2019 (12) TMI 80 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80P - HELD THAT - We find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr 1983 (4) TMI 3 - BOMBAY HIGH COURT where there is a conflict between the decisions of non-jurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society 2017 (7) TMI 1049 - KARNATAKA HIGH COURT and State Bank Of India Vs. CIT 2016 (7) TMI 516 - GUJARAT HIGH COURT wherein it was observed that the interest income earned by a cooperative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO 2016 (2) TMI 620 - ITAT MUMBAI Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set aside‟ his order and restore the order passed by the A.O under Sec. 143(3) - Appeal filed by the assessee is allowed.

Issues Involved:
1. Invocation of Section 263 by Pr. CIT.
2. Eligibility for deduction under Section 80P(2)(d) on interest income from FDs with cooperative banks.
3. Validity of Pr. CIT's reliance on the Totagor Co-operative Sales judgment.
4. Direction by Pr. CIT to enhance assessed income.
5. Jurisdiction of Pr. CIT under Section 263.
6. Consideration of previous ITAT orders regarding Section 80P(2)(d) deductions.
7. Additional grounds of appeal.

Detailed Analysis:

1. Invocation of Section 263 by Pr. CIT:
The assessee challenged the Pr. CIT's invocation of Section 263, arguing that the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Pr. CIT had invoked Section 263 on the grounds that the AO erroneously allowed the deduction under Section 80P(2)(d) without proper verification.

2. Eligibility for Deduction under Section 80P(2)(d):
The core issue was whether the interest income earned from FDs with cooperative banks qualifies for deduction under Section 80P(2)(d). The assessee contended that the deduction was valid as cooperative banks are considered cooperative societies. The Pr. CIT argued that post the insertion of Section 80P(4), cooperative banks are excluded from such deductions.

3. Validity of Pr. CIT's Reliance on Totagor Co-operative Sales Judgment:
The assessee argued that the Pr. CIT erred in relying on the Totagor Co-operative Sales judgment, which pertained to Section 80P(2)(a) and not Section 80P(2)(d). The Tribunal agreed with the assessee, noting that the cited judgment was distinguishable and not applicable to the present case.

4. Direction by Pr. CIT to Enhance Assessed Income:
The Pr. CIT directed the AO to enhance the assessed income by disallowing the deduction under Section 80P(2)(d). The Tribunal found this direction to be contrary to law, as the AO had already formed a plausible opinion based on existing judicial pronouncements.

5. Jurisdiction of Pr. CIT under Section 263:
The Tribunal examined whether the Pr. CIT exceeded his jurisdiction under Section 263. It concluded that the AO had taken a plausible view supported by judicial precedents, and the Pr. CIT's action amounted to a mere change of opinion, which is not permissible under Section 263.

6. Consideration of Previous ITAT Orders:
The assessee cited previous ITAT orders, including those in the cases of Land End Cooperative Society Ltd. and Sea Green CHS Ltd., which supported the deduction under Section 80P(2)(d). The Tribunal acknowledged these precedents and found that the AO's original order was in line with these decisions.

7. Additional Grounds of Appeal:
The assessee reserved the right to add, amend, or delete grounds of appeal as deemed fit. However, the Tribunal's decision on the main issues rendered this point moot.

Conclusion:
The Tribunal ruled in favor of the assessee, setting aside the Pr. CIT's order and restoring the AO's original assessment. It held that the AO had taken a plausible view supported by judicial precedents, and the Pr. CIT's invocation of Section 263 was unwarranted. The appeal filed by the assessee was allowed, and the deduction under Section 80P(2)(d) was upheld.

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