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| The Tax Publishers2020 TaxPub(DT) 3835 (Pune-Trib) : (2021) 186 ITD 0220 INCOME TAX ACT, 1961
Section 263
Where thread of link between income and business of providing credit facilities to the members would be broken if despite there being the members wanting to avail credit facilities, cooperative society chooses to prefer making deposits with banks etc. rather than advancing sums to its members and CIT had not returned any contrary finding, further, an assessment order can be termed as erroneous and prejudicial to interest of the Revenue if AO had taken a view which was not legally sustainable, Therefore, CIT was not justified in exercising the revisional power under section 263.
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Revision under section 263 - Erroneous and prejudicial order - Interest income on surplus funds invested with co-operative banks - Allowability of deduction under section 80P
Assessee was a credit co-operative society providing credit facility to its members. CIT observed from the records that assessee society earned a sum as interest on investments made with co-operative banks and claimed deduction under section 80P(2). It was opined that such deduction was not available in respect of interest received from investments made with co-operative banks. Assessee submitted that it had claimed deduction under section 80P(2)(a)(i) and no claim was made under section 80P(2)(d). CIT held the assessment order to be erroneous and prejudicial to the interest of Revenue by observing that deduction under section 80P(2)(d) could not be allowed on interest on investments made by a co-operative society with co-operative banks. Held: The thread of link between income and business of providing credit facilities to the members would be broken, if despite there being the members wanting to avail credit facilities, cooperative society chooses to prefer making deposits with banks, etc., rather than advancing sums to its members. CIT had not returned any contrary finding. In such a scenario, entire interest income not only the one derived from its members by providing credit facilities but also that earned by utilizing the surplus available funds for the time being at some places like investment in FDR, etc. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue if AO had taken a view which was not legally sustainable. Therefore, CIT was not justified in exercising the revisional power anent to interest income earned on investments made with co-operative banks.
Followed:M/s. The Totgars' Cooperative Sale Society Ltd. v. ITO (2010) 322 ITR 283 (SC) : 2010 TaxPub(DT) 1466 (SC) Pr. CIT v. The Totagars Co-Operative Sale Society (2017) 395 ITR 611 (Kar.) : 2017 TaxPub(DT) 1748 (Karn-HC) Tumkur Merchants Souharda Credit Cooperative Ltd. v. ITO (2015) 230 Taxman 309 (Kar.) : 2015 TaxPub(DT) 2857 (Karn-HC) Mantola Co-Operative Thrift & Credit Society Ltd. v. CIT (2014) 110 DTR 89 (Delhi) : 2014 TaxPub(DT) 3786 (Del-HC) Sureshdada Jain Nagari Sahakari Patsanstha Maryadit v. Pr. CIT [ITA No. 713/PUN/2016, dt. 9-4-2019] : 2019 TaxPub(DT) 2223 (Pune-Trib) Shri Laxmi Narayan Nagari v. ITO [ITA No. 604/PN/2014, dt. 19-8-2015]
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2014-15
INCOME TAX ACT, 1961
Section 263
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