INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Applicability of section 80P on interest from co-operative banks - Verdict of jurisdictional High Court should be followed

The assessee, being a Co-operative credit society, was engaged in providing credit facility to its members by giving loan and advances and accepting deposits from members of the society. The assessee filed its return of income, declaring total income at Rs. NIL after claiming deduction of Rs. 1,04,56,923 under section 80P. The case was scrutinized under section 143(3) which resulted in addition of Rs. 37,575. Subsequently, Pr. CIT, having consulted relevant records, decided to invoke revisional jurisdiction under section 263 on the ground that the AO wrongly allowed deduction under section 80P on the interest, earned from Co-operative Bank in violation of principles enunciated by Karnataka High Court in Totgars Co-Operative Sale Society, (2017) 83 taxmann.com 140 (Karnataka). Accordingly, order under section 263 was passed, directing the AO to reframe the assessment de novo in accordance with the provisions of the Act and after considering the position of law as explained above in the judgment of the Karnataka High Court in the case of Totgars Co-operative Sale Society after granting proper opportunities of being heard to the assessee. Held: In differing with the Karnataka High Court in the case of Totgars Co-operative Sale Society, (2017) 83 taxmann.com 140 (Karnataka), jurisdictional Gujarat High Court in the case of State Bank of India v. CIT (2016) 72 taxmann.com 64 (Guj) : 2016 TaxPub(DT) 3564 (Guj-HC), dated 25-4-2016 allowed benefit of deduction under section 80P in respect of interest, earned from Co-operative banks. In view of this, the impugned order passed by the Pr. CIT under section 263 was quashed.

Followed:The Citizen Co-Operative Society Limited, Through Its Managing DIT, Hyderabad v. Asstt. CIT (2017) 397 ITR 1 (SC) : 2017 TaxPub(DT) 2053 (SC), Pr. CIT, ITO v. The Totagars Co-Operative Sale Society (2017) 83 taxmann.com 140 (Karnataka) : 2017 TaxPub(DT) 1748 (Karn-HC), State Bank of India (SBI) v. CIT (2016) 72 Taxmann.com 64 (Guj) : 2016 TaxPub(DT) 3564 (Guj-HC), CIT-II v. Sabarkantha District Cooperative Milk Producers Union Ltd. [Tax Appeal No. 473 of 2014, dt. 16-6-2014], Shree Ashapura Co-op. Credit Society Limited v. Pr. CIT [ITA No. 856/AHD/2019, dated 6-7-2022] : 2022 TaxPub(DT) 4821 (Ahd-Trib), The Sardar Patel Co-operative Credit Society Limited v. Pr. CIT [ITA No. 575/AHD/2019, dated 17-6-2022] : 2022 TaxPub(DT) 4209 (Ahd-Trib), The People Co-op. Credit Society Ltd. v. The ITO 2022 TaxPub(DT) 1699 (Ahd-Trib) and The Peoples Co-operative Credit Society Ltd., M/s. Banaskantha Dist. Co-operative Milk Producers Union Ltd. v. ACIT, B.K. Circle, C/o. ITO, Shri Hari Complex, Palanpur [ITA No. 1891/Ahd/2014 & 2987/Ahd/2015, ITA No. 1090 & 1582/Ahd/2015, dt. 23-3-2018]

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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