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2022 (6) TMI 123 - AT - Income TaxRevision u/s 263 by CIT - Assessee declared interest income from fixed deposit made with Co-operative Bank which was claimed as exempted under the provision of section 80P(2)(a)(i) - PCIT was of the view that assessee being credit society was eligible for deduction under section 80P(2)(i)(a) of the Act for interest income earned from credit facility provided to its members only whereas the interest income from fixed deposit made with Co-operative bank is not allowable deduction under section 80P(2)(a)(i) - HELD THAT - As different Hon ble High Courts have taken different view with respect to the deduction of the interest income earned by the assessee from the co-operative bank. Some of the judgements are in favour of the assessee and some of them are against the assessee. It is also an admitted fact that the Hon ble High Court of Gujarat is in favour of the assessee with respect to the interest on deposits made with the co-operative bank - See Sabarkantha District Cooperative Milk Producers Union Ltd. 2014 (6) TMI 977 - GUJARAT HIGH COURT Based on the above, it is transpired that the AO has taken one of the possible view for allowing the deduction to the assessee under the provisions of section 80P(2)(d)/80P(2)(a)(i)(a) of the Act. Where two view are possible on the issue and the AO has taken one of the possible view, however the PCIT does not agree with the view adopted by the AO, in such scenario, the order of the AO cannot be held as erroneous. See Mehsana District Co. Op. Milk Producers Union Ltd. 2003 (4) TMI 77 - GUJARAT HIGH COURT Thus we find no error in the order of AO so as to justify the initiation of proceedings under section 263 of the Act by the Ld. Pr. CIT. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quashed the same - Decided in favour of assessee.
Issues:
1. Jurisdiction of Principal Commissioner under section 263 of the Income Tax Act, 1961. 2. Eligibility of deduction under section 80P(2)(a)(i) of the Act for interest income from a cooperative bank. 3. Interpretation of judicial precedents regarding deduction of interest income from a cooperative bank under section 80P(2)(d) of the Act. Issue 1: Jurisdiction of Principal Commissioner under section 263: The Assessee challenged the order of the Principal Commissioner of Income Tax, Rajkot, under section 263 of the Income Tax Act, 1961, claiming that the assessment order passed under section 143(3) of the Act was not erroneous or prejudicial to the revenue's interest. The Principal Commissioner set aside the assessment order due to lack of proper verification regarding the eligibility of deductions claimed by the Assessee. The Tribunal granted an early hearing date based on administrative orders prioritizing such appeals. Issue 2: Eligibility of deduction under section 80P(2)(a)(i) of the Act: The Assessee, a cooperative society, declared interest income from a fixed deposit with a cooperative bank as exempt under section 80P(2)(a)(i) of the Act. The Principal Commissioner held that this interest income was not eligible for deduction as it did not arise from the cooperative society's activities of providing credit facilities to its members. The Principal Commissioner referred to legal precedents and concluded that the assessment order allowing the deduction was erroneous and prejudicial to the revenue's interest. Issue 3: Interpretation of judicial precedents on deduction of interest income from a cooperative bank: The Assessee cited judgments supporting the eligibility of interest income from a cooperative bank for deduction under section 80P(2)(d) of the Act. The Assessee argued that since different High Courts had differing views on this issue, and the Assessing Officer had taken a plausible view in allowing the deduction, the assessment order could not be deemed erroneous. The Tribunal agreed with the Assessee's contention, citing judicial precedents and held that when two plausible views exist, and the Assessing Officer has taken one, the order cannot be considered erroneous. Consequently, the Tribunal quashed the revisional order of the Principal Commissioner. In conclusion, the Tribunal allowed the Assessee's appeal, emphasizing that the assessment order was not erroneous or prejudicial to the revenue's interest based on the interpretations of legal provisions and judicial precedents.
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