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2021 (2) TMI 670 - AT - Income TaxRevision u/s 263 - deduction u/s 80P(2)(d) as granted by Ld. AO on account of interest received by assessee from cooperative bank was required to be denied - HELD THAT - a specific query was raised by Ld. AO during original assessment proceedings regarding deduction claimed u/s 80P(2)(d) which was duly responded to by the assessee. The decision of this Tribunal rendered in Lands End Co-operative Housing Society Ltd. 2016 (2) TMI 620 - ITAT MUMBAI was brought to the notice of Ld. AO in support of the deduction. The Ld. AO was clinched with the issue of deduction u/s 80P(2)(d) and assessee s claim was allowed after due application of mind and a view was already taken in the matter. Therefore, the allegation of Ld. Pr. CIT that the deduction was allowed without verification and necessary inquires is bereft of any merits. We find that it not a case of no inquiry but it is a case wherein a plausible / possible view has been taken by Ld. AO after due consideration of issue of deduction u/s 80P(2)(d). Whether the view taken by Ld. AO was in accordance with law or not ? - As it could be observed that there were two possible views on the issue at the time of framing of assessment. Dealing with similar conflicting position, Mumbai Tribunal in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. V/s ITO 2018 (4) TMI 1678 - ITAT MUMBAI relying upon the order of Hon'ble High Court of Bombay in the case of K. Subramanian V/s Siemens India Ltd. 1983 (4) TMI 3 - BOMBAY HIGH COURT held that where there are conflicting decisions of non-jurisdictional High Courts then a view which is in favor of the assessee is to be preferred as against that taken against him. Hence, the coordinate bench chose to took a view that interest income earned by a co-operative 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. Similar favorable view has been taken in various subsequent decisions of this Tribunal which has already been tabulated by Ld. AR in the legal paper-book. In view of the fact that no decision of the jurisdictional High court holding the field is available, it could safely be concluded that the issue was a debatable one and the view taken by Ld.AO was one of the possible view which could not be said to be contrary to law. Therefore, the assessment order could not be held to be erroneous and prejudicial to the interest of revenue which would require revision u/s 263. Thus the revisional jurisdiction as invoked by Ld. Pr. CIT could not be held to be valid under law. By quashing the order we allow assessee s appeal.
Issues Involved:
1. Validity of revisional jurisdiction under Section 263 of the Income Tax Act. 2. Whether the Assessing Officer (AO) conducted proper verification and inquiry regarding the deduction claimed under Section 80P(2)(d). 3. Whether the deduction under Section 80P(2)(d) for interest income from cooperative banks was correctly allowed by the AO. Detailed Analysis: 1. Validity of Revisional Jurisdiction under Section 263: The primary issue is whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking Section 263 to revise the assessment orders for AY 2015-16 and AY 2016-17. The assessee argued that the Pr. CIT erred in passing the order under Section 263, as the provisions were not applicable to the facts of the case. The Pr. CIT believed that the AO's order was erroneous and prejudicial to the interest of the revenue because the AO allowed the deduction under Section 80P(2)(d) without proper verification. 2. Inquiry and Verification by the AO: The assessee contended that the AO had duly considered the issue of deduction under Section 80P(2)(d) during the original assessment proceedings. Specific queries were raised, and the assessee responded with detailed submissions and relevant judicial precedents, including the decision in Lands End Co-operative Housing Society Ltd. The AO accepted the deduction after due application of mind, indicating that the issue was thoroughly examined. The Pr. CIT, however, argued that the AO failed to verify whether the interest income from cooperative banks qualified for deduction under Section 80P(2)(d). The Pr. CIT issued a show-cause notice to the assessee, indicating that cooperative banks are commercial banks and do not fall within the purview of cooperative societies, thus making the income ineligible for the deduction. 3. Deduction under Section 80P(2)(d): The core of the dispute was whether the interest income earned from cooperative banks should be eligible for deduction under Section 80P(2)(d). The assessee relied on favorable decisions, including those from the Mumbai Tribunal and the Karnataka High Court, which considered cooperative banks as cooperative societies for the purpose of the deduction. However, there was a conflicting decision from the Karnataka High Court, which favored the revenue's view that such interest income should not be eligible for the deduction. The Tribunal noted that at the time of the original assessment, there were two possible views on the issue, and the AO adopted one of the plausible views, which was in favor of the assessee. Conclusion: The Tribunal concluded that the AO had conducted proper inquiries and verification regarding the deduction under Section 80P(2)(d). The view taken by the AO was one of the possible views and could not be considered erroneous or prejudicial to the interest of the revenue. The Tribunal emphasized that when two views are possible, and the AO adopts one, the order cannot be revised simply because the Pr. CIT holds a different opinion. The Tribunal quashed the revisional orders passed by the Pr. CIT for both AY 2015-16 and AY 2016-17, thereby allowing the assessee's appeals. The Tribunal relied on established principles from various judicial precedents, including the Supreme Court and High Courts, which held that an order is not erroneous if it is in accordance with one of the possible legal views. Order Pronounced: The appeals for both assessment years were allowed, and the orders dated 03/03/2020 by the Pr. CIT were quashed. The Tribunal pronounced the order on 12th February 2021.
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