2022 (12) TMI 1085 - AT - Income Tax

Revision u/s 263 - deduction u/s 80P(2)(d) on the interest received from the cooperative banks - whether assessee is eligible to claim deduction on interest earned from Co-Operative Banks u/s 80P(2)(d) of the Act ? - HELD THAT - As in the case of Surat Vankar Sahakari Sangh Ltd. 2016 (7) TMI 1217 - GUJARAT HIGH COURT held assessee-cooperative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank. In the case of Surendranagar District Co-op. Milk Producers Union Ltd. 2019 (9) TMI 978 - ITAT RAJKOT held that assessee-co-operative society could not claim benefit of section 80P(2)(d) in respect of interest earned by it from deposits made with nationalised/private banks, however, said benefit was available in respect of interest earned on deposits made with co-operative bank. In the case of Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT held 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. In view of the aforesaid decisions of Honourable High Court of Gujarat and other cases cited above , Principal CIT erred in holding that the order passed by AO is erroneous and prejudicial to the interest of the Revenue on account of allowability of interest earned by the assessee on interest earned by the assessee from cooperative banks, coupled with the fact that Ld. AO had made due enquiries on this issue during the course of assessment proceedings.Appeal of the assessee is allowed.

Summary

Issues:
1. Validity of revisional jurisdiction of Principal CIT
2. Eligibility of the assessee to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961

Analysis:
1. Validity of revisional jurisdiction of Principal CIT:
The appeal before the Appellate Tribunal ITAT Rajkot challenged the validity of the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961. The grounds of appeal raised concerns about the legality and validity of the revisional jurisdiction exercised by the PCIT. The PCIT set aside the assessment order passed by the Assessing Officer (AO) and directed a fresh assessment order, which the appellant contended was unjustified both on facts and in law. The Tribunal considered the submissions and ultimately allowed the appeal, indicating that the order passed by the PCIT was erroneous.

2. Eligibility of the assessee to claim deduction under section 80P(2)(d) of the Act:
The core issue revolved around the eligibility of the assessee to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961, concerning interest income earned from cooperative banks. The Principal CIT initiated proceedings under section 263 on the grounds that the AO had erroneously allowed the deduction claimed by the assessee under section 80P(2)(d) for interest income from FDRs held with cooperative banks. The Principal CIT's decision was based on the view that the interest/dividend income earned by the assessee was not eligible for deduction under section 80P(2)(d) as it was sourced from other cooperative banks. The Tribunal analyzed various legal precedents, including judgments from the Gujarat High Court and other cases, to determine the eligibility criteria for claiming such deductions. Ultimately, the Tribunal held that the Principal CIT erred in concluding that the AO's order was erroneous and prejudicial to the revenue's interests. The Tribunal cited relevant legal precedents to support its decision, emphasizing that the AO had appropriately considered the issue during the assessment proceedings, and therefore, the appeal of the assessee was allowed.

In conclusion, the Appellate Tribunal ITAT Rajkot, in the judgment delivered by Shri Siddhartha Nautiyal, Judicial Member, addressed the issues of the validity of the revisional jurisdiction of the Principal CIT and the eligibility of the assessee to claim deduction under section 80P(2)(d) of the Income Tax Act, 1961. The Tribunal found in favor of the assessee, allowing the appeal and setting aside the order passed by the Principal CIT. The detailed analysis considered legal precedents and the facts of the case to reach a decision that upheld the assessee's position regarding the deduction claimed under section 80P(2)(d).