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Income Tax Appellate Tribunal, JAIPUR BENCHES ‘B’ JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 23/JP/2021
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES ‘B’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 23/JP/2021 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke M/s Rajasthan Cooperative Dairy PCIT, Vs. Federation Ltd. Jaipur-2 Saras Sankul, JLN Marg, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAAAR0278A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Sh. B. K. Gupta (Pr.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 18/10/2021 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 09/11/2021 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of ld. Pr. CIT, Jaipur-2 dated 31.03.2021 wherein the assessee has raised the following grounds of appeal: “1. Under the facts and circumstances of the case, order passed by the Ld. PCIT u/s 263 is illegal & bad in law. He has further erred in passing the order without considering the complete reply filed by the assessee. 2. The Ld. PCIT has erred on facts and in law in holding that the order passed by the AO u/s 143(3) dt. 06.12.2017 is erroneous and prejudicial to the interest of Revenue as the said order has been passed in routine and perfunctory manner without examining the
2 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 issue of deduction u/s 80P(2)(d) of the Act ignoring the fact that this issue was examined by the AO in detail vide notice issued u/s 142(1) dt. 09.10.2017 and this issue is also covered in favour of the assessee by the order of Hon’ble ITAT, Jaipur for earlier AYs.”
The ld A/R submitted that the facts of the case are that the assessee is an Apex body responsible for development of dairy activities in cooperative sector in the State of Rajasthan. It filed its return of income on 24.09.2015 declaring nil income after claiming deduction u/s 80P(2) at Rs 4,14,68,041/-. The AO vide notice u/s 142(1) dt. 09.10.2017, in Q. No.4 required the assessee to explain allowability of deduction u/s 80P, especially in case of other incomes. In response to same, assessee vide reply dt. 23.10.2017 submitted that deduction of Rs.4,14,68,041/- has been claimed under clause (c) & (d) of sub-section (2) of section 80P. It also provided break-up of deduction as per which interest on FDR with cooperative bank of Rs.3,69,19,911/- has been claimed as deduction u/s 80P(2)(d). The assessee further submitted that deduction u/s 80P has been allowed to assessee in past while completing assessment u/s 143(3) of the Act. The AO after examining all the details/ explanation furnished by the assessee accepted the declared income u/s 143(3) dt. 06.12.2017.
It was submitted that the ld. PCIT thereafter issued notice dt. 29.11.2018 u/s 263 stating that interest earned on FDR with cooperative bank of Rs. 3,69,19,911/- and interest earned from Milk Unions of Rs. 44,98,130/- does not fall within the scope of provision of section 80P(2)(d). Thus, the order passed u/s 143(3) is erroneous so far as it is prejudicial to the interest of Revenue.
3 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 4. It was submitted that in response to this notice, the assessee filed detailed reply vide letter dt. 29.01.2019 stating that interest income of Rs. 3,69,19,911/- has been received from Jaipur Central Cooperative Bank Ltd. which is a cooperative society. In support of the same, registration certificate of Jaipur Central Cooperative Bank Ltd. issued by co-operative department was also filed. Similarly, Milk Unions are also constituted as co-operative society, thus, interest income of Rs. 44,98,130/- received from them is also deductible u/s 80P(2)(d). Further vide reply dt. 10.09.2019, the assessee filed the order of Hon’ble ITAT in case of Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. wherein Hon’ble ITAT held that interest income on FDR with Jaipur Central Cooperative Bank Ltd. is eligible for deduction u/s 80P(2)(d) of the Act.
It was submitted that the ld. PCIT, however, held that assessee cooperative society had received interest of Rs.3,69,19,911/- from FDR with cooperative banks which are not cooperative society. Therefore, deduction u/s 80P(2)(d) of Rs.3,69,19,911/- was wrongly allowed. The order passed by AO u/s 143(3) is thus erroneous in so far as it is prejudicial to the interest of revenue as the said order has been passed in a routine and perfunctory manner without examining the issue of deduction u/s 80P(2)(d) of the Act which has resulted in wrong deduction of income to the assessee and thus liable to revision under the clause (a), (b) & (c) of Explanation 2 to section 263 of IT Act. Accordingly, order passed by AO was set aside for passing a fresh order.
