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2022 (1) TMI 419 - AT - Income TaxRevision u/s 263 by CIT - claim of deduction u/s 80P on the interest income received on the investments/deposits lying with the co-operative banks - scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007 - HELD THAT - On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank - we are unable to subscribe to his view that the aforesaid amendment would jeopardize the claim of deduction of a co-operative society u/s 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. Though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d). As the 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. Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec. 143(3) - Decided in favour of assessee.
Issues Involved:
1. Legality and jurisdiction of the notice issued and order passed under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT). 2. Eligibility of the assessee for deduction under Section 80P(2)(d) of the Income Tax Act, 1961. 3. Validity of the Pr. CIT's decision to set aside the assessment order and direct a fresh assessment. Issue-wise Detailed Analysis: 1. Legality and Jurisdiction of Notice and Order under Section 263: The assessee challenged the notice and order passed under Section 263 by the Pr. CIT, arguing that they were illegal, bad in law, and without jurisdiction. The Tribunal examined whether the Pr. CIT had the authority to revise the assessment order under Section 263. The Tribunal concluded that the Pr. CIT's assumption of jurisdiction was erroneous because the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal emphasized that the Assessing Officer (A.O) had taken a plausible view after necessary verifications, and the Pr. CIT had exceeded his jurisdiction by seeking to review this order. 2. Eligibility for Deduction under Section 80P(2)(d): The core issue was whether the assessee, a cooperative society, was eligible for deduction under Section 80P(2)(d) for interest income earned from fixed deposits with cooperative banks. The Pr. CIT argued that cooperative banks are commercial banks and not cooperative societies, thus disqualifying the assessee from claiming the deduction. However, the Tribunal disagreed, citing various judicial pronouncements and the definition of "co-operative society" under Section 2(19) of the Act. The Tribunal noted that as long as the interest income is derived from investments with another cooperative society, the deduction under Section 80P(2)(d) is permissible. The Tribunal referenced decisions from the ITAT Mumbai and Pune benches and the High Courts of Karnataka and Gujarat, which supported the assessee's eligibility for the deduction. 3. Validity of Pr. CIT's Decision to Set Aside the Assessment Order: The Tribunal scrutinized whether the Pr. CIT was justified in setting aside the assessment order and directing a fresh assessment. The Tribunal found that the A.O had taken a possible view in allowing the deduction under Section 80P(2)(d) after due verification. The Tribunal held that the Pr. CIT's action of invoking Section 263 to dislodge the A.O's view was unjustified. The Tribunal emphasized that the A.O's order was in line with judicial precedents and the legislative intent behind Section 80P(2)(d). Consequently, the Tribunal set aside the Pr. CIT's order and restored the original assessment order passed by the A.O. Conclusion: The Tribunal allowed the appeal filed by the assessee, concluding that the Pr. CIT had erred in exercising his revisional jurisdiction under Section 263. The Tribunal restored the A.O's order, affirming the assessee's eligibility for deduction under Section 80P(2)(d) for interest income earned from investments with cooperative banks. The judgment underscored the importance of adhering to judicial precedents and legislative provisions in tax assessments.
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