2023 (4) TMI 39 - AT - Income Tax

Revision u/s 263 - revenue allowed 80P deduction claim representing interest derived from deposits made in cooperative banks - HELD THAT - We find merit in assessee s arguments in light of this tribunal s recent order in Rena Sahakari Sakhar Karkhana Ltd. 2022 (1) TMI 419 - ITAT PUNE as held A.O while framing the assessment had taken a possible view, and allowed the assessee‟s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same. We adopt the foregoing detailed discussion mutatis mutandis to accept the assessee s arguments. The learned PCIT s revision directions stand reversed. Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the assessee is entitled to deduction u/s 80P(2)(d) for interest income derived from deposits made in cooperative banks.
2. Validity of the PCIT's revision directions u/s 263 of the Act.

Summary:

Issue 1: Deduction u/s 80P(2)(d) for Interest Income from Cooperative Banks

The assessee claimed a deduction of Rs.15,00,780/- u/s 80P for interest income derived from deposits in cooperative banks. The PCIT contended that such interest income is not eligible for deduction u/s 80P(2)(a)(i) r.w.s. 80P(2)(d) as cooperative banks are commercial banks and not cooperative societies. The revenue supported this view citing the Karnataka High Court decision in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.). However, the tribunal found merit in the assessee's arguments, referencing its own recent decision in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT (ITA No.1249/PUN/2018), which allowed such deductions.

Issue 2: Validity of PCIT's Revision Directions u/s 263

The PCIT had set aside the Assessing Officer's (AO) assessment order allowing the deduction, deeming it erroneous and prejudicial to the revenue's interest. The tribunal observed that the AO had taken a plausible view after necessary verifications, which was in line with various tribunal decisions and judicial pronouncements. The tribunal concluded that the PCIT exceeded his jurisdiction by reviewing the AO's order under the guise of revisional powers u/s 263. The tribunal noted that conflicting judicial pronouncements exist regarding this issue, and in such cases, the view favoring the assessee should be preferred. Therefore, the tribunal set aside the PCIT's order and restored the AO's original assessment order dated 18.02.2021.

Conclusion

The assessee's appeal was allowed, the PCIT's revision directions were reversed, and the AO's regular assessment dated 18.02.2021 was restored. The order was pronounced in the Open Court on 30.03.2023.