TN CIVIL SPPLIES CORPORTION STAFF COOP THRIFT AND CREDIT SOCIETY LTD,CHENNAI vs. ITO, NON CORP WARD-12(1) CHE, CHENNAI

This appeal by the assessee is arising out of the Revision order passed by the Principal Commissioner of Income Tax, Chennai - 8 in order No.ITBA/REV/F/REV5/2022-23/1051465537(1) dated 28.03.2023. The assessment was framed by the - 2 - Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income-tax Officer, National e-Assessment Centre, Delhi u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2018-19 vide order dated 18.02.2021.

The only issue in this appeal of assessee is against the order of PCIT u/s.263 of the Act revising the assessment framed by AO u/s.143(3) of the Act dated 18.02.2021, on the issue of claim of deduction u/s.80P(2)(d) of the Act in regard to income from investment in Chennai Central Co-operative Bank holding the same not eligible.

Brief facts are that the assessee is co-operative society filed its return of income for the relevant assessment year 2018-19 on 31.03.2019 and claimed the entire income as deduction u/s.80P(2)(d) of the Act. The return of income was processed u/s.143(1) of the Act and subsequently, assessee’s case was selected for scrutiny assessment under CASS for verifying the following items:- i. Investment/Advance/Loans ii. Capital/Other Capital iii. Deduction from total income under Chapter VIA Subsequently, assessment was completed u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act vide order dated 18.02.2021. The AO accepted the claim of deduction u/s. 80P(2)(d) of the Act. Subsequently, the PCIT on perusal of assessment proceedings noticed that the assessee has received a sum of Rs.35,11,389/- being dividend from Chennai Central Co-op Bank and Rs.50,44,368/- being interest on FDs / Savings Bank account, reserve fund etc., and claimed the same as deduction u/s.80P(2)(d) of the Act. Accordingly, the PCIT issued show-cause notice vide letter dated 02.03.2023 asking the assessee as to why the assessment allowing the claim of deduction on the above two incomes u/s.80P(2)(d) of the Act be not revised and assessment framed be not set-aside. The PCIT by going through the various case laws invoked the provisions of section 263 of the Act and held that the assessee is not eligible for claim of deduction on the above two incomes in view of the decision of Hon’ble Supreme Court in the case of Totgar Cooperative Sales Society Ltd., vs. ITO, 322 ITR 283. Accordingly, the PCIT held that the assessment framed is erroneous insofar as prejudicial to the interest of Revenue and hence, he set aside the assessment and directed the AO to pass a fresh assessment order after necessary verification and after giving reasonable opportunity of being heard to - 4 - the assessee. Aggrieved, assessee came in appeal before the Tribunal.

We have heard rival contentions and gone through facts and circumstances of the case. We noted that admittedly, the assessee is a co-operative society extending credit facility to its members who are the employees of TamilNadu Civil Supplies Corporation and depositing the surplus funds with its controlling bank i.e., Chennai Central Cooperative Bank Ltd. The assessee admittedly earned dividend and interest income to the tune of Rs.85,55,757/- from its investments in the Central Cooperative Bank Ltd., and claimed the same as deduction u/s.80P(2)(d) of the Act. The AO while framing assessment in limited scrutiny assessment has examined the claim of deduction u/s.80P(2)(d) of the Act and even otherwise on merits also, the assessee’s case is squarely covered by the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., vs. CIT, (2021) 431 ITR 1 and a recent decision of Hon’ble Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd., in Civil Appeal No.10069 of 2016, order dated 14.09.2023. We noted that the assessee is a co-operative society and its receipts are mainly from members from where the assessee earned interest income and also - 5 - Co-operative Banks / Societies and earned interest and dividend of Rs.85,55,757/- and claimed the same as deduction u/s.80P(2)(d) of the Act. Since, the issue is covered by the decisions of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd., supra and Kerala State Co-operative Agricultural and Rural Development Bank Ltd., supra, respectfully following the same we quash the revision order passed u/s.263 of the Act by the PCIT and allow the appeal of assessee.

In the result, the appeal filed by the assessee is allowed.