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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 11.12.2018 of the Ld. Commissioner of Income Tax (Appeals)-2, Chandigarh [in short ‘CIT(A)’]. 1 . 966-c-2019 M/s Punjab State Corp. Development Society Ltd., Chandigarh
In this appeal the assessee has taken following grounds of appeal:-
“1. That the Ld. CIT(A) and A.O. have erred in law in upholding the proceedings under the provisions of Section 147 of the Income Tax Act, 1961.
2. That the Ld. CIT(A) and A.O. have erred in law in law and on facts denying the deduction under section 80P to the society in respect of interest paid without appreciating that the society is engaged in the business of providing credit of the Act its members.
That the Ld. CIT(A) and A.O. have erred in law in law and on facts in holding the funds as surplus funds of the society when the society in accordance with its bye laws required to keep the corpus funds of Rs. 20Crores with bank.
4. That the Ld. CIT(A) and A.O. have erred in law in law and on facts in holding that the Co-operative bank is not a Co-operative Society U/s 2(19) of the Act.
5. That the assessee craves permission to add, amend or delete any ground of appeal before the finalization of appellate proceedings.”
3. At the outset, the Ld. counsel for the assessee has submitted that the assessee has been wrongly denied deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 (in short 'the Act') and even in the alternative the assessee is also entitled to deduction u/s 80P(2)(d) of the Income Tax Act. For the sake of convenience, the relevant part of section 80(P) is reproduced as under:- 2 . 966-c-2019 M/s Punjab State Corp. Development Society Ltd., Chandigarh “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)…………….. The whole of the amount of profits and gains of business attributable to any jone or more of such activities.”
The Ld. Counsel for the assessee has submitted that the only activity of the assessee is relating to providing credit facilities to its members. When the surpluses generated from these activities has been invested in a cooperative bank for short term period certain interest income is received which is linked to the activities of assessee of giving credit to its members, whereupon, the deduction of Section 80P(2)(a)(i) has been claimed. The Ld. Counsel has further submitted that the assessee has taken a specific plea in this respect before the Ld. CIT(A), however, the Ld. CIT(A) has failed to decide the same.
The next contention of the Ld. counsel for the assessee is that the assessee is otherwise eligible for deduction u/s 80P(2)(d) of the 3 . 966-c-2019 M/s Punjab State Corp. Development Society Ltd., Chandigarh Act. The relevant part of the said provisions for the sake of ready reference is reproduced as under:-
“ 80P(2)(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.”
The Ld. counsel for the assessee has submitted that since the assessee had made investments / deposits of surpluses with a cooperative bank, which otherwise is a Cooperative Society, therefore, the assessee is entitled to deduction u/s 80P(2)(d) of the Act.
We are not convinced with the above submissions of the Ld. counsel for the assessee. As per the provisions as reproduced above, the income by way of interest or dividend derived by co-operative Society from its investments with any other co-operative society is an allowable deduction. However, section 80P(2)(4) of the Act states as under:-
“80P(4)
The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit . 966-c-2019 M/s Punjab State Corp. Development Society Ltd., Chandigarh society or a primary co-operative agricultural and rural development bank.”
As per the above reproduced provisions of section 80P(2)(4), a co-operative bank as such does not mean a cooperative society. The Ld. Counsel for the assessee in this respect has submitted that the intention of the legislature is to deny deduction to the cooperative
However, we are not convinced with the above argument of the Ld. Counsel for the assessee. As per the provisions of section 80P(2)(d), what has been allowed is interest or dividend derived by the co-operative society with investment in any another co-operative society. The meaning of co-operative society cannot be taken differently for the investor and for the Institution (investee). The provisions of section 80P(4) specifically states that the provisions of this section will not apply to any co-operative bank. The plain meaning of which is that the same interpretation is to be given in case of an investor co-operative society and to the bank in which the investment is made. The Co-operative Bank cannot be given a different interpretation as an investee Bank. Two different meanings cannot be ascribed to the same word in the same provision. . 966-c-2019 M/s Punjab State Corp. Development Society Ltd., Chandigarh 9. In view of this, we hold that the assessee is not entitled to any deduction on interest income as per the provisions of section 80P(2)(d) of the Act. However, so far as the claim of the assessee that the assessee is entitled to deduction us 80P(2)(a) is concerned, the said issue has not been looked into by the Ld. CIT(A) despite a ground in this respect taken by the assessee before the Ld. CIT(A).
In view of this, the matter is restored to the file of the Ld. CIT(A) for the limited purpose of adjudicating on the plea of the assessee regarding its eligibility of deduction of interest income u/s 80P(2)(a) of the Act. The Ld. CIT(A) will give proper opportunity to the assessee to present its case and address on this issue by way of a speaking order.
The Ld. Counsel, at this stage, has submitted that the assessee has also raised the issue of validity of the reopening of the assessment u/s 147 of the Act. We find that the Assessing Officer noticed that as per the provisions of the Statute, the assessee was not entitled to deduction u/s 80P(2)(d) of the Act. This was not a case of change of opinion on certain evidences, rather, the Assessing Officer has noticed the escapement of income in view of the express provisions of the Statute. We, therefore, find no infirmity in the . 966-c-2019 M/s Punjab State Corp. Development Society Ltd., Chandigarh action of the Assessing Officer in invoking the provisions of section 147 read with section 148 of the Act.
This ground of the assessee is, therefore, dismissed.
In the result, the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced on 04.03.2021