2022 (4) TMI 287 - AT - Income Tax

Revision u/s 263 - Deduction u/s 80P Admissibility - HELD THAT - We are of the view that u/s 80P(2)(d) of the Act interest received from co-operative bank are allowable deduction, that is, the deduction is available in respect of interest received from co-operative bank for that reliance can be placed on the order in the case of Bardoli Vibhag GramVikas Co.Op. Credit Society Ltd. 2018 (12) TMI 1912 - ITAT SURAT We note that on the identical issue, Ld. PCIT had exercised his jurisdiction u/s 263 of the Act and the Co-ordinate Bench in the case of Bardoli Vibhag GramVikas Co.Op. Credit Society Ltd. (supra) has quashed the order passed by Ld. PCIT u/s 263 of the Act. We see no reason to take any other view than the view so taken in above mentioned case, therefore respectively following the binding precedent we quash the order passed by Ld. PCIT u/s 263 of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenge to order under section 263 of the Income Tax Act, 1961 regarding deduction u/s 80P(2)(d) - Correctness of jurisdiction - Disallowance of deduction - Erroneous assessment - Prejudicial to Revenue's interest.

Analysis:
1. The appeal challenged the order dated 10.01.2019 passed by the Principal Commissioner of Income Tax, Surat-1 under section 263 of the Income Tax Act, 1961. The assessee, an urban Co-op. Credit Society, claimed deduction u/s 80P in its return of income for the assessment year 2014-15. The Principal Commissioner observed that the interest income earned from a Co-operative Bank, claimed as deduction, was not allowable under section 80P(2)(d) of the Act.

2. The Principal Commissioner issued a show cause notice to the assessee to explain the transaction. The assessee contended that it was eligible for the deduction under section 80P(2)(d) for interest income earned from the Co-operative Bank. However, the Principal Commissioner disagreed, deeming the deduction erroneous and prejudicial to the Revenue's interest. The Principal Commissioner directed the assessing officer to recompute the correct total income after disallowing the claim.

3. The assessee, aggrieved by the order, appealed. The Authorized Representative argued that the assessee did not claim the deduction in question and that the assessing officer had examined the issue during the assessment proceedings. The AR emphasized that the order passed by the assessing officer was not erroneous and did not prejudice the Revenue's interest.

4. The Co-ordinate Bench's decision in a similar case supported the view that interest income from a Co-operative Bank is eligible for deduction under section 80P(2)(d). The assessing officer had made inquiries and allowed the deduction after due consideration. The order was not erroneous, though it may have been prejudicial to the Revenue's interest.

5. Referring to legal precedents, including decisions by High Courts, the Tribunal concluded that the assessing officer's order was not erroneous. The Tribunal noted that similar disallowances were deleted in previous years upon appeal. Following the binding precedent, the Tribunal allowed the appeal and quashed the Principal Commissioner's order under section 263.

6. The Tribunal relied on the Co-ordinate Bench's decision in a related case to quash the Principal Commissioner's order. Following the binding precedent, the Tribunal allowed the appeal, finding that the assessing officer's order was not erroneous. The appeal of the assessee was allowed, and the Principal Commissioner's order was set aside.