VAPI MERCHANT SAVING & CREDIT CO. OP. SOCIETY LTD.,VAPI vs. THE PCIT, VALSAD, VALSAD

The grounds of appeal

raised by the assessee are as follows: “1. The Ld. Pr. CIT has erred in law and on facts in initiating and passing the order u/s 263 of the Income Tax Act, 1961 as the assessment order sought to be revised is neither erroneous nor prejudicial to the interest of the revenue.

Aggrieved by the order of the Ld. PCIT, the assessee is in appeal before us.

The Ld. Counsel for the assessee submitted that the issue is squarely covered by the judgement of Co-ordinate Bench of ITAT, Surat, in the case of Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. vs PCIT, (2021) 127 taxmann.com 334 (Surat Trib.), wherein it was held as follows: “8. We have heard the submission of learned authorized representative (ld.AR) of the assessee and the learned Commissioner of Income tax-Departmental representative (ld. CIT-DR) for the Revenue and perused the assessment order as well as order passed by ld. PCIT. The Ld. AR for the assessee submits that the order passed by assessing officer under section 143(3) in allowing deduction under section 80P(2)(d) is not erroneous. The assessing officer during the assessment examined the issue in detail and took a possible and a reasonable view on the claim made by assessee. The finding of the assessing officer in the assessment order about the examination of this issue is clearly discernable. The learned PCIT by examining the record, may have a different view, thus the revision order passed by learned PCIT is not valid in the eyes of law. The learned AR for the assessee submits that for revising the assessment order, twin condition as provided under section 263 must be fulfilled simultaneously, that is the assessment order is erroneous and insofar as prejudicial to the interest of revenue. The order passed by assessing officer is not at all erroneous; the order is in accordance with the decision of various Tribunals and order passed by jurisdictional High Court on similar issue. The learned AR for the assessee also invited our attention on para 4 of the assessment, wherein the consideration of the issue under reference is clearly discernable. The learned AR for the assessee further submits that the assessing officer while issuing show cause notice dated 6-3-2019 raised a specific quarry on this issue. The assessee furnished its explanation with regard to the claim of deduction under section 80P(2)(d). The assessee explained before Ld. PCIT that assessee is claiming statutory deduction. The learned AR for the assessee further submitted that it is settled law that once assessing officer made enquiry on a particular point and after deliberation allow deduction, on that very point, the proceeding under section 263 cannot exist to form a different view. The ld.AR for assessee further submits that assessee claim similar deduction was disallowed by the assessing officer while passing the assessment order in A.Y. 2009-10, 2010-11 and again in 2012-13. However on appeal before Ld. CIT(A) the assessee was allowed deductions under section80P(2)(d). On further appeal by the revenue before the Tribunal the appeal of the revenue was dismissed in dated 18-4-2017, ITA No. 2582/Ahd/2014 dated 28-6- 2018 and in ITA No. 2617/Ahd/2016 dated 18-12-2018 for A.Y. 2009-10, 2010- 11 and 2012-13 respectively. The copies of the decisions of Tribunal are placed on record. The ld.PCIT for the first time revised the assessment order on the issue. 9. On merit of the case the learned AR for the assessee submits that the assessee earned interest from its investment in cooperative bank. The cooperative banks are primarily a cooperative society, as has been held by various benches of ITA 107/SRT/2022/AY.2017-18 Vapi Merchant Savings & Credit Co.op Society Ltd.

We have considered the rival submission of both the parties. We have also deliberated on the written submission filed by learned AR of the assessee and various case laws relied by him during his submission. We have also gone through the various documentary evidences filed in the form of paper book (PB) by learned AR of the assessee. We have noted that during the assessment the Assessing Officer vide notice under section 143(2)/142(1) of the Act dated 31-8- 2015 and 13-4-2016. The assessee filed its reply through its CA (AR) and furnished required details and after examining the issue allowed the deductions under section 80P(2)(d) as discussed in para 4 of the assessment order. The Assessing Officer passed assessment order on 18-10-2016.

The ld. PCIT before passing under section 263 of the Act, identified the issue regarding the claim of deduction under section 80P(2)(d) in its show cause notice dated 6-3-2019. The assessee in its reply dated 7-3-2019 clearly explained that the issue was examined by Assessing Officer and that the assessment order is not erroneous. The assessee also explained that similar disallowances/issues was subject matter in the appeal filed by the revenue before Tribunal in A.Y. 2009-10, 2010-11 and 2012-13 and the assessee was allowed similar deductions.

The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd. v. Pr. CIT [2019] 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. (emphasis added by us). Further, Hon'ble Madras High Court in CIT v. Mepco Industries Ltd. [2007] 163 Taxman 648/294 ITR 121 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in law, Commissioner cannot invoke his jurisdiction under section 263 of the Act. (emphasis added by us) 14. As we have noted above the assessing officer has made enquiries on the allowability of deduction under section 80(P)(2)(d) and passed the assessment order, thus, the Assessing Officer has taken a reasonable and possible view which cannot be held as erroneous.

The Hon'ble Karnataka High Court in Totagars Cooperative Sales Society (supra) held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and interest earned by Co-operative Society from Cooperative Bank would necessarily be deductible under section 80P(1) of the Act. Further, the Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. (supra) held that assessee co-operative society is 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.

Moreover, we have seen that in assessee's own case for A.Y. 2009-10, 2010- 11 and 2012-13, the similar disallowance under section 80P(2)(d) was made by the assessing officer while passing assessment order under section 143(3), however, on appeal before Ld. CIT(A) , the disallowances were deleted and the order of the Ld. CIT(A) in all years were confirmed.

The ld. DR for the revenue relied on the case law in Totagars Co-operative Sales Society (second case)/(supra), wherein the Hon'ble Karnataka High Court held that interest earned by a Co-operative Society from surplus deposits kept with Co-operative bank, is not eligible for deduction under section 80P(2)(d). Considering the legal position that when there are conflicting decisions of non- jurisdictional High Courts, on similar issue, the decision of Jurisdictional High Court is having binding precedent. Thus, keeping in view of the decision Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. (supra) wherein the assessee-co-operative society is held 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, we conclude that the order passed by assessing officer is not erroneous. Hence, the grounds of appeal

We have heard both the parties and noted that the issue under consideration is squarely covered by the judgment of Co-ordinate Bench, ITAT, Surat wherein it was held that deduction under section 80P(2)(d) is allowable in the case of co-operative bank that is interest received on fixed deposit made in co-operative bank is allowable under section 80P(2)(d) of the Act and hence the Assessing Officer after examining the assessee’s submission and the position in law allowed the claim of the assessee. Therefore, order passed by the Assessing Officer should not be erroneous and prejudicial to the interest of Revenue. Hence, we quash the order of Ld. PCIT.