Case Law Details
M.P. Police Sakh Sahkari Sanstha Maryadit Vs PCIT (ITAT Indore)
Co-operative societies engaged in banking business are eligible for deduction u/s. 80P on their interest income from bank deposits- ITAT Indore
Facts of the Case
1. The assessee is a co-operative society engaged in the business of banking which filed ITR claiming deduction u/s 80P.
2. The case was selected for scrutiny assessment where the claim of assessee was allowed.
3. Subsequently, the PCIT examined the assessment-order
and found that the assessee had earned interest from fixed deposits with banks which is not eligible for deduction u/s 80P.
4. The PCIT held assessment-order as erroneous cum-prejudicial to the interest of revenue and set aside the assessment-order with a direction to re-examine the issue of deduction u/s. 80P.
5. Aggrieved by revision order of the PCIT, The assessee filed an appeal before ITAT.
Observations of the Hon. Tribunal
6. That the tribunal observed that the co-ordinate bench had held as under:
“9. In the present case, the undisputed fact is that the assessee society is required to deposit 25% of its profit as mandated by section 43(2) of the M.P./Chattisgarh Societies Act, 1960. Hence, the assessee is under legal obligation to keep 25% of its profits as reserves. Any interest accrued there on would certainly, in our considered view partake character of business income of the assessee. Hence, it would be eligible for deduction. Therefore, the A.O. is directed to allow deduction on the interest earned out of amount so reserved by the assessee i.e. 25% of profit transferred to reserves.”
7. That it was held by the tribunal that therefore the AO was correct in giving deduction u/s 80P qua the Bank interest income. Therefore the assessment-order passed by AO was neither erroneous non prejudicial to the interest of revenue and therefore the Ld. PCIT was not justified in invoking the revisionary-action u/s 263.
8. That the revision-order passed by Ld. PCIT was quashed and the original assessment-order was restored.
FULL TEXT OF THE ORDER OF ITAT INDORE
Feeling aggrieved by revision-order dated 19.03.2022 passed by Ld. Principal Commissioner of Income Tax [“Ld. PCIT”] u/s 263 of the Income-Tax Act 1961 [“the Act”], which in turn arises out of assessment-order dated 26.11.2019 passed by Ld. ITO, Ward-2(3), Ujjain [“Ld. AO”] for assessment year [“AY”] 2017-18, the assessee has filed this appeal.
2. Heard the learned Representatives of both sides and case-records perused.
3. The facts leading to present appeal before us are such that the assessee is a co-operative society. It filed return of income of the relevant assessment-year after claiming deduction u/s 80P of Rs. 41,73,300/-. The Ld. AO subjected assessee’s case to scrutiny-assessment and being satisfied, allowed deduction as claimed by assessee. Subsequently, the Ld. PCIT examined the assessment-order and found that the assessee had earned interest of Rs. 13,70,890/-from fixed deposits with banks which is not eligible for deduction u/s 80P. Thus, the Ld. PCIT framed a view that the Ld. AO had wrongly allowed deduction u/s 80P qua the impugned interest income of Rs. 13,70,890/-, which has rendered the assessment-order as erroneous-cum-prejudicial to the interest of revenue. Holding so, the Ld. PCIT took revisionary action u/s 263 of the act whereby the assessment-order passed by Ld. AO was set aside with a direction to re-examine the issue of deduction and frame assessment de novo. Aggrieved by revision-order, the assessee has come in present appeal before us.
4. The Ld. AR appearing for the assessee straightaway submitted that the issue of allowability of deduction u/s 80P qua the impugned interest income is squarely covered in assessee’s favour by the order passed by Hon’ble Co-ordinate Bench of ITAT, Indore in ITA Nos. 422/Ind/2017 & 649/Ind/2019, M.P. Police Sakh Sahkarita Maryadit, Indore Vs. ITO-4(5) dated 17.12.2019, a copy placed before us. The relevant paragraph of the order reads thus:
“9. In the present case, the undisputed fact is that the assessee society is required to deposit 25% of its profit as mandated by section 43(2) of the M.P./Chattisgarh Societies Act, 1960. Hence, the assessee is under legal obligation to keep 25% of its profits as reserves. Any interest accrued there on would certainly, in our considered view partake character of business income of the assessee. Hence, it would be eligible for deduction. Therefore, the A.O. is directed to allow deduction on the interest earned out of amount so reserved by the assessee i.e. 25% of profit transferred to reserves.”
5. The Ld. DR representing the revenue, with all his fairness, has not raised any serious objection.
6. We do not find any reason to deviate from the view taken by Hon’ble Co-ordinate Bench in the absence of any change in facts or law. Respectfully relying upon the same, we hold that the Ld. AO was correct in giving deduction u/s 80P to the assessee qua the impugned interest income. That also brings us to conclude that the assessment-order passed by Ld. AO is neither erroneous non prejudicial to the interest of revenue and therefore the Ld. PCIT was not justified in invoking the revisionary-action u/s 263. Being so, we quash the revision-order passed by Ld. PCIT and restore the original assessment-order passed by Ld. AO.
7. In the result, assessee’s appeal is allowed.
Order pronounced as per Rule 34 of ITAT Rules, 1963 on 20/12/2022.
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