The Thanjavur District Co Op Milk ... vs Acit, Circle2(1), Trichy on 21 November, 2022
आयकर अपीलीय अिधकरण चे ई "सी" ायपीठ म।
IN THE INCOME TAX APPELLATE TRIBUNAL, CHENNAI
BENCHES "C" : CHENNAI
BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND
DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER
आयकरअपीलसं. / ITA No.404/CHNY/2022
िनधारणवष / Assessment Year : 2017-18
The Thanjavur District Co Op The Principal
Milk Producers Union Limited, Vs Commissioner of Income
No.1, Nanjikottai Road, Tax-1, Madurai.
Thanjavur - 613006.
PAN: AAAAT 0224 E
Appellant/ Assessee Respondent /Revenue
Assessee by K.Meenakshisundaram - ITP
Revenue by Shri M.Rajan - CIT(DR)
Date of hearing 23/08/2022
Date of pronouncement 21/11/2022
आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:This is an appeal filed by the Appellant Assessee against the order u/s 263 of the Income Tax Act (Act) of the Principal Commissioner of Income Tax Madurai-1, dated 26/03/2022 for A.Y. 2017-18. The Assessee has raised following grounds of appeal:
"The order under section 263 of the income tax Act dated 26/3/2022 received by the appellant on 1/4/2022 is objected to on the following grounds of appeal.
1. The learned Principal Commissioner Madurai erred in setting aside the valid order passed by the Assisstant Commissioner of Income tax Circle-2(1) Trichy dated 5/11/2019 for the assessment year 2017- 2018 under section 263 on mere assumptions and presumptions that the order had been erroneous and prejudicial to the interest of revenue.
2. The learned Principal Commissioner misdirected himself that the valid order passed by the Assisstant Commissioner was erroneous and prejudicial to the interest of revenue simply for the reason that the The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] order was cryptic and parsimonious in description of the reliefs claimed by the assessee and allowed by the Assessing Officer with the Assisstant Commissioner's views on each and every claim of the assessee under chapter VIA and more especially with respect to the relief under section 80(P)(2)(d).
3. The learned Principal Commissioner is believed to have set aside the valid order mainly on account of the objections raised by Revenue Audit party or the Internal Audit party and such action on the part of the Principal Commissioner is erroneous as the Audit parties are not the persons vested with powers to express opinions on legal aspects of an assessment.
4. The learned Principal Commissioner ought to have appreciated the fact that the assessee's file was never called for by the Principal Commissioner for review and inspection at any point of time and it is a mystery as to how the Principal commissioner came to know about the erroneous nature of assessment on his own."
2. Brief Facts of the case :
It is mentioned in the assessment order that the assessee is a Co-
Operative Society engaged in promoting dairy activities like procuring milk, processing milk, producing by- products, marketing milk and its products. The Assessee filed return of Income for AY 2017-18 on 09/10/2017. Assessee also filed revised return on 11/03/2019. The case of the assessee was selected for scrutiny for following reasons:
- Claim of any other amount as deduction
- Deduction under chapter VIA
- Deduction and deposits of TDS
- Cash deposits during demonetisation period.
2.1 It is mentioned in the Assessment Order that the assessee being Co-Operative Society have claimed deduction u/s.80P(2)(d) on following amounts:
-Interest on fixed deposit with Co-Op Central bank Thanjavur Rs. 79,17,751/-
The Thanjavur District Co. Op Milk Producers Union Ltd.,[A]
-Interest on Saving Account with Co-Op Central bank Thanjavur Rs.72990/-
2.2 In addition to these the assessee had also claimed deduction u/s.80P(2)(e), 80P(c) for various amounts mentioned in the order.
2.3 It has also been mentioned by the Assessing Officer(AO) in the assessment order that Assessee has submitted Ledger copies of the respective bank accounts in supports of the interest accrued on the fixed deposits and saving account. The Assessing Officer allowed the assessee's claim for deduction u/s.80P(2)(d), u/s.80P(2)(e), u/s.80P(c) and assessed the income of the assessee at NIL.
2.4 However, the Pr.Commissioner of Income Tax, Madurai-
1(PCIT), issued notice u/s 263 of the Act to the assessee and after giving opportunity to the assessee, passed the order u/s 263 of the Act on 26/03/2022. Assessee has filed appeal before this Tribunal against the said order u/s 263.
