2022 (1) TMI 596 - AT - Income Tax

Revision u/s 263 by CIT - deduction u/s. 80P on interest income - HELD THAT - Admittedly, the assessee is a Co-operative Society and not a Co-operative Bank. It deposited certain amounts with other Co-operative Societies on which interest income was earned. Deduction u/s.80P was claimed on such interest income, which was allowed by the AO, but questioned by the ld. CIT in the extant proceedings. We are dealing with a case in which the ld. Pr. CIT has invoked his power u/s.263 of the Act. It is trite that the exercise of such a power is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue, if the AO has taken a view which is not legally tenable. Per contra , if two views are available on a particular issue and the AO adopts one of such views, the case goes outside the purview of revisional power exercisable by the Pr.CIT u/s.263 of the Act. We, therefore, hold that the ld. Pr. CIT was not justified in exercising the revisional power anent to the interest income in the circumstances as are obtaining in this case. We, therefore, set-aside the same. - Appeal of assessee allowed.

Summary

Issues:
1. Whether the assessee is eligible for deduction u/s.80P on interest earned from other cooperative societies.
2. Whether the Principal Commissioner of Income Tax (Pr.CIT) was justified in invoking power u/s.263 of the Income-tax Act, 1961.

Analysis:

Issue 1: Eligibility for deduction u/s.80P on interest income:
The assessee, a Cooperative Society, claimed deduction u/s.80P on interest income earned from other cooperative societies. The Pr.CIT set aside the assessment order, citing the judgment of the Supreme Court in Totgar's Cooperative Sales Society Ltd., stating the assessee was not eligible for the deduction. The Tribunal noted that the AO had allowed the deduction, but the Pr.CIT questioned it. The Tribunal highlighted that the eligibility of deduction u/s.80P on interest income is a debatable issue. The Tribunal referred to the Pune Benches' decisions and other High Court judgments discussing conflicting views on this matter. Notably, the Tribunal emphasized that if two views are available on an issue, the revisional power u/s.263 cannot be exercised.

Issue 2: Justification of invoking power u/s.263 by Pr.CIT:
The Tribunal analyzed the relevance of the Pr.CIT's reliance on a specific case regarding the eligibility of deduction u/s.80P(2)(d) on interest income. The Tribunal clarified that the case cited by the Pr.CIT was not directly applicable to the current case, as the issue here concerned deduction u/s.80P(2)(a)(i) and not u/s.80P(2)(d). The Tribunal also noted that the AO's view was supported by various decisions, indicating that it was a plausible interpretation. Consequently, the Tribunal concluded that the Pr.CIT was not justified in exercising revisional power concerning the interest income in this case and set aside the Pr.CIT's order.

In conclusion, the Tribunal allowed the appeal, emphasizing that the Pr.CIT's invocation of power u/s.263 was unwarranted in the circumstances of the case. The Tribunal's decision was based on the debatable nature of the issue regarding the eligibility of deduction u/s.80P on interest income earned by the Cooperative Society from other cooperative societies.