It was submitted that from the facts stated above, it can be noted that AO in the assessment proceedings vide notice u/s 142(1) dt. 09.10.2017, in Q. No.4 required the assessee to explain allowability of deduction u/s 80P, especially in case of other incomes. In response to
4 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 same, assessee vide reply dt. 23.10.2017 submitted that deduction of Rs.4,14,68,041/- has been claimed under clause (c) & (d) of sub-section (2) of section 80P. It also provided break-up of deduction as per which interest on FDR with cooperative bank of Rs.3,69,19,911/- has been claimed as deduction u/s 80P(2)(d). The assessee further submitted that deduction u/s 80P has been allowed to assessee in past while completing assessment u/s 143(3). The AO after examining all the details/ explanation furnished by the assessee accepted the declared income u/s 143(3) dt. 06.12.2017. Thus, when the AO has made necessary verification of claim of deduction u/s 80P(2)(d), his order cannot be said to be erroneous so far as it is prejudicial to the interest of revenue. For this purpose, reliance is placed on the following cases:-
• Sir Dorabji Tata Trust Vs. DCIT(E) 188 ITD 38 dt. 28.12.2020 (Mum.) (Trib.) • CIT Vs. Vijay Kumar Koganti (2020) 275 Taxman 394 (Mad.) (HC) • CIT Vs. Green Fields Commercial Pvt. Ltd. (2015) 119 DTR 303 (J&K) (HC)
The principles laid down in these decision when applied to the facts of assessee's case is evident that in the assessee's case AO has made all the necessary enquiry and verification as can be expected of a of a prudent, judicious and responsible AO in normal course of his assessment work. The Ld. CIT has not specified as to what type of enquiry ought to have been made by AO which would have resulted into income or disallowance or any other adverse action. Thus, none of the condition of clause (a), (b) or (c) of Explanation 2 to section 263 is attracted. Hence, the order passed by AO can't be branded as erroneous and prejudicial to the interest of revenue.
5 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2
It was further submitted that section 80P(2)(d) provides deduction in respect of income by way of interest or dividend derived by the cooperative society from its investment with any other cooperative society. Deduction of Rs.3,69,19,911/- claimed u/s 80P(2)(d) is in respect of interest earned on FDR maintained with Jaipur Central Cooperative Bank Ltd. The Jaipur Central Cooperative Bank Ltd. is constituted under the provision of Jaipur Cooperative Societies Act, 1943. Copy of registration certificate of Jaipur Central Cooperative Bank Ltd. issued by cooperative department is enclosed as part of paperbook at page 18. Thus, it is apparent that Jaipur Central Cooperative Bank Ltd. is a cooperative society. Further Hon’ble ITAT, Jaipur Bench vide order dt. 02.09.2019 in case of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. after relying on the order of Hon’ble ITAT, Jaipur Bench in case of ITO Vs. Shree Keshorai Patan Sahakari Sugar Mill has held that for the purpose of section 80P(2)(d), Jaipur Central Cooperative Bank shall be treated as cooperative society. Hence, interest received by the assessee from Jaipur Central Cooperative Bank Ltd. is eligible for deduction u/s 80P(2)(d) of the Act. It is a settled law that where two views are possible and the AO has taken one view, assessment order cannot be treated as erroneous or prejudicial to the interest of revenue. For this reliance is placed on the following cases:- • CIT Vs. Kwality Steel Suppliers Complex (2017) 395 ITR 1 (SC) • CIT Vs. Max India 295 ITR 282 (SC) • Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 (SC)
It was further submitted that the issue as to whether the PCIT u/s 263 can held the order of AO erroneous where he has allowed the claim of deduction u/s 80P(2)(d) in respect of interest received on investment
6 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 made with cooperative bank has been decided in favour of assessee by Hon’ble ITAT Surat Bench in case of Bardoli Vibhag Gram Vikas Cooperative Credit Society Ltd. Vs. PCIT 189 ITD 601 dt. 12.05.2021 after considering the decision of Karnataka High Court in case of PCIT Vs. Totagars Cooperative Sales Society 395 ITR 611 where it is held that interest earned on deposits with cooperative bank is not eligible for deduction u/s 80P(2)(d). Therefore, in view of this decision of coordinate bench, the order passed by PCIT u/s 263 be quashed.
