GURUMAULI NAGARI SAHKARI PAT SANSTHA MARYA SANGOLA, PUNE,SANGOLA vs. PR COMMISSIONER OF INCOME-TAX -4, PUNE

This appeal by the assessee is directed against the order passed by the Pr.CIT u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) on 31-03-2021 in relation to the assessment year 2015-16.

Tersely, the facts of the case are that the assessee is a Cooperative Society engaged in accepting deposits from members and providing loans/advances to its members. A return was filed declaring total income at Rs.28,650/-. The assessment was completed u/s.143(3) of the Act at a total income of Rs.50,750/- On perusal of records, the ld. PCIT observed that the assessee claimed deduction u/s.80P on interest earned from other co- operative societies which, in his opinion, was not eligible for deduction u/s.80P(2). Relying on the judgment of Hon’ble Supreme Court in the case of Totgar’s Cooperative Sales Society Ltd. (2010) 322 ITR 283 (SC), it was held that the assessee was not eligible for deduction u/s.80P. He, therefore, set-aside the assessment order by holding it as erroneous and prejudicial to the interest of Revenue and accordingly directed the AO to re-frame the assessment after affording opportunity of hearing to the assessee. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

We have heard both the sides through Virtual Court and perused the relevant material on record. Admittedly, the assessee is a Co-operative Society and not a Co-operative Bank. It deposited certain amounts with other Co-operative Societies on which interest income was earned. Deduction u/s.80P was claimed on such interest income, which was allowed by the AO, but questioned by the ld. CIT in the extant proceedings.

It is relevant to note that we are dealing with a case in which the ld. Pr. CIT has invoked his power u/s.263 of the Act. It is trite that the exercise of such a power is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue, if the AO has taken a view which is not legally tenable. Per contra, if two views are available on a particular issue and the AO adopts one of such views, the case goes outside the purview of revisional power exercisable by the Pr.CIT u/s.263 of the Act.

The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the (supra). The position continues to remain the same before this Tribunal also.

Reliance of the ld. Pr. CIT on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is not relevant. The issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee co-operative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon’ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the effect of this decision, it turns out that the same is not germane to case under consideration in view of the position that the claim of the extant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d).

In the result, the appeal is allowed. Order pronounced in the Open Court on 13th January, 2022.