2022 (7) TMI 729 - AT - Income Tax

Revision u/s 263 - interest income has claimed a deduction u/s 80P - HELD THAT - We note that this tribunal in the case of Shree Keshav Co-operative Credit Society Limited 2022 (7) TMI 79 - ITAT RAJKOT involving identical facts and circumstances has decided the issue in favour of the assessee. Thus we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.

Summary

Issues:
Interpretation of section 80P of the Income Tax Act for deduction on interest income from a cooperative bank.

Analysis:
The appeal was filed by the Assessee against the order of the Principal Commissioner of Income Tax, Rajkot, regarding the assessment order passed under section 263 of the Income Tax Act for the Assessment Year 2017-18. The main issue raised by the Assessee was the contention that the assessment framed under section 143(3) was erroneously considered prejudicial to the interest of Revenue by the Principal CIT. The Assessee had claimed a deduction under section 80P of the Act on interest income, but the PCIT held that the income was not eligible for deduction as it did not arise from financing activities with members. The PCIT initiated proceedings under section 263, leading to the appeal before the ITAT.

The Assessee argued that a similar case involving identical facts was decided in their favor by the Rajkot Tribunal, citing the case of Shree Keshav Cooperative Credit Society Limited. The ITAT noted that different High Courts had different views on the deduction of interest income from cooperative banks. The Gujarat High Court's judgment in favor of the Assessee in the case of CIT vs. Sabarkantha District Cooperative Milk Producers Union Ltd. was referenced. The ITAT emphasized that when two views are possible on an issue and the AO has taken one view, the order cannot be deemed erroneous unless the view is unsustainable in law, as per the judgment in CIT vs. Mehsana District Co. Op. Milk Producers Union Ltd.

After considering the arguments and judicial precedents, the ITAT found no error in the AO's assessment under section 143(3) to justify the initiation of proceedings under section 263 by the PCIT. The ITAT quashed the revisional order by the PCIT, ruling in favor of the Assessee. The ITAT highlighted that the Revenue failed to provide any material or distinguishing features to support their case. Consequently, the ITAT allowed the appeal filed by the Assessee, concluding that the assessment by the AO did not cause prejudice to the interest of revenue.

In conclusion, the ITAT's detailed analysis of the interpretation of section 80P of the Income Tax Act and the application of judicial precedents led to the quashing of the PCIT's revisional order, thereby allowing the appeal filed by the Assessee. The judgment emphasized the importance of considering different views on tax matters and the necessity for an error to be unsustainable in law for invoking section 263 of the Act.