It was further submitted that ld PCIT/DR has relied on the decision of Hon’ble Karnataka High Court in case of CIT Vs. Totagars Cooperative Sales Society dt. 16.06.2017 reported at 395 ITR 611 where it is held that interest earned on deposits with cooperative bank is not eligible for deduction u/s 80P(2)(d). It is submitted that the Hon’ble Karnataka High Court in the same case vide order dt. 05.01.2017 reported at 392 ITR 74 has held that cooperative banks is a cooperative society and therefore, the interest earned from investment made is FDR of cooperative banks is eligible for deduction u/s 80P(2)(d). The said decision of Karnataka High Court by the divisional bench reported in 392 ITR 74 has been distinguished in the subsequent decision of the Karnataka High Court of equal strength reported in 395 ITR 611 without referring to the Full Bench. Therefore, in view of the decision of Hon’ble Bombay High Court in case of K. Subramanian & Anr. Vs. Siemen’s India Ltd. & Anr. (1985) 156 ITR 11 where there is conflict between the decisions of non jurisdictional High Courts, then a view which is in favour of the assessee is to be preferred as against that taken against him. The Hon’ble Supreme Court in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192 has held that where two reasonable constructions of a taxing provisions are possible, then the construction which favours the assessee must be adopted. The effect of
7 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 both the decisions of Karnataka High Court has been considered by ITAT Mumbai Benches in case of Kaliandas Udyog Bhavan Premises Cooperative Society Ltd. Vs. ITO (ITA No.6547/Mum/2017 dt. 25.04.2018). In view of above decisions, it is evident that there are two views on allowability of deduction u/s 80P(2)(d) on interest received by a cooperative society on the investment made with a cooperative bank. There is no decision of jurisdictional High Court/ Supreme Court against the assessee directly deciding this issue. Thus, the case of assessee does not fall in any of the limb of Explanation 2 to section 263. Hence, the order passed by Ld. PCIT u/s 263 is illegal & bad in law and the same be quashed.
In his submissions, the ld PCIT/DR taken us through the findings of the ld PCIT which reads as under:- “6. During the examination of records of the society it was noticed that assessee cooperative society had received interest of Rs. 3,69,19,911/- from FDR with Cooperative banks which are not cooperative society. Therefore, the deduction claimed u/s 80P(2)(d) of Rs. 3,69,19,911/- was wrongly allowed. 7. As per part V of Banking Regulation Act, 1949 “Co-operative bank” means a “state co-operative bank, a central co-operative bank and a primary co-operative bank” and “Co-operative society” means “a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co- operative societies, or any other Central or state law relating to co- operative societies for the time being in force.” As per part V of Banking Regulation act, 1949 a co-operative bank is different from the cooperative society. The assessee has claimed deduction of Rs. 3,69,19,911/- u/s 80P to the extent of available income for deduction including the amount of interest earned. 8. Thus, AO during the course of assessment proceedings has not verified the claim of deduction u/s 80P(2)(d) of the assessee
8 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 society. This has resulted in order being erroneous and prejudicial to the interest of revenue. 10. I have gone through the assessment order and case records and submission filed by the assessee, in the facts and circumstances of the case. The contentions of assesse are not tenable. On bare perusal of the Act it is clear that any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, is wholly exempt. However, the assessee cooperative society has received interest from banks who are not themselves cooperative societies, therefore the interest received is taxable and deduction u/s 80P(2)(d) is not available to it. From the above facts and circumstances of the case and having regard to the material available on record, I am of the considered opnion that the Assessing Officer failed to consider/apply his mind to the information available on record with regard to the deduction allowed to the cooperative society u/s 80P(2)(d) of the Act. This in turn has resulted in passing of an erroneous order by the Assessing Officer in the case due to non-application of mind to relevant material, reflecting non appreciation of facts and an incorrect application of mind to law which is prejudicial to the interest of the revenue. Thus, the order passed u/s 143(3) on 06.12.2017 is erroneous and prejudicial to the interest of the revenue. 11. Accordingly, by virtue of powers conferred on the undersigned under the provisions of section 263 of the Income Tax Act, 1961, I hold that the order under Section 143(3) of the IT Act dated 06.12.2017 for AY 2015-16 passed by the Assessing Officer is erroneous in so far as it prejudicial to the interest of revenue as the said order has been passed by the Assessing Officer in a routine and perfunctory manner without examining the issue of deduction u/s 80P(2)(d) of the Act. The order has thus resulted in wrong deduction of income to the assessee. The order of the Assessing Officer is therefore liable to revision under the clause (a), (b) & (c) of Explanation (2) to Section 263 ofthe Income Tax Act. Hence, the assessment order is set aside as discussed above on the issue of
9 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 deduction allowed U/s 80P(2)(d) of the Act. The AO is directed to examine the issue of allowability of deduction u/s 80P afresh affording the assessee an opportunity of being heard and pass the order as per law.” Further, reliance was placed on the following decisions:- • Pr. Cit vs. Totagars Co-operative Sale Society 83 taxmann.com140 (Karnataka) (2017). • Chitradurga City Multi Purpose Co-operative Society vs. ITO 82 taxmann.com 314 Bangalore-Trib.)(2017).
We have heard the rival contentions and perused the material available on record. The issue under consideration is whether interest of Rs 3,69,19,911/- on FDRs placed with Jaipur Central Co-operative Bank Ltd is eligible for deduction u/s 80P(2)(d) and where the answer to the same is not in affirmative, whether the order passed by the Assessing officer allowing such deduction can be held as erroneous in so far as prejudicial to the interest of Revenue. During the course of revisionary proceedings, the assessee cooperative society has submitted before the ld PCIT that the Jaipur Central Cooperative Bank Ltd. is constituted under the provision of Jaipur Cooperative Societies Act, 1943 and is a cooperative society and Jaipur Benches of the Tribunal in case of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. has held that for the purpose of section 80P(2)(d), Jaipur Central Cooperative Bank shall be treated as cooperative society and therefore, interest received by the assessee cooperative society from Jaipur Central Cooperative Bank Ltd. is eligible for deduction u/s 80P(2)(d) of the Act. The ld PCIT however referred to the Banking Regulation Act of 1949 and held that as per Part V of the Banking Regulation Act, a co-operative bank is different from the cooperative society and the deduction has been wrongly allowed by the
10 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 Assessing officer. In case of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd, we find that the Coordinate Bench has considered the meaning of cooperative society and cooperative bank and has referred to the decision of the Hon’ble Karnataka High Court in case of Totagars Co- operative sale society 392 ITR 74 wherein it was held as under: “8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co- operative Society".
Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'.
Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.”
11 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 13. The Coordinate Bench thereafter held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as co-operative society and interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. The ld PCIT has however not considered the aforesaid decision and gone ahead and has concluded that the deduction has been wrongly allowed by the Assessing officer without verifying the said claim of the assessee cooperative society.
We find that during the course of assessment proceedings, the Assessing officer did enquire about the claim of deduction from the assessee and in response, the assessee has submitted its response which was considered and the claim of deduction was accordingly allowed. Therefore, it is not a case of lack of enquiry on part of the Assessing officer. Further, no decision has been referred by the ld PCIT or brought to our notice which has been rendered by the Hon’ble Rajasthan High Court and it is therefore not a case where the decision of the Hon’ble jurisdictional High Court which is prejudicial to the assessee has not been followed by the AO. Therefore, where there is a direct decision of the Hon’ble Karnataka High Court and which has been followed by the jurisdictional Tribunal on identical set of facts, the view taken by the Assessing officer in allowing the deduction to the assessee cooperative society cannot be held as erroneous in nature as the same is clearly a plausible view supported by the aforesaid High Court and Tribunal decisions.
As regards reliance placed by the ld PCIT/DR on the subsequent decision of the Hon’ble Karnataka High Court in case of Totgar Cooperative Sale Society 395 ITR 611 where it was held that interest
12 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 earned on deposits with cooperative bank is not eligible for deduction u/s 80P(2)(d), we note that in the decision of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd, the Coordinate Jaipur Benches did consider the latter decision of Hon’ble Karnataka High Court in case of Totgar Cooperative Sale Society 395 ITR 611 while referring to Coordinate Bench decision in case of Kaliandas Udyog Bhavan Premises Co-op society Ltd. We further respectfully note that even among the different benches of the same High Court, there are divergent views on the matter and in absence of decision of the jurisdictional High Court, where there are two views in the matter of a non-jurisdictional High Court in terms of construing a taxing statue and the AO has taken one of the views in the matter which favours the assessee, the view so taken by the AO, being a plausible view taken by a quasi-judicial authority cannot be held as erroneous in nature as the same is in consonance with the legal proposition laid down by the Hon’ble Supreme Court in case of Vegetable Products Ltd. In the entirety of facts and circumstances of the case and in light of aforesaid discussions, we set-aside the order passed by the ld PCIT and the order of the AO is sustained.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 09/11/2021.
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13 ITA No. 23/JP/2021 M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur Vs. PCIT, Jaipur-2 आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Rajasthan Cooperative Dairy Federation Ltd., Jaipur 2. izR;FkhZ@ The Respondent- PCIT, Jaipur-2 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 23/JP/2021}
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