2023 (4) TMI 37 - AT - Income Tax

Revision u/s 263 - PCIT observed that AO had allowed the claim made by the appellant society u/s 80P without verification of the claim - appellant society had earned interest income and dividend income on deposits made out of the surplus with other co-operative society or co-operative banks - PCIT was of the opinion that the said income is liable to tax under head Income from other sources under the provisions of section 68 and does not qualify for deduction u/s 80P - Whether the issue of eligibility of interest income earned on investments made with other co-operative banks qualifies for exemption u/s 80P(2)(a)(i) or section 80P(2)(d)? - HELD THAT - The interest income earned by the co-operative society from investments made out of the surplus fund with other co-operative banks qualifies for deduction u/s 80P(2)(a)(i) or section 80P(2)(d) is not free from the debate, as the very fact there is cleavage of judicial opinion amongst various High Courts clearly establishes that the existence of debate cannot be ruled out. Thus, it is a purely legal debateable issue, which is not amenable to jurisdiction u/s 263 of the Act in view of the discussion made by us supra. Therefore, we are of the considered opinion that the ld. PCIT was not justified in exercising the power of revision u/s 263 in the facts of the present case. Accordingly, the appeal filed by the assessee stands allowed.

Summary

Issues:
The appeal filed by the assessee against the order of ld. Pr. Commissioner of Income Tax-1, Pune dated 16.01.2023 for the assessment year 2018-19.

Facts:
The appellant, a cooperative society, filed a Return of Income for the assessment year 2018-19 declaring total income of Rs.62,710/- after claiming deduction u/s 80P of the Income Tax Act, 1961. The assessment was completed by the Assessing Officer accepting the returned income and allowing the deduction u/s 80P as claimed by the appellant. Subsequently, the ld. PCIT observed interest income and dividend income earned by the appellant society and issued a show-cause notice u/s 263 calling for explanation on why the assessment order should not be set aside.

Contentions:
The appellant contended that the interest income qualifies for deduction u/s 80P, while the ld. PCIT argued otherwise, setting aside the assessment order for further verification. The appellant challenged this revision order, citing precedent cases supporting their claim for deduction u/s 80P.

Decision:
The Tribunal examined whether interest income earned on investments with cooperative banks qualifies for exemption u/s 80P(2)(a)(i) or section 80P(2)(d) of the Act. Citing various High Court decisions, including the Hon'ble Madras High Court and Hon'ble Calcutta High Court, the Tribunal held that income earned on investments with cooperative banks qualifies for deduction u/s 80P(2)(a)(i) of the Act. The Tribunal reasoned that the existence of a legal debate on this issue precludes the revision under section 263. Therefore, the Tribunal allowed the appeal filed by the assessee.

Conclusion:
The Tribunal concluded that interest income earned by the cooperative society from investments with other cooperative banks qualifies for deduction u/s 80P(2)(a)(i) or section 80P(2)(d) of the Act. The decision was based on legal precedents and the presence of a legal debate on the issue, leading to the allowance of the appeal filed by the assessee.