2.5 ThePr.CIT has observed in the order u/s 263 as under :
3. OBSERVATIONS IN THE ORDER u/s 263 :
"5. I have considered the written submissions of the assessee, in the light of the facts of the case, the provisions of the law and the material information available on records. The assessee had admitted a gross total income of Rs.79,37,939/- and claimed the entire income as deduction u/s 80P(2).Further verification of the records shows that assessee has invested the society's funds in Cooperative Banks and the interest received from such investments has been claimed as deduction u/s 80P(2)(d) of the IT Act, 1961 The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] under Chapter VIA. The assessee in the reply filed before me stated that they derived interest income on fixed deposit with Central Co- operative Bank or Rs.79,17,751/-, interest on SB account with Central Co-op Bank of Rs.72,990/- and interest on SB account with other commercial Bank of Rs.5,88,226/- totaling to Rs.85,78,967/- and claimed deduction of Rs.79,90,741/- u/s 80(p)(2)(d) and restricted the same to gross total income of Rs.79,37,939/-. I have perused the written submission made by the assessee quoting various judgments. Whereas the Income Tax Act is very clear that the deduction u/s 80P(2)(d) is applicable "in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income". In the case on hand, the assessee has derived interest and dividend income on the investments made in the Cooperative Banks. Section 80P(2)(d) of the Act reads as under;
(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, the whole of such income;
Accordingly, any Co-operative Society can claim deduction of the whole of the interest and dividend income derived from its investment with any other Cooperative Society, whereas the assessee invested in Cooperative Banks which could not be considered as a cooperative society since their activities are on par with commercial banks and therefore, the income on investments made in the Banks is not an allowable deduction as per the provisions of section 80P(2)(d) of the Act, and the same has to be disallowed and assessed separately under the head income from other sources. The assessing officer has failed to take congnizance of the above facts and wrongly allowed the deduction claimed u/s 80P(2)(d) of the Act with regard to the interest receipt of Rs.79,90,741/- on the investment made with Thanjavur District Central Cooperative Bank and kumbakonam Central Cooperative Bank and completed the assessment accepting the income returned.
6. It is seen from the above that the assessment order passed by the Assessing Officer is not only erroneous but also prejudicial to the interest of revenue since the same has been passed without proper enquiry and verification of deduction claimed u/s 80P(2)(d) of the Act."
4. We have heard both the parties and perused the records. The Pr.CIT has invoked his powers of revision u/s.263. There are conditions which ought to be satisfied before invoking Section 263. Those are that the Assessment Order should be Erroneous and it The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] should be prejudicial to the interest of revenue. For ready reference Section 263 of the Act is reproduced here under:
263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
"Explanation 1.--..........
(b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner;
(c)............
Explanation 2.--For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,--
(a) the order is passed without making inquiries or verification which should have been made;
(b) the order is passed allowing any relief without inquiring into the claim;
(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or
(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person."
4.1 The Pr.CIT was of the opinion that the Assessment Order has been passed without making inquiries or verification and relief allowed without inquiring.
4.2 However, on perusal of the assessment order it is observed that the AO had got the ledger copies of the accounts showing interest The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] income. The AO has reproduced the amounts of interest income earned and the same figures have been mentioned by the Pr.CIT. Thus, there is no error in the amounts mentioned. The AO has studied the Ledger Copies of the accounts showing interest income. After analysing the same the AO arrived at a conclusion that the Assessee was entitled for deduction u/s.80P(2)(d) of the Act for the amount of Rs.79,37,939/-. It is important to mention here that the AO has excluded interest income of Rs.5,88,226/- earned from Commercial Bank from the deduction u/s 80P(2)(d) of the Act. This explains that the AO had applied his mind to the documents submitted by the assessee.
5. Before we discuss the case further, we will like to mentions the relevant case laws on this issue.
5.1 The Hon'ble Supreme Court in the case of CIT Vs. Amitabh Bachchan, 384 ITR 200(SC) observed as under :
"21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from."
5.2 The Hon'ble Jurisdictional High Court in the case of CIT v/s Mepco Industries Ltd. 294 ITR 121 (Madras) held as under :
The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] Quote, "8. Therefore, on the facts of the case, when two views are possible and it is not the case of the Revenue that the view taken by the Assessing Officer is not permissible in law, the CIT is not justified in invoking the jurisdiction under section 263 of the Act. "
Unquote.
5.3 The Hon'ble Bombay High Court in the case of CIT Vs. Future Corporate Resources Ltd in IT Appeal No.1275 of 2017 vide order dated September 29, 2021 held as under :
Quote ," 7. In the order of PCIT it is stated "in paragraph 4.3 of the assessment order, the Assessing Officer has recorded that from the details submitted by the assessee and the explanation given by him, it was observed that assessee had regular business connection with the company in which investment had been made and also there was business income to the assessee from the same. Therefore, interest expense debited by the assessee has not been considered for the calculation of disallowance under section 14A because the same has been incurred for the purpose of business."
The PCIT therefore agrees that the Assessing Officer has recorded from the details submitted by respondent and the explanation given by respondent that the assessee had regular business connection with the company in which investment has been made and also there was a business income to the assessee from the same. He notes that the Assessing Officer, therefore did not consider the calculation of disallowance under section 14A the interest expense debited by the assessee because the same has been incurred for the purpose of business. The PCIT though was unhappy with the view of the Assessing Officer, the PCIT himself does not say why it should have been considered for the calculation of disallowance under section 14A. Even if one assumes that he has, after reading of the order expressed his views, but still the position is two views therefore were possible. Therefore, if one of the two possible views was taken by the Assessing Officer, the PCIT could not have exercised his powers under section 263 of the Act. 8. " Unquote . 5.4 Thus, the principal of the law emanating from the above decision of the Hon'ble SC, Hon'ble Jurisdictional High Court, Hon'ble Bombay High Court is that when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s 263.
The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] 5.5 We will analyze the facts of the present case on the touch stone of law mentioned above.
5.6 Hon'ble Karnataka High Court in the case of Pr.CIT Vs. Totagars Co-operative Sale Society in IT Appeal No.100069 of 2016 vide Order dated 05/01/2017 has held as under :
Quote, "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".
9. 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'.
10. 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 deductible 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. The learned counsel has relied on the case of Totgars Co- operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case." Unquote. 5.7 The ITAT Chennai in the case of ITO Vs. Irula Snake Catchers Industrial Co-operative Society Ltd [2022] 140 taxmann.com 494 (Chennai - Trib.) has held on identical facts as under :
Quote, "We heard the rival submissions and considered the documents available on records. Here, we are adjudicatingtwo issues; one relating to deduction u/s.80P(2) of the Act and the applicability of the video / still photography- charges within the ambit of the income of the co-operative society. The Assessee received the interest from theco-operative bank "TAICO". The co- operative banks are first cooperative society and thereafter they areconverted into banks. The Hon'ble jurisdictional High Court is also in favour of the Assessee. Hon'ble SupremeCourt in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161/279 Taxman75 (SC) observed that whether the Assessee is registered as a primary agricultural credit society, it is entitled forthe benefit of deduction u/s.80P(2) of the Act, notwithstanding that it was also giving loans to its members whichis not related to agriculture. Respectfully considering the judicial observations, it is clear that, in the case of theinterest earned from the co-operative bank, it does not come under the consideration of the income from othersources. The said interest is eligible for deduction u/s.80P(2) of the Act." Unquote.
5.8 The ITAT Surat Bench on identical facts in the case of BardoliVibhag Gram Vikas Co.Op. Credit Society Vs. Pr.CIT [2021] 127 taxmann.com 334 (Surat-Trib.) has held as under :
Quote "12. 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.
13. 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 The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] 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 AssessingOfficer 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.
15. 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 VankarSahakari 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.
16. The Co-ordinate Bench of Rajkot Tribunal in Surendarnagar District Co-operative Milk Producer Union Ltd. v. Dy. CIT [2019] 111 taxmann.com 69/179 ITD 690 (Rajkot Tribunal) also held the assessee co-operative society could not claim benefit under section 80P(2)(d) in respect of interest earned by it from deposits made with nationalized/private banks, however, the said benefit was available in respect of interest earned and on deposits made with co-operative bank. Thus, in view of the aforesaid legal discussion we are of the considered view that order passed by Assessing Officer is not erroneous, though it may be prejudicial to the interest of the Revenue. Therefore, the twin conditions that orders is erroneous and so far as prejudicial to the interest of revenue, as prescribed under section 263 is not fulfilled in the present case." Unquote.
6. Thus, in this case we have to first decide whether the Assessment Order is erroneous or not! The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] 6.1 In the case under consideration, it is observed that the AO has taken a possible view on the issue of allowability of deduction u/s 80P(2)(d) of the Act after studying the respective ledger accounts. The AO had called for the respective ledger accounts which are categorically mentioned in the assessment order. To arrive at the figure of the Interest earned one just needs to study the ledger accounts. Before the AO, the fact that the assessee has earned Interest Income from Co-operative bank was on record and easy to understand from the ledger accounts. The Pr.CIT has also relied on the same ledger accounts to arrive at a different conclusion. It is a fact that the issue of deductibility of Interest earned by Co-Operative society from Co-Operative Bank has been held in favour of assessee by Hon'ble Karnataka High Court (supra), ITAT Chennai, ITAT Surat (supra). Therefore, the AO has adopted a view which was one legally possible view. Therefore, in these facts and circumstances of the case as held by Hon'ble SC in the case of Amitabh Bachchan (supra) and Hon'ble High Court (Supra), when two views are possible and AO adopts one view, the Assessment cannot be said to be erroneous. Therefore, the Pr.CIT has no power to invoke jurisdiction u/s.263 in such circumstances where the Assessment Order is not erroneous. Therefore, on all facts and circumstances of the case, respectfully following the judicial precedence discussed in The Thanjavur District Co. Op Milk Producers Union Ltd.,[A] earlier paragraphs, the order of the Pr.CIT is set aside. Accordingly, the appeal of the Appellant Assessee is allowed.
7. In the result, appeal of the Assessee is Allowed.
Order pronounced in the open Court on 21st November, 2022.
Sd/- Sd/- (MAHAVIR SINGH) (DR. DIPAK P. RIPOTE) VICE-PRESIDENT ACCOUNTANT MEMBER पुणे / Pune; दनांक / Dated : 21st Nov, 2022/ SGR*
आदेशक ितिलिपअ ेिषत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT(A), concerned.
4. The Pr. CIT, concerned.
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, चे ई बच, चे ई / DR, ITAT, "C" Bench, Chennai.
6. गाडफ़ाइल / Guard File.
आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुण/े ITAT, Pune.
