2013 (3) TMI 102 - HC - Income Tax

Rectification u/s 154 - whether ITAT is right in dismissing the appeal of the revenue on the issue of disallowance of deduction under Section 80P on interest earned on investment of surplus reserves - Held that - CIT(Appeals) relying upon the fact that the identical issues in the assessment years 1991-92, 1993-94, 1996-97 and 1997-98 have been decided by the Tribunal wherein held that investment in PSEB bonds and IDBI bonds by the assessee were eligible for deduction under Section 80P(2)(a)(i) of the Act - rectification allowed. No substantial question of law arises for consideration of this Court.

Summary

Issues:
1. Relief under Section 154 on an issue related to assumption of jurisdiction under Section 147
2. Disallowance of deduction under Section 80P on interest earned on investment of surplus reserves
3. Disallowance of deduction under Section 80P on interest earned from utilization of voluntary reserves

Analysis:

1. The appeal under Section 260-A of the Income Tax Act, 1961 was filed against an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 1994-95. The Revenue raised the issue of whether ITAT was correct in granting relief under Section 154 on an issue crucial to the assumption of jurisdiction under Section 147. The question was whether challenging the assumption of jurisdiction under Section 147 through rectification was permissible. The Tribunal had dismissed the Revenue's appeal on this issue.

2. Another issue raised by the Revenue was the disallowance of deduction under Section 80P on interest earned on investment of surplus reserves, specifically in the absence of statutory provisions governing such investments for banking purposes. The ITAT had dismissed the Revenue's appeal on this matter, leading to a further challenge in the High Court.

3. The third issue involved the disallowance of deduction under Section 80P on interest earned from the utilization of voluntary reserves other than statutory reserves. The Revenue contested the ITAT's decision to dismiss their appeal on this issue, citing a previous Supreme Court ruling in a similar case. The High Court considered the previous rulings and the facts of the case to determine if a substantial question of law existed.

In the detailed analysis, it was revealed that the assessment initially finalized under Section 143(3) of the Act had led to a series of rectification applications and appeals regarding the deduction under Section 80P. The Commissioner of Income Tax (Appeals) had relied on previous Tribunal decisions to allow the deduction for investments in PSEB and IDBI bonds. The High Court noted that a Division Bench had already dismissed the Revenue's appeal against a previous order related to similar issues. Consequently, based on the previous rulings and the facts presented, the High Court found no substantial question of law warranting consideration and thus dismissed the appeal.