under section 80P(2)(d) of the Act. Without prejudice the above, the assessee submitted that the issue has been decided in favour of the assessee in the case of State Bank of India v. CIT 389 ITR 578 (Gujarat), in which the Gujarat High Court held that "if the assessee wants to avail of the benefit of deduction of such interest income, it was always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act". Therefore, since the issue has been decided in favour of the assessee by the jurisdictional High Court, coupled with the fact that the AO had also enquired into this aspect during the course of assessment proceedings, and after due application of mind had decided the issue in favour of the assessee, this is not a fit case for initiation of proceedings under section 263 of the Act.
5. In response, DR relied upon the observations made by the Principal CIT in the 263 order.
6. We have heard the rival contentions and perused the material on record. The issue for consideration before us is whether the Principal CIT is correct in holding that the order passed by the Ld. Assessing Officer is erroneous and prejudicial to the interests of the Revenue in holding that the assessee is eligible to claim deduction on interest earned from Co-Operative Banks u/s 80P(2)(d) of the Act. The Hon'ble Gujarat High Court in the case of State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj) made following I.T.A No. 83/Rjt/2022 A.Y. 2017-18 Page No 5 Shree Raghuvanshi Sarafi Sahkari Mandli vs. PCIT observations in respect of interest earned from deposits kept with a cooperative bank:
Therefore, it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India not being attributable to the business carried on by the appellant, cannot be deducted under section 80P(2)(a) (i) of the Act. If the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act.
6.1 It may further be noted that in the case of Surat VankarSahakari Sangh Ltd. v Assistant Commissioner of Income-tax [2016] 72 taxmann.com 169 (Gujarat), the Gujarat High Court held assessee-co-
operative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank.
6.2 In the case of Surendranagar District Co-op. Milk Producers Union Ltd. v Deputy Ld. CIT(A) 111 taxmann.com 69 (Rajkot Bench) the ITAT held that assessee-co-operative society could not claim benefit of section 80P(2)(d) in respect of interest earned by it from deposits made with nationalised/private banks, however, said benefit was available in respect of interest earned on deposits made with co-operative bank.
I.T.A No. 83/Rjt/2022 A.Y. 2017-18 Page No 6Shree Raghuvanshi Sarafi Sahkari Mandli vs. PCIT 6.3 In the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn), the Karnataka High Court has held that the interest income earned by a co- operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.
6.4 In our view, in view of the aforesaid decisions of Honourable High Court of Gujarat and other cases cited above, Principal CIT erred in holding that the order passed by AO is erroneous and prejudicial to the interest of the Revenue on account of allowability of interest earned by the assessee on interest earned by the assessee from cooperative banks, coupled with the fact that Ld. Assessing Officer had made due enquiries on this issue during the course of assessment proceedings.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21-12-2022 Sd/- Sd/-
(WASEEM AHMED) (SIDHHARTHA NAUTIYAL)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad : Dated 21/12/2022
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
I.T.A No. 83/Rjt/2022 A.Y. 2017-18 Page No 7
Shree Raghuvanshi Sarafi Sahkari Mandli vs. PCIT